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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
March 31, 2023
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
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Delaware | 46-3354276 | ||||
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| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common stock, par value $0.01 per share | BL | NASDAQ Global Select Market | ||||||
| Large accelerated filer |
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Emerging growth company |
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March 31, 2023 reason, except as required by applicable law. whole. September 30, December 31, 2017 2016 ASSETS ASSETS Current assets: Cash and cash equivalents $ 24,645 $ 22,118 Marketable securities 85,125 83,130 Accounts receivable, net 45,233 42,294 Deferred sales commissions 10,946 9,667 Prepaid expenses and other current assets 6,794 6,614 Total current assets 172,743 163,823 Capitalized software development costs, net 6,129 4,591 Property and equipment, net 12,126 11,318 Intangible assets, net 44,130 54,118 Goodwill 185,138 185,138 Other assets 1,857 1,449 Total assets $ 422,123 $ 420,437 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,934 $ 7,165 Accrued expenses and other current liabilities 18,354 18,931 Deferred revenue 94,158 80,360 Short-term portion of contingent consideration 2,008 2,008 Total current liabilities 117,454 108,464 Common stock warrant liability — 11,380 Contingent consideration 3,597 3,230 Deferred tax liabilities, net 993 1,262 Deferred revenue, noncurrent 2,100 2,373 Other long-term liabilities 2,190 2,318 Total liabilities 126,334 129,027 Commitments and contingencies (Note 6) Stockholders' equity: Common stock 528 513 Additional paid-in capital 414,915 378,272 Accumulated other comprehensive loss (32 ) (41 ) Accumulated deficit (119,622 ) (87,334 ) Total stockholders' equity 295,789 291,410 Total liabilities and stockholders' equity $ 422,123 $ 420,437 Quarter Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Revenues Subscription and support $ 43,462 $ 30,853 $ 120,757 $ 83,830 Professional services 2,409 1,343 6,041 3,953 Total revenues 45,871 32,196 126,798 87,783 Cost of revenues Subscription and support 8,707 6,440 24,729 18,515 Professional services 2,191 1,101 5,776 3,029 Total cost of revenues 10,898 7,541 30,505 21,544 Gross profit 34,973 24,655 96,293 66,239 Operating expenses Sales and marketing 33,375 19,037 81,996 56,279 Research and development 5,883 5,087 17,840 15,552 General and administrative 8,920 7,698 25,809 19,633 Total operating expenses 48,178 31,822 125,645 91,464 Loss from operations (13,205 ) (7,167 ) (29,352 ) (25,225 ) Other income (expense) Interest income 281 — 749 4 Interest expense (6 ) (1,294 ) (13 ) (3,138 ) Change in fair value of the common stock warrant liability — — (3,490 ) 300 Other income (expense), net 275 (1,294 ) (2,754 ) (2,834 ) Loss before income taxes (12,930 ) (8,461 ) (32,106 ) (28,059 ) Provision for (benefit from) income taxes 162 (1,842 ) 110 (4,564 ) Net loss $ (13,092 ) $ (6,619 ) $ (32,216 ) $ (23,495 ) Net loss per share, basic and diluted $ (0.25 ) $ (0.16 ) $ (0.62 ) $ (0.58 ) Weighted average common shares outstanding, basic and diluted 52,592 40,824 51,910 40,746 Quarter Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Net loss $ (13,092 ) $ (6,619 ) $ (32,216 ) $ (23,495 ) Other comprehensive income Net change in unrealized gain on marketable securities, net of tax of $0 for the quarters and nine months ended September 30, 2017 and 2016 41 — 9 — Other comprehensive income 41 — 9 — Comprehensive loss $ (13,051 ) $ (6,619 ) $ (32,207 ) $ (23,495 ) Accumulated Common Stock Additional Other Shares Outstanding Amount Paid-in Capital Comprehensive Loss Accumulated Deficit Total Balance at December 31, 2016 51,278 $ 513 $ 378,272 $ (41 ) $ (87,334 ) $ 291,410 Adjustment for change in accounting policy for stock option forfeitures — — 72 — (72 ) — Balance at January 1, 2017 51,278 513 378,344 (41 ) (87,406 ) 291,410 Net exercise of stock warrants 428 4 14,866 14,870 Stock option exercises 1,137 11 8,661 — — 8,672 Stock-based compensation — — 13,044 — — 13,044 Other comprehensive income — — — 9 — 9 Net loss — — — — (32,216 ) (32,216 ) Balance at September 30, 2017 52,843 $ 528 $ 414,915 $ (32 ) $ (119,622 ) $ 295,789 Nine Months Ended September 30, 2017 2016 Cash flows from operating activities Net loss $ (32,216 ) $ (23,495 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 14,786 12,690 Accretion of debt discount and accrual of paid-in-kind interest — 2,083 Change in fair value of common stock warrant liability 3,490 (300 ) Change in fair value of contingent consideration 367 278 Stock-based compensation 12,951 4,534 (Accretion) amortization of purchase discounts/premiums on marketable securities, net 100 — Deferred income taxes (269 ) (4,820 ) Provision for doubtful accounts receivable 602 — Changes in operating assets and liabilities, net of effects of the acquisition: Accounts receivable (3,541 ) (9,933 ) Deferred sales commissions (1,279 ) (983 ) Prepaid expenses and other current assets (180 ) (936 ) Other assets (408 ) (150 ) Accounts payable (4,185 ) 3,250 Accrued expenses and other current liabilities 59 1,886 Deferred revenue 13,525 17,535 Other long-term liabilities (128 ) (590 ) Net cash provided by operating activities 3,674 1,049 Cash flows from investing activities Acquisition, net of cash acquired — (31,488 ) Purchases of marketable securities (51,647 ) — Proceeds from maturities of marketable securities 49,561 — Capitalized software development costs (3,345 ) (2,326 ) Purchases of property and equipment (3,729 ) (1,308 ) Net cash used in investing activities (9,160 ) (35,122 ) Cash flows from financing activities Proceeds from term loan, net of issuance costs — 34,469 Principal payments on capital lease obligations (549 ) (124 ) Proceeds from issuance of common stock — 3,075 Proceeds from exercises of stock options 8,672 2,196 Payments of initial public offering costs (110 ) (1,162 ) Net cash provided by financing activities 8,013 38,454 Net increase in cash and cash equivalents 2,527 4,381 Cash and cash equivalents, beginning of period 22,118 15,205 Cash and cash equivalents, end of period $ 24,645 $ 19,586 Nine Months Ended September 30, 2017 2016 Non-cash financing and investing activities Stock-based compensation capitalized for software development $ 93 $ 70 Net exercise of stock warrants $ 14,870 $ — Capitalized software development costs included in accounts payable and accrued expenses and other current liabilities at end of period $ 151 $ 107 Purchases of property and equipment included in accounts payable and accrued expenses and other current liabilities at end of period $ 42 $ 149 Deferred offering costs included in accounts payable and accrued expenses and other current liabilities at end of period $ — $ 2,186 Term loan issuance costs included in accounts payable and accrued expenses and other current liabilities at end of period $ — $ 143 Recently-Issued Accounting Pronouncements 2023. Policies" of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes BlackLine K.K. In goodwill (in thousands): September 30, 2017 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (in thousands) Marketable securities U.S. treasury securities $ 21,473 $ 1 $ (19 ) $ 21,455 Corporate bonds 28,627 — (12 ) 28,615 Commercial paper 27,257 — — 27,257 Asset-backed securities 7,800 — (2 ) 7,798 $ 85,157 $ 1 $ (33 ) $ 85,125 December 31, 2016 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (in thousands) Marketable securities U.S. treasury securities $ 29,742 $ — $ (17 ) $ 29,725 Corporate bonds 25,522 — (21 ) 25,501 Commercial paper 15,554 — — 15,554 Asset-backed securities 12,353 — (3 ) 12,350 $ 83,171 $ — $ (41 ) $ 83,130 Other Current Liabilities September 30, December 31, 2017 2016 Accrued salaries and employee benefits $ 10,612 $ 11,589 Accrued commissions to third-party partners 2,726 2,081 Accrued income and other taxes payable 878 1,553 Accrued professional services costs 563 454 Short-term portion of capital lease 442 992 Short-term tenant improvement allowance 341 341 Accrued initial public offering costs — 110 Other accrued expenses and current liabilities 2,792 1,811 $ 18,354 $ 18,931 Value Measurements September 30, 2017 Level 1 Level 2 Level 3 Total Cash equivalents Money market funds $ 15,983 $ — $ — $ 15,983 Marketable securities U.S. treasury securities 21,455 — — 21,455 Corporate bonds — 28,615 — 28,615 Commercial paper — 27,257 — 27,257 Asset-backed securities — 7,798 — 7,798 Total assets $ 37,438 $ 63,670 $ — $ 101,108 Liabilities Contingent consideration — — 5,605 5,605 Total liabilities $ — $ — $ 5,605 $ 5,605 December 31, 2016 Level 1 Level 2 Level 3 Total Cash equivalents Money market funds $ 18,936 $ — $ — $ 18,936 Marketable securities U.S. treasury securities 29,725 — — 29,725 Corporate bonds — 25,501 — 25,501 Commercial paper — 15,554 — 15,554 Asset-backed securities — 12,349 — 12,349 Total assets $ 48,661 $ 53,404 $ — $ 102,065 Liabilities Common stock warrant liability $ — $ — $ 11,380 $ 11,380 Contingent consideration — — 5,238 5,238 Total liabilities $ — $ — $ 16,618 $ 16,618 Quarter Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Beginning fair value $ — $ 5,200 $ 11,380 $ 5,500 Change in fair value — — 3,490 (300 ) Exercise of stock warrants — — (14,870 ) — Ending fair value $ — $ 5,200 $ — $ 5,200 Quarter Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Beginning fair value $ 5,427 $ 5,010 $ 5,238 $ 4,867 Change in fair value 178 135 367 278 Ending fair value $ 5,605 $ 5,145 $ 5,605 $ 5,145 Quarter Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Cost of revenues $ 334 $ 150 $ 855 $ 425 Sales and marketing 7,761 501 9,169 1,834 Research and development 236 198 534 532 General and administrative 784 511 2,393 1,743 $ 9,115 $ 1,360 $ 12,951 $ 4,534 performance and service vesting conditions with grant dates established (in thousands): Taxes September 30, 2017 2016 Options to purchase common stock 5,604 5,247 Common stock warrants — 500 Total shares excluded from net loss per share 5,604 5,747 cash flows are affected by economic factors. Quarter Ended Nine Months Ended September 30, 2016 September 30, 2016 Pro forma total revenues $ 33,808 $ 92,856 Pro forma net loss $ (5,535 ) $ (23,391 ) Pro forma net loss per share, basic and diluted $ (0.14 ) $ (0.57 ) services are performed. products provide. the first quarter of fiscal 2023. Refer to "Note 8 - Restructuring Costs" for additional information on this event. Quarter Ended Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, 2016 2016 2017 2017 2017 Dollar-based net revenue retention rate 118 % 116 % 117 % 114 % 113 % Number of customers (at end of period) 1,625 1,758 1,850 1,978 2,091 Number of users (at end of period) 156,774 166,903 171,423 178,604 186,461 At March 31, 2023, our dollar-based net revenue retention rate declined marginally from the quarter ended December 31, 2022. Our ability to maximize the lifetime value of our customer relationships will depend, in part, on the willingness of the customer to purchase additional user 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 all our products provide. products, such as Transaction Matching, Intercompany, and BlackLine Cash Application. Quarter Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 (in thousands, except percentages) Non-GAAP Revenues $ 45,871 $ 32,375 $ 126,798 $ 87,962 Non-GAAP Gross Profit $ 37,023 $ 26,579 $ 102,281 $ 71,507 Non-GAAP Gross Margin 80.7 % 82.1 % 80.7 % 81.3 % Non-GAAP Net Loss $ (633 ) $ (2,196 ) $ (4,909 ) $ (12,620 ) all periods presented. Quarter Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 (in thousands, except percentages) Non-GAAP Revenues Revenues $ 45,871 $ 32,196 $ 126,798 $ 87,783 Purchase accounting adjustment to revenues* — 179 — 179 Total Non-GAAP Revenues $ 45,871 $ 32,375 $ 126,798 $ 87,962 Non-GAAP Gross Profit: Gross profit $ 34,973 $ 24,655 $ 96,293 $ 66,239 Purchase accounting adjustment to revenues* — 179 — 179 Amortization of developed technology 1,716 1,595 5,133 4,664 Stock-based compensation 334 150 855 425 Total Non-GAAP Gross Profit $ 37,023 $ 26,579 $ 102,281 $ 71,507 Gross Margin 76.2 % 76.6 % 75.9 % 75.5 % Non-GAAP Gross Margin 80.7 % 82.1 % 80.7 % 81.3 % Non-GAAP Net Loss: Net loss $ (13,092 ) $ (6,619 ) $ (32,216 ) $ (23,495 ) Provision for (benefit from) income taxes (159 ) (1,926 ) (298 ) (4,821 ) Purchase accounting adjustment to revenues* — 179 — 179 Amortization of intangibles 3,325 3,138 9,988 9,184 Stock-based compensation 9,115 1,360 12,951 4,534 Accretion of debt discount — 96 — 242 Accretion of warrant discount — 69 — 207 Change in fair value of contingent consideration 178 135 367 278 Change in fair value of the common stock warrant liability — — 3,490 (300 ) Acquisition-related costs — 1,372 — 1,372 Secondary offering costs — — 809 — Total Non-GAAP Net Loss $ (633 ) $ (2,196 ) $ (4,909 ) $ (12,620 ) *The purchase accounting adjustments for the quarter and nine months ended September 30, 2017 related to the Runbook Acquisition were not meaningful and were thus not presented. The Company is presenting non-GAAP net revenues for consistency with prior presentations. Quarter Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 (in thousands, except per share data) Revenues Subscription and support $ 43,462 $ 30,853 $ 120,757 $ 83,830 Professional services 2,409 1,343 6,041 3,953 Total revenues 45,871 32,196 126,798 87,783 Cost of revenues Subscription and support 8,707 6,440 24,729 18,515 Professional services 2,191 1,101 5,776 3,029 Total cost of revenues 10,898 7,541 30,505 21,544 Gross profit 34,973 24,655 96,293 66,239 Operating expenses Sales and marketing 33,375 19,037 81,996 56,279 Research and development 5,883 5,087 17,840 15,552 General and administrative 8,920 7,698 25,809 19,633 Total operating expenses 48,178 31,822 125,645 91,464 Loss from operations (13,205 ) (7,167 ) (29,352 ) (25,225 ) Other income (expense) Interest income 281 — 749 4 Interest expense (6 ) (1,294 ) (13 ) (3,138 ) Change in fair value of the common stock warrant liability — — (3,490 ) 300 Other income (expense), net 275 (1,294 ) (2,754 ) (2,834 ) Loss before income taxes (12,930 ) (8,461 ) (32,106 ) (28,059 ) Provision for (benefit from) income taxes 162 (1,842 ) 110 (4,564 ) Net loss $ (13,092 ) $ (6,619 ) $ (32,216 ) $ (23,495 ) Net loss per share, basic and diluted $ (0.25 ) $ (0.16 ) $ (0.62 ) $ (0.58 ) Weighted average common shares outstanding, basic and diluted 52,592 40,824 51,910 40,746 Quarter Ended Nine Months Ended September 30, Change September 30, Change 2017 2016 $ % 2017 2016 $ % (in thousands, except percentages) Subscription and support $ 43,462 $ 30,853 $ 12,609 41 % $ 120,757 $ 83,830 $ 36,927 44 % Professional services 2,409 1,343 1,066 79 % 6,041 3,953 2,088 53 % Total revenues $ 45,871 $ 32,196 $ 13,675 42 % $ 126,798 $ 87,783 $ 39,015 44 % September 30, 2017 2016 Number of customers (at end of period)* 2,091 1,625 Number of users (at end of period)* 186,461 156,774 * Exclusive of the Runbook Acquisition Quarter Ended Nine Months Ended September 30, Change September 30, Change 2017 2016 $ % 2017 2016 $ % (in thousands, except percentages) Subscription and support $ 8,707 $ 6,440 $ 2,267 35 % $ 24,729 $ 18,515 $ 6,214 34 % Professional services 2,191 1,101 1,090 99 % 5,776 3,029 2,747 91 % Total cost of revenues $ 10,898 $ 7,541 $ 3,357 45 % $ 30,505 $ 21,544 $ 8,961 42 % Gross margin 76.2 % 76.6 % 75.9 % 75.5 % FourQ Acquisition; partially offset by Quarter Ended Nine Months Ended September 30, Change September 30, Change 2017 2016 $ % 2017 2016 $ % (in thousands, except percentages) Sales and marketing $ 33,375 $ 19,037 $ 14,338 75 % $ 81,996 $ 56,279 $ 25,717 46 % Percentage of total revenues 72.8 % 59.1 % 64.7 % 64.1 % Quarter Ended Nine Months Ended September 30, Change September 30, Change 2017 2016 $ % 2017 2016 $ % (in thousands, except percentages) Research and development $ 5,883 $ 5,087 $ 796 16 % $ 17,840 $ 15,552 $ 2,288 15 % Percentage of total revenues 12.8 % 15.8 % 14.1 % 17.7 % Collectively, these increases resulted in a decrease in net expenses; Quarter Ended Nine Months Ended September 30, Change September 30, Change 2017 2016 $ % 2017 2016 $ % (in thousands, except percentages) General and administrative $ 8,920 $ 7,698 $ 1,222 16 % $ 25,809 $ 19,633 $ 6,176 31 % Percentage of total revenues 19.4 % 23.9 % 20.4 % 22.4 % "Note 8 - Restructuring Costs" for additional information. Quarter Ended Nine Months Ended September 30, Change September 30, Change 2017 2016 $ % 2017 2016 $ % (in thousands) Interest income $ 281 $ — $ 281 * $ 749 $ 4 $ 745 * * Not meaningful cash balances. Quarter Ended Nine Months Ended September 30, Change September 30, Change 2017 2016 $ % 2017 2016 $ % (in thousands) Interest expense $ 6 $ 1,294 $ (1,288 ) (100 %) $ 13 $ 3,138 $ (3,125 ) (100 %) Quarter Ended Nine Months Ended September 30, Change September 30, Change 2017 2016 $ % 2017 2016 $ % (in thousands) Change in fair value of common stock warrant liability $ — $ — $ — * $ (3,490 ) $ 300 $ (3,790 ) * * Not meaningful Quarter Ended Nine Months Ended September 30, Change September 30, Change 2017 2016 $ % 2017 2016 $ % (in thousands) Provision for (benefit from) income taxes $ 162 $ (1,842 ) $ 2,004 (109 %) $ 110 $ (4,564 ) $ 4,674 (102 %) profitable jurisdictions. Nine Months Ended September 30, 2017 2016 (in thousands) Net cash provided by operating activities $ 3,674 $ 1,049 Net cash used in investing activities $ (9,160 ) $ (35,122 ) Net cash provided by financing activities $ 8,013 $ 38,454 costs; and Financing Activities stock options. Payments Due by Period Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Operating lease obligations (1) $ 22,074 $ 5,299 $ 7,924 $ 5,317 $ 3,534 Purchase obligations 1,369 1,369 — — — Capital lease obligations 442 442 — — — $ 23,885 $ 7,110 $ 7,924 $ 5,317 $ 3,534 Critical Accounting this Quarterly Report on Form 10-Q. During the cash balances at March 31, 2023. Procedures uncertainties that you should consider before investing in our Company, as fully described below. The principal factors and uncertainties that make investing in our Company risky include, among others: future economic slowdowns. See Risks Related to Our Dependence on Third Parties. If we are not able to provide successful enhancements, new features or modifications to our software solutions, our business could be adversely affected. We may be required to or find it appropriate to expend substantial capital and other resources to alleviate problems caused by any actual or perceived security breaches or incidents. agreements typically include performance guarantees and service level standards that obligate us to provide credits in the event of a significant disruption in our platform. To the extent that we do not effectively address capacity constraints, upgrade our systems and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be adversely affected. by legacy solutions. •the need to educate potential customers about the uses and benefits of our software solutions; •the need to educate potential customers on the differences between traditional, on-premise software and SaaS solutions; •the relatively long duration of the commitment customers make in their agreements with us; •the discretionary nature and timing of potential customers’ purchasing and budget cycles and decisions; •the competitive nature of potential customers’ evaluation and purchasing processes; •announcements or planned introductions of new products by us or our competitors; and •lengthy purchasing approval processes of potential professional services resources to individual customers, resulting in increased costs and reduced profitability, and would likely lengthen our typical sales cycle, which could strain our resources. our operating results could suffer. Even if we are successful, we cannot assure you that these relationships will result in improved operating results. results. Our solutions, our business, results of operations, and financial condition could be adversely affected. If resellers do not effectively market and sell our solutions, or fail to meet the needs of our customers, our reputation and ability to grow our business may also be adversely affected. We depend and rely upon SaaS applications from third parties to operate our business and interruptions or performance problems with these technologies may adversely affect our business and operating results. standards, or meet such customer requests, it could reduce demand for our services and adversely affect our business. Changes in laws and regulations related to the internet and cloud computing or changes to internet infrastructure may diminish the demand for our solutions, and could have a negative impact on our business. business. financial results. results and financial condition or require us to devote additional research and development resources to change our products. In addition, if we were to combine our proprietary software products with open source software in a certain manner, we could, under certain of the open source licenses, be required to release the source code of our proprietary software products. If we inappropriately use open source software, we may be required to re-engineer our products, discontinue the sale of our products or take other remedial actions. •actual or anticipated fluctuations in our operating results; •the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; •failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; •ratings changes by any securities analysts who follow our company; •announcements by us or our competitors of significant technical innovations, acquisitions, strategic relationships, joint ventures, or capital commitments; •changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; •price and volume fluctuations in the overall stock market from time to time, including as a result of trends in the economy as a whole; •changes in accounting standards, policies, guidelines, interpretations or principles; •actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally; •developments or disputes concerning our intellectual property, or our products or third-party proprietary rights; •announced or completed acquisitions of businesses or technologies by us or our competitors; •new laws or regulations, or new interpretations of existing laws or regulations applicable to our business; •any major change in our board of directors or management; •sales of shares of our common stock by us or our stockholders; •lawsuits threatened or filed against us; and •other events or factors, including Provisions of our corporate governance documents could make an acquisition of the company more difficult and may impede attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders. •we have authorized but unissued shares of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include supermajority voting, special approval, dividend, or other rights or preferences superior to the rights of stockholders; •we have a classified board of directors with staggered three-year terms; •stockholder action by written consent •stockholders are required to comply with advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder Notes (and are likely to do so on each exercise date of the Capped Call). This activity could also cause or prevent an increase or a decrease in the market price of our common stock. affected. and Use of Proceeds ProceedsSeptember 30, 2017Part I. Financial Information17282929295252anticipate,“anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “would,” “continue,” “ongoing” or the negative of these terms or other comparable terminology. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, but not limited to, statements regarding future financial and operational performance; statements concerning growth strategies including acquisitions, extension of distribution channels and strategic relationships, product innovation, international expansion, customer growth and expansion, customer service initiatives, expectations regarding dealour acquisitions, expectations regarding contract size and increased focus on strategic products, expectations for hiring new talent and expanding our sales organization; our ability to accurately forecast revenue and appropriately plan expenses and investments; the demand for and benefits from the use of our current and future solutions; market acceptance of our solutions; volatility and uncertainty in the banking and financial services sector; the impact of the COVID-19 pandemic and the related responses by governments and private industry on our business and financial condition, as well as that of our customers and partners; changes in the competitive environment in our industry and the markets in which we operate.operate and our liquidity and capital resources. These statements are based upon our historical performance and our current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith beliefs and assumptions as of that time with respect to future events and are subject to risks and uncertainties.uncertainty. If any of these risks or uncertainties materialize or if any assumptions prove incorrect, actual performance or results may differ materially from those expressed in or suggested by the forward lookingforward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties,uncertainty, and assumptions that are difficult to predict, including those identified below, under “Part II—OtherII-Other Information, Item 1A. Risk Factors” and elsewhere herein. Forward-looking statements should not be read as a guarantee of future performance or results, and you should not place undue reliance on such statements. Furthermore, we undertake no obligation to revise or update any forward-looking statements for any reason.“us,”“us” and “our” in this Quarterly Report on Form 10-Q refer to the consolidated operations of BlackLine, Inc. and its consolidated subsidiaries as a whole, references to “Silver Lake Sumeru” refers to either or both of Silver Lake Sumeru Fund, L.P. and Silver Lake Technology Investors Sumeru, L.P., and references to “Iconiq” refer to any or all of Iconiq Strategic Partners, L.P., ICONIQ Strategic Partners-B, L.P. and Iconiq Strategic Partners Co-Invest, L.P., BL Series. We refer to Silver Lake Sumeru, Iconiq, Therese Tucker and Mario Spanicciati collectively as our Principal Stockholders.1 – FinancialI. Financial Informationthousands)thousands, except shares and par values)March 31,
2023December 31,
2022ASSETS Current assets: Cash and cash equivalents $ 222,557 $ 200,968 Marketable securities (amortized cost of $865,420 and $875,456 at March 31, 2023 and December 31, 2022, respectively) Marketable securities (amortized cost of $865,420 and $875,456 at March 31, 2023 and December 31, 2022, respectively) 865,314 874,083 Accounts receivable, net of allowances of $2,990 and $2,282 at March 31, 2023 and December 31, 2022, respectively Accounts receivable, net of allowances of $2,990 and $2,282 at March 31, 2023 and December 31, 2022, respectively 120,419 150,858 Prepaid expenses and other current assets 34,911 23,658 Total current assets 1,243,201 1,249,567 Capitalized software development costs, net 34,374 32,070 Property and equipment, net 18,956 19,811 Intangible assets, net 85,779 90,864 Goodwill 443,861 443,861 Operating lease right-of-use assets Operating lease right-of-use assets 14,066 14,708 Other assets 92,417 92,775 Total assets $ 1,932,654 $ 1,943,656 LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,573 $ 14,964 Accrued expenses and other current liabilities 49,031 58,600 Deferred revenue, current Deferred revenue, current 277,107 279,325 Finance lease liabilities, current Finance lease liabilities, current 1,012 989 Operating lease liabilities, current Operating lease liabilities, current 5,872 5,943 Contingent consideration, current Contingent consideration, current 25,953 8,000 Total current liabilities 363,548 367,821 Finance lease liabilities, noncurrent Finance lease liabilities, noncurrent 528 785 Operating lease liabilities, noncurrent Operating lease liabilities, noncurrent 8,717 9,292 Convertible senior notes, net Convertible senior notes, net 1,385,668 1,384,306 Contingent consideration, noncurrent Contingent consideration, noncurrent 18,702 33,549 Deferred tax liabilities, net 5,487 5,568 Deferred revenue, noncurrent 741 343 Other long-term liabilities 3,119 6,229 Total liabilities 1,786,510 1,807,893 Commitments and contingencies (Note 12) Commitments and contingencies (Note 12) Redeemable non-controlling interest (Note 3) Redeemable non-controlling interest (Note 3) 29,152 23,895 Stockholders' equity: Common stock, $0.01 par value, 500,000,000 shares authorized, 60,477,800 and 60,016,824 issued and outstanding at March 31, 2023 and December 31, 2022, respectively Common stock, $0.01 par value, 500,000,000 shares authorized, 60,477,800 and 60,016,824 issued and outstanding at March 31, 2023 and December 31, 2022, respectively 605 600 Additional paid-in capital 396,403 385,709 Accumulated other comprehensive loss (231) (1,472) Accumulated deficit (279,785) (272,969) Total stockholders' equity 116,992 111,868 Total liabilities, redeemable non-controlling interest, and stockholders' equity Total liabilities, redeemable non-controlling interest, and stockholders' equity $ 1,932,654 $ 1,943,656 Quarter Ended March 31, 2023 2022 Revenues Subscription and support $ 130,426 $ 113,525 Professional services 8,558 6,711 Total revenues 138,984 120,236 Cost of revenues Subscription and support 28,512 24,156 Professional services 6,759 6,517 Total cost of revenues 35,271 30,673 Gross profit 103,713 89,563 Operating expenses Sales and marketing 61,931 60,027 Research and development 27,105 25,248 General and administrative 28,976 29,652 Restructuring costs Restructuring costs 1,014 — Total operating expenses 119,026 114,927 Loss from operations (15,313) (25,364) Other income (expense) Interest income 10,665 518 Interest expense (1,455) (1,447) Other income (expense), net 9,210 (929) Loss before income taxes (6,103) (26,293) Provision for (benefit from) income taxes 628 (12,862) Net loss (6,731) (13,431) Net income (loss) attributable to redeemable non-controlling interest Net income (loss) attributable to redeemable non-controlling interest 85 (3) Adjustment attributable to redeemable non-controlling interest Adjustment attributable to redeemable non-controlling interest 5,192 (3,417) Net loss attributable to BlackLine, Inc. Net loss attributable to BlackLine, Inc. $ (12,008) $ (10,011) Basic net loss per share attributable to BlackLine, Inc. Basic net loss per share attributable to BlackLine, Inc. $ (0.20) $ (0.17) Shares used to calculate basic net loss per share Shares used to calculate basic net loss per share 60,187 59,123 Diluted net loss per share attributable to BlackLine, Inc. Diluted net loss per share attributable to BlackLine, Inc. $ (0.20) $ (0.17) Shares used to calculate diluted net loss per share Shares used to calculate diluted net loss per share 60,187 59,123 5Quarter Ended March 31, 2023 2022 Net loss $ (6,731) $ (13,431) Other comprehensive income (loss): Net change in unrealized losses on marketable securities, net of tax of $0 for the quarters ended March 31, 2023 and 2022 1,266 (47) Foreign currency translation (45) (266) Other comprehensive income (loss) 1,221 (313) Comprehensive loss (5,510) (13,744) Less comprehensive loss attributable to redeemable non-controlling interest: Net income (loss) attributable to redeemable non-controlling interest 85 (3) Foreign currency translation attributable to redeemable non-controlling interest (20) (128) Comprehensive income (loss) attributable to redeemable non-controlling interest 65 (131) Comprehensive loss attributable to BlackLine, Inc. $ (5,575) $ (13,613) STATEMENTSTATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)thousands)thousands except share data)Quarter Ended March 31, 2023 Common Stock Additional
Paid-inAccumulated
Other
ComprehensiveAccumulated Shares Amount Capital Income (Loss) Deficit Total Balance at December 31, 2022 60,017 $ 600 $ 385,709 $ (1,472) $ (272,969) $ 111,868 Stock option exercises 209 2 7,220 — — 7,222 Vesting of restricted stock units 252 3 — — — 3 Acquisition of common stock for tax withholding obligations — — (12,403) — — (12,403) Stock-based compensation — — 21,069 — — 21,069 Other comprehensive income — — — 1,241 — 1,241 Net loss attributable to BlackLine, Inc., including adjustment to redeemable non-controlling interest — — (5,192) — (6,816) (12,008) Balance at March 31, 2023 60,478 $ 605 $ 396,403 $ (231) $ (279,785) $ 116,992 Quarter Ended March 31, 2022 Common Stock Additional
Paid-inAccumulated
Other
ComprehensiveAccumulated Shares Amount Capital Income (Loss) Deficit Total Balance at December 31, 2021 58,984 $ 590 $ 625,883 $ 298 $ (301,735) $ 325,036 Cumulative-effect adjustment related to adoption of ASU 2020-06, net of tax — — (324,418) — 62,288 (262,130) Balance at January 1, 2022 58,984 590 301,465 298 (239,447) 62,906 Stock option exercises 71 1 1,386 — — 1,387 Vesting of restricted stock units 238 2 — — — 2 Acquisition of common stock for tax withholding obligations — — (4,187) — — (4,187) Stock-based compensation — — 16,216 — — 16,216 Other comprehensive loss — — — (185) — (185) Net loss attributable to BlackLine, Inc., including adjustment to redeemable non-controlling interest — — 3,417 — (13,428) (10,011) Balance at March 31, 2022 59,293 $ 593 $ 318,297 $ 113 $ (252,875) $ 66,128 Quarter Ended March 31, 2023 2022 Cash flows from operating activities Net loss attributable to BlackLine, Inc. $ (12,008) $ (10,011) Net gain (loss) and adjustment attributable to redeemable non-controlling interest (Note 3) 5,277 (3,420) Net loss (6,731) (13,431) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 12,004 9,147 Change in fair value of contingent consideration 3,106 (1,816) Amortization of debt issuance costs 1,362 1,357 Stock-based compensation 20,438 15,902 Noncash lease expense 1,498 1,445 Amortization (accretion) of purchase discounts on marketable securities, net (7,519) 95 Net foreign currency (gains) losses 473 (182) Deferred income taxes (187) (14,156) Provision for credit losses 5 28 Changes in operating assets and liabilities: Accounts receivable 30,166 9,459 Prepaid expenses and other current assets (5,268) 2,576 Other assets 467 (2,094) Accounts payable (9,518) 6,555 Accrued expenses and other current liabilities (10,653) (13,815) Deferred revenue (1,820) (460) Operating lease liabilities (1,654) (1,440) Other long-term liabilities (3,302) 1,006 Net cash provided by operating activities 22,867 176 Cash flows from investing activities Purchases of marketable securities (311,246) (335,550) Proceeds from maturities of marketable securities 328,800 328,250 Capitalized software development costs (6,879) (4,657) Purchases of property and equipment (1,676) (1,528) Acquisition, net of cash acquired — (157,738) Net cash provided by (used in) investing activities 8,999 (171,223) Cash flows from financing activities Principal payments under finance lease obligations (241) (106) Proceeds from exercises of stock options 2,411 1,389 Acquisition of common stock for tax withholding obligations (12,403) (4,187) Net cash used in financing activities (10,233) (2,904) Effect of foreign currency exchange rate changes on cash, cash equivalents, and restricted cash (41) (271) Net increase (decrease) in cash, cash equivalents, and restricted cash 21,592 (174,222) Cash, cash equivalents, and restricted cash, beginning of period 201,207 539,991 Cash, cash equivalents, and restricted cash, end of period $ 222,799 $ 365,769 Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets Cash and cash equivalents at end of period $ 222,557 $ 365,522 Restricted cash included within other assets at end of period 242 247 Total cash, cash equivalents, and restricted cash at end of period shown in the consolidated statements of cash flows $ 222,799 $ 365,769 FLOWFLOWS DISCLOSUREQuarter Ended March 31, 2023 2022 Non-cash financing and investing activities Adjustment for adoption of ASU 2020-06 $ — $ 262,130 Estimated fair value of contingent consideration $ — $ 55,947 Stock-based compensation capitalized for software development $ 832 $ 382 Capitalized software development costs included in accounts payable and accrued expenses and other current liabilities at end of period $ 710 $ 995 Purchases of property and equipment included in accounts payable and accrued expenses and other current liabilities at end of period $ 934 $ 454 Receivables from exercises of stock options, including tax withholdings $ 5,933 $ — Notes to Unaudited Condensed Consolidated Financial Statements overviewLos Angeles,Woodland Hills, California and has other local offices in Chicago, Atlanta,Pleasanton, California; New York, Vancouver, London, Paris, Frankfurt, Sydney, Melbourne, Kuala Lumpur,New York; and Westport, Connecticut. We also have international office locations in Australia, Canada, France, Germany, India, Japan, the Netherlands, Poland, Romania, Singapore, and South Africa.the United Kingdom.presentation, significant accounting policiesPresentation, Significant Accounting Policies and recently-issued accounting pronouncements20162022, which was filed with the Securities and Exchange Commission (“SEC”) on March 10, 2017.February 23, 2023. The unaudited condensed consolidated financial statements are unaudited and have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair statement of the condensed consolidated financial statements. The unaudited condensed consolidated balance sheet as ofat December 31, 20162022 was derived from audited financial statements, but does not include all disclosures required by GAAP. The operating results for the quarter and nine months ended September 30, 2017March 31, 2023 are not necessarily indicative of the results expected for the full year ending December 31, 2017.amountsresults could differ from those estimates.Policiesinto the Company’s significant accounting policies from those disclosed inpolicies.audited consolidated financial statements andfiling of the related notes included in theCompany's Annual Report on Form 10-K. During10-K for the nine monthsyear ended September 30, 2017, the Company adopted the new stock compensation guidance and changed its policy to account for forfeitures when they occur and record income tax benefits related to stock awards in the statement of operations, subject to the need for a deferred tax asset valuation allowance – See Recently Issued Accounting Pronouncements.standardsIn May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance related to revenue from contracts with customers. Under this guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The updated standard will replace all existing revenue recognition guidance under GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. In July 2015, the FASB voted to defer the effective date to January 1, 2018, with early adoption beginning January 1, 2017. In March, April, May, and December 2016, the FASB issued amendments to the new guidance relating to reporting revenue on a gross versus net basis, identifying performance obligations and licensing arrangements and other narrow scope improvements. pronouncementswill adopt the new revenue guidance in the first quarterhas evaluated all recent accounting pronouncements and believes that none of 2018 using the full retrospective method to restate each prior reporting period presented. While the Company is currently assessing the impact of the new revenue guidance on its arrangements, we anticipate this standardthem will have a material impacteffect on our consolidatedthe company’s financial statements. The Company currently believes that the new guidance will impact the amount and timing of incremental costs of obtaining a contract, such as sales commissions. The Company generally does not pay sales commissions upon contract renewal.10Accordingly, under the new revenue guidance, the sales commissions will be recognized over an estimated period of benefit rather than over the non-cancelable term under current guidance. The new guidance is also expected to impact the Company’s on-premise solutions subject to current software revenue recognition guidance, asmay be requiredentered into an agreement with Japanese Cloud Computing and M30 LLC (the “Investors”) to recognize as revenueengage in the investment, organization, management, and operation of a significant portionJapanese subsidiary (“BlackLine K.K.”) of the contract consideration upon deliveryCompany that is focused on the sale of the software compared toCompany's products in Japan. In October 2018, the current practice of recognizing the contract consideration ratably over timeCompany initially contributed approximately $4.5 million in cash in exchange for certain arrangements. The new guidance will also require incremental disclosures51% of the Company’s revenue arrangements. The Company is in processoutstanding common stock of quantifying the impact of these changes. Adoption of this standard will also require changes to the Company’s business processes, systems and controls to support the new revenue recognition guidance. The Company is in the process of identifying and implementing such changes.February 2016, the FASB issued new guidance which significantly changes the accounting for leases. The new guidance requires a lessee recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. For income statement purposes, the new guidance retained a dual model, requiring leases to be classified as either operating or financing. Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern similar to existing capital lease guidance. For statement of cash flow purposes, the new guidance also retained the existing dual method, where cash payments for operating leases are reflected in cash flows from operating activities and principal and interest payments for finance leases are reflected in cash flows from financing activities and cash flows from operating activities, respectively. The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. The new guidance requires the recognition and measurement of leases at the beginning of the earliest period presented using a modified retrospective approach. The use of the modified retrospective approach allows an entity to use a number of practical expedients in the application of this new guidance. AlthoughNovember 2021, the Company is evaluatingmade a further investment in BlackLine K.K. of $2.3 million that, including additional investments in BlackLine K.K. of $2.2 million by existing third-party investors in November 2021, maintained the impactCompany's majority ownership of adopting this guidance on its consolidated financial statements, the Company expects that most of its operating lease commitments will be recognized as operating lease liabilities and right-of-use assets upon adoption of the new guidance.In March 2016, the FASB issued new guidance to simplify various aspects relating to accounting for stock-based compensation and related tax impacts, the classification of excess tax benefits on the statement of cash flows, statutory tax withholding requirements, and other stock-based compensation classification matters. The guidance was effective for annual reporting periods beginning after December 15, 2016 and interim periods within those annual periods. The Company adopted this guidance during the first quarter ended March 31, 2017. Upon adoption, the Company changed an accounting policy to account for forfeitures when they occur rather than estimate a forfeiture rate. The impact of this change in policy increased the Company’s accumulated deficit and additional paid-in capital by $0.1 million as of January 1, 2017. The new guidance also requires the Company to record, on a prospective basis, the income tax effects of stock-based compensation awards in the income statement as discrete items, subject to deferred tax asset valuation allowance considerations, in the reporting period in which they occur, which will increase volatility in the Company’s income tax provision in the future to the extent that the Company is able to realize the tax benefits. In addition, upon adoption previously unrecognized tax benefits were recorded as an adjustment to accumulated deficit, subject to assessment for the need for a deferred tax asset valuation allowance, as of January 1, 2017. The Company had $36.7 million of net operating losses related to tax benefits for stock-based compensation awards as of December 31, 2016 which were not recorded as deferred tax assets.51%. As the Company continues to control a majority stake in BlackLine K.K., the entity has been consolidated.full valuation allowance against its deferred tax assets,prescribed formula derived from the adoptiondiscrete revenues of this guidance did not have a material impact onBlackLine K.K. and the Company and may be settled, at the Company’s financial statements.In June 2016, the FASB issued guidance which requires that financial assets measured at amortized costs be presented at the net amount expected to be collected. This guidance amends the accounting for credit losses for available-for-sale securities and purchased financial assetsdiscretion, with credit deterioration. This guidance is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted for any interimCompany stock or annual period after December 15, 2018. The Company has not determined the impact of this guidance on its consolidated financial statements.In November 2016, the FASB issued guidance which requires that restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning and ending total amounts shown on the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those years, and should be applied using a retrospective transition method to each period presented. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company’s restricted cash as of September 30, 2017 and December 31, 2016 was $0.4 million and therefore, the11adoption of this guidance is not expected to have a material impact on the Company’s consolidated statements of cash flows.In February 2017, the FASB issued guidance which simplifies the subsequent measurement of goodwill by no longer requiring an entity to determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Under this new guidance, an entity would perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity would consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. Under the new guidance, an entity continues to have the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.In March 2017, the FASB issued guidance which shortens the amortization period for certain purchased callable debt securities held at a premium. Under this new guidance, an entity would shorten the amortization period of the premium to the earliest call date. This guidance is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. The Company has not determined the impact of this guidance on its consolidated financial statements.In May 2017, the FASB issued guidance to clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Under this guidance an entity should account for the effects of a modification unless all the following are met: 1) The fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification; 2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and 3) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments in this guidance are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017 and should be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted, including adoption in any interim period. The Company is assessing the impact of this guidance but does not regularly or frequently modify the terms of equity awards so the adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.In July 2017, the FASB issued guidance which changes the classification analysis of certain equity-linked financial instruments or embedded features, for example warrants and convertible debt, with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments.cash. As a result, a freestanding equity-linked financial instrument or embedded conversion option no longer would be accounted for as a derivative liability at fair value as a result of the existenceput right available to the Investors in the future, the redeemable non-controlling interest in BlackLine K.K. is classified outside of a down round feature. This new guidance also amends existing earnings per share guidance to recognizepermanent equity in the effectCompany’s consolidated balance sheets, and the balance is reported at the greater of the down round feature when it is triggered. This guidance is effectiveinitial carrying amount adjusted for annualthe redeemable non-controlling interest's share of earnings, or its estimated redemption value. The resulting changes in the estimated redemption amount are recorded within retained earnings or, in the absence of retained earnings, additional paid-in-capital.beginning after December 15, 2018,indicated below:Quarter Ended March 31, 2023 2022 Balance at beginning of period $ 23,895 $ 28,699 Net income (loss) attributable to redeemable non-controlling interest (excluding adjustment to non-controlling interest) 85 (3) Foreign currency translation (20) (128) Adjustment to redeemable non-controlling interest 5,192 (3,417) Balance at end of period $ 29,152 $ 25,151 interim periods within those annual periods. Early adoption is permitted, including adoptionGoodwillMarch 31, 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Trade name $ 15,977 $ (15,312) $ 665 Developed technology 129,258 (57,411) 71,847 Customer relationships 26,089 (14,210) 11,879 Defensive patent 2,333 (945) 1,388 $ 173,657 $ (87,878) $ 85,779 December 31, 2022 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Trade name $ 15,977 $ (14,913) $ 1,064 Developed technology 129,258 (54,462) 74,796 Customer relationships 26,089 (12,552) 13,537 Defensive patent 2,333 (866) 1,467 $ 173,657 $ (82,793) $ 90,864 an interim period. If the guidance is adopted in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. This new guidance may be adopted on a modified retrospective approach by means of a cumulative-effect adjustment to the statement of financial position as of the beginning of the first fiscal year and interim period in which the guidance is effective or on a full retrospective basis. The Company’s warrants to purchase common stock which were exercised in May 2017 were liability classified and recorded at fair value each period as a result of down round features. The Company is assessing the impact of this guidance and its adoption method.12Balance at December 31, 2022 $ 443,861 Additions from acquisitions — Balance at March 31, 2023 $ 443,861 35 – Balance Sheet Componentssheetsheets consisted of the following:following (in thousands):March 31, 2023 Amortized
CostGross
Unrealized
GainsGross
Unrealized
LossesFair Value Marketable securities U.S. treasury securities $ 437,622 $ 279 $ (267) $ 437,634 Corporate bonds 44,767 7 (113) 44,661 Commercial paper 220,309 — — 220,309 U.S. government agencies U.S. government agencies 162,722 98 (110) 162,710 $ 865,420 $ 384 $ (490) $ 865,314 Gross realizedDecember 31, 2022 Amortized
CostGross
Unrealized
GainsGross
Unrealized
LossesFair Value Marketable securities U.S. treasury securities $ 418,941 $ 9 $ (1,047) $ 417,903 Corporate bonds 64,597 3 (296) 64,304 Commercial paper 278,406 — — 278,406 U.S. government agencies 113,512 40 (82) 113,470 $ 875,456 $ 52 $ (1,425) $ 874,083 March 31, 2023 Amortized Cost Fair Value Maturing within 1 year $ 850,631 $ 850,504 Maturing between 1 and 2 years 14,789 14,810 $ 865,420 $ 865,314 onrelated to maturities of marketable securities and net gains and lossesthat were reclassified from accumulated other comprehensive loss to earnings were not materialand included in interest income in the accompanying condensed consolidated statements of operations, was $7.5 million and immaterial for the quarterquarters ended March 31, 2023 and nine months2022, respectively.September 30, 2017. AsMarch 31, 2023 and 2022, there were no realized gains or losses related to sales of September 30, 2017, the Company’s marketable securities haverecognized in the Company's accompanying condensed consolidated statements of operations.contractual maturity within one year.Note 4 – continuous loss position for less than 12 months had an estimated fair value of $364.7 million and $521.8 million, and $0.5 million and $1.4 million of unrealized losses, at March 31, 2023 and December 31, 2022, respectively. There were no marketable securities in a continuous loss position for greater than 12 months at March 31, 2023 or December 31, 2022.expensesExpenses and other current liabilitiesconsistedwere comprised of the following (in thousands):March 31,
2023December 31,
2022Accrued salaries and employee benefits $ 24,670 $ 39,043 Accrued income and other taxes payable 11,300 9,415 Accrued restructuring costs 684 1,737 Other accrued expenses and current liabilities 12,377 8,405 $ 49,031 $ 58,600 56 – Fair value measurementsMarch 31, 2023 Level 1 Level 2 Level 3 Total Cash equivalents Money market funds $ 98,874 $ — $ — $ 98,874 Commercial paper Commercial paper — 50,509 — 50,509 U.S. government agencies U.S. government agencies — 18,381 — 18,381 Marketable securities U.S. treasury securities 437,634 — — 437,634 Corporate bonds — 44,661 — 44,661 Commercial paper — 220,309 — 220,309 U.S. government agencies U.S. government agencies — 162,710 — 162,710 Total assets $ 536,508 $ 496,570 $ — $ 1,033,078 Liabilities Contingent consideration $ 8,000 $ — $ 36,655 $ 44,655 Total liabilities $ 8,000 $ — $ 36,655 $ 44,655 The following table summarizes the changes in the common stock warrant liability (in thousands):In May 2017, warrants to purchase 499,999 shares of common stock were net exercised resulting in the issuance of 428,033 shares of common stock and, accordingly, there we be no future changes in the fair value.December 31, 2022 Level 1 Level 2 Level 3 Total Cash equivalents Money market funds $ 101,919 $ — $ — $ 101,919 Commercial paper — 59,405 — 59,405 Marketable securities U.S. treasury securities 417,903 — — 417,903 Corporate bonds — 64,301 — 64,301 Commercial paper — 278,406 — 278,406 U.S. government agencies — 113,471 — 113,471 Total assets $ 519,822 $ 515,583 $ — $ 1,035,405 Liabilities Contingent consideration $ 8,000 $ — $ 33,549 $ 41,549 Total liabilities $ 8,000 $ — $ 33,549 $ 41,549 Quarter Ended March 31, 2023 2022 Beginning fair value $ 41,549 $ 20,732 Additions in the period Additions in the period — 55,947 Change in fair value 3,106 (1,816) Ending fair value $ 44,655 $ 74,863 Note 6 – Commitments and contingenciesOperating Leases - has various non-cancelable operating leasesclassified the marketable debt securities as available-for-sale debt securities at the time of purchase and reevaluated such classification as of each balance sheet date. The valuation techniques used to measure the fair values of our instruments that were classified as Level 1 were derived from quoted market prices for its corporate and international offices. These leases expire at various times through 2024. Certain lease agreements contain renewal options, rent abatement, and escalation clauses and entitleidentical instruments in active markets. The valuation techniques used to measure the Company to receive a tenant allowancefair values of Level 2 instruments were derived from the landlord. The Company records tenant allowances as a deferred rent credit, which the Company amortizes on a straight-line basis, as a reduction of rent expense, over the term of the underlying lease.Contingent Consideration - On September 3, 2013, BlackLine Systems, Inc. was acquired by BlackLine, Inc. (the “2013 Acquisition”). broker reports that utilized quoted market prices for similar instruments.requiredobligated to pay additional cash consideration to certain equity holders ifsince the Company realizes a tax benefit fromrealized taxable income for the use of net operating losses generated from the stock option exercises concurrent with the 2013 Acquisition.year ended December 31, 2022. The maximum contingent cash consideration payable of $8.0 million is due on or before November 15, 2023. Accordingly, at March 31, 2023, the additional cash consideration was classified as a Level 1 liability.$8.0$73.2 million. TheChanges in the significant inputs used in the fair value measurement, specifically a change in new and incremental combined bookings from FourQ and the Company, can significantly impact the fair value of the contingent consideration liability. At March 31, 2023, the fair value of the contingent consideration liability was $5.6 million and $5.2 million as of September 30, 2017 and December 31, 2016, respectively.Litigation - From time to time, the Company may become subject to legal proceedings, claims and litigation arising$36.7 million.ordinary coursefair value of business. The Company is not currently a party to any legal proceedings, nor is it aware of any pending or threatened litigation, that would have a material adverse effect on the Company’s business, results of operations, cash flows or financial condition should such litigation be resolved unfavorably.Indemnification - In the ordinary course of business, the Company may provide indemnification of varying scopecontingent consideration are recorded as general 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 the Company, or from intellectual property infringement claims made by third parties. These indemnification provisions may survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is indeterminable. The Company has never paid a material claim, nor has it been suedadministrative expenses in connection with these indemnification arrangements. As of September 30, 2017 and December 31, 2016, the Company has not accrued a liability for these indemnification arrangements because the likelihood of incurring a payment obligation, if any, in connection with these indemnification arrangements is not probable or reasonably estimable.Note 7 – Stock-based compensation plansStock-based compensationThe following table summarizes the stock-based compensation that has been included in the following line items within the unaudited condensed consolidated statements of operationsoperations.March 31,
2023December 31,
2022Liability: Principal $ 250,000 $ 250,000 Unamortized debt issuance costs (1,748) (2,069) Net carrying amount $ 248,252 $ 247,931 On July 21, 2017,Company modified2024 Notes at face value less unamortized issuance costs on the vesting terms of optionsaccompanying condensed consolidated balance sheets and presents the fair value for certain Australian employees to purchase 219,000 shares of common stock to a time-based vesting schedule. Prior todisclosure purposes only. The estimated fair value was determined based on the modification, the options vested solely upon a change in controlactual bids and offers of the Company.2024 Notes in an over-the-counter market on the last trading day of the period. The Company recorded $5.8estimated fair value of the 2024 Notes, based on a market approach at March 31, 2023, was approximately $270.5 million, of stock-based compensation inwhich represents a Level 2 valuation.September 30, 2017 relatingMarch 31, 2023, the Company recognized $0.3 million of interest expense related to this modification. In addition,the amortization of issuance costs and $0.1 million of coupon interest expense. During the quarter ended March 31, 2022, the Company recognized $0.3 million of interest expense related to the amortization of debt issuance costs and $0.1 million of coupon interest expense. March 31,
2023December 31,
2022Liability: Principal $ 1,150,000 $ 1,150,000 Unamortized debt issuance costs (12,584) (13,625) Net carrying amount $ 1,137,416 $ 1,136,375 Balance at December 31, 2022 $ 1,737 Restructuring charges and adjustments 1,014 Cash payments (2,067) Balance at March 31, 2023 $ 684 Quarter Ended March 31, 2023 2022 Cost of revenues $ 2,352 $ 1,714 Sales and marketing 6,483 5,924 Research and development 3,824 2,897 General and administrative 7,779 5,367 $ 20,438 $ 15,902 additional $1.1asset was $0.8 million relating to the modification of an award in connectionand $0.4 million, respectively.Outstanding at December 31, 2022 2,431 Granted — Exercised (213) Forfeited/canceled (16) Outstanding at March 31, 2023 2,202 Nonvested at December 31, 2022 2,202 Granted 1,117 Vested (383) Forfeited/canceled (67) Nonvested at March 31, 2023 2,869 the termination of an employee.Nonvested at December 31, 2022 69 Granted 142 Vested (41) Performance adjustment (28) Forfeited/canceled (4) Nonvested at March 31, 2023 138 Nonvested at December 31, 2022 138 Granted 141 Forfeited/canceled (48) Nonvested at March 31, 2023 231 Nonvested at December 31, 2022 189 Granted — Vested — Forfeited/canceled (126) Nonvested at March 31, 2023 63 810 – Income taxes34%21% primarily as a result of state taxes, foreign taxes, and changes in the Company’s valuation allowance for domestic income taxes. For the quarterquarters ended September 30, 2017March 31, 2023 and 2016,2022, the Company recorded $0.2$0.6 million in income tax expense related to foreign taxes and $1.8$12.9 million in income tax benefit, respectively. For the nine months ended September 30, 2017 and 2016, the Company recorded $0.1 million in income tax expense related to foreign taxes and $4.6 million in income tax benefit, respectively. The $13.5 million difference between the $0.6 million income tax expense for the quarter ended March 31, 2023, and the $12.9 million income tax benefit for the 2016 period wasquarter ended March 31, 2022, resulted primarily from the partial release of $14.0 million of existing valuation allowance recognized during the quarter ended March 31, 2022, along with changes in the mix of profitable jurisdictions. For the quarters ended March 31, 2023 and 2022, for purposes of calculating its income tax attributed to continuing operations, the Company continued to maintain a result of the amortization offull valuation allowance on its U.S. federal and state net deferred tax liabilities recordedassets as it was more likely than not that those deferred tax assets will not be realized.Quarter Ended March 31, 2023 2022 Numerator: Net loss attributable to BlackLine, Inc. $ (12,008) $ (10,011) Denominator: Weighted average shares 60,187 59,123 Add: Dilutive effect of securities — — Shares used to calculate diluted net loss per share 60,187 59,123 Basic net loss per share attributable to BlackLine, Inc. $ (0.20) $ (0.17) Diluted net loss per share attributable to BlackLine, Inc. $ (0.20) $ (0.17) Quarter Ended March 31, 2023 2022 Stock options - service-only vesting conditions 2,202 2,657 Restricted stock units - service-only vesting conditions 2,869 1,271 Restricted stock units - performance and service conditions 370 — Restricted stock units - performance, market, and service conditions 63 — Total shares excluded from net loss per share 5,504 3,928 resultnotice of the 2013 Acquisition.redemption.912 – Net loss per shareBasicCommitments and diluted loss per shareContingenciescalculated by dividing net lossnot currently a party to any legal proceedings, nor is it aware of any pending or threatened litigation that would have a material adverse effect on the Company’s business, operating results, cash flows, or financial condition should such litigation be resolved unfavorably.weighted average numberCompany, or from intellectual property infringement claims made by third parties. These indemnification provisions may survive termination of sharesthe underlying agreement and the maximum potential amount of common stock outstanding. Asfuture payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is indeterminable. The Company has never paid a material claim, nor has it been sued in connection with these indemnification arrangements. At March 31, 2023 and December 31, 2022, the Company has net lossesnot accrued a liability for these indemnification arrangements because the periods presented all potentially dilutive common stock, which are comprisedlikelihood of stock optionsincurring a payment obligation, if any, in connection with these indemnification arrangements was not probable or reasonably estimable.warrants, are antidilutive.The following potentially dilutive shares have been excluded fromPerformance Obligationscalculationquarters ended March 31, 2023 and 2022, respectively, that was previously included in the deferred revenue balance at December 31, 2022 and 2021, respectively. diluted net loss per share attributable to common stockholders because they are antidilutive (in thousands):Note 10 - Business combinationsOn August 31, 2016, the Company acquired Runbook Company B.V., a Netherlands-based provider of licensed financial close automation software and integration for SAP customers, or Runbook, which the Company refersexpects to recognize approximately 56% over the next 12 months and the remainder thereafter.“Runbook Acquisition.” The primary purposenature, amount, timing, and uncertainty of the Runbook Acquisition was to enhance our position as a leading provider of software solutions to automate the financial close process for SAP customersits revenues and secondarily it supports our European expansion strategy.presentssets forth the Company’s unaudited pro forma information, as if the acquisition occurred on January 1, 2015revenues by geographic region (in thousands):Quarter Ended March 31, 2023 2022 United States $ 100,012 $ 85,682 International 38,972 34,554 $ 138,984 $ 120,236 The pro forma results reflect certain adjustments for the depreciation and amortization of the fair value of the intangible assets acquired and related tax adjustments. Such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisition been completed on the date indicated, nor is it indicative of the future operating results of the Company.16 consolidated 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, 20162022 filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 10, 2017February 23, 2023 (“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. intercompany accounting and controls assurance. By introducing software to automate these processes and to enable them to function continuously, we empower our customers to improve the integrity of their financial reporting, increase efficiency in their accounting and finance processes and enhance real-time visibility into their operations.As of September 30, 2017,more than 2,000 customers with over 186,000369,493 individual users in over 130 countries exclusive of our acquisition of Runbook Company B.V., a Netherlands based provider of financial close automation software and integration solutions for SAP customers, (“Runbook”) on August 31, 2016 (the “Runbook Acquisition”). Weacross 4,236 customers. Additionally, we continue to build strategic relationships with technology vendors, professional services firms, business process outsourcers, and resellers.We are a holding company and conduct our operations through our wholly-owned subsidiary, BlackLine Systems, Inc. (“BlackLine Systems”). BlackLine Systems funded its business with investments from our founder and cash flows from operations until September 3, 2013. On September 3, 2013, we acquired BlackLine Systems, and Silver Lake Sumeru and Iconiq acquired a controlling interest in us, which we refer to as the “2013 Acquisition.” The 2013 Acquisition was accounted for as a business combination under GAAP and resulted in a change in accounting basis as of the date of the 2013 Acquisition. platform consists of eight core cloud-based products includinginclude Account Reconciliations, Transaction Matching, Account Reconciliations, Consolidation Integrity Manager, Daily Reconciliations,Task Management, Journal Entry, Variance Analysis, Financial Reporting Analytics, Compliance, BlackLine Cash Application, Credit & Risk Management, Collections Management, Disputes & Deductions, Team & Task Management, AR Intelligence, Intercompany Create, Intercompany Balance and Insights. CustomersResolve, and Intercompany Netting and Settlement. These products are offered to customers as scalable solutions that support critical accounting processes, such as the financial close, account reconciliations, cash application, intercompany accounting, and compliance.purchase these productsinvoice customers annually in packagesadvance for subscriptions which is initially recorded as deferred revenue and recognized ratably over the term of the customer contract. The first year of subscription fees are typically payable within 30 days after execution of a contract, and thereafter upon renewal.refer toinvoice in advance and is initially recorded as solutions, but they havedeferred revenue and recognized on a proportional-performance basis as the option to purchase these products individually. Current solutions include Finance Transformation, Accounting Process Automation, Close Process Management, Balance Sheet Integrity, Intercompany Hub and Smart Close.platformsolutions primarily through our direct sales force, which leverages our relationships with technology vendors, professional services firms and business process outsourcers. In particular, we have a strategic relationship with SAP. Ourour solution is a SAP endorsed business solution that integrates with SAP’s ERP solutions. Underenterprise resource planning (“ERP”) solutions, and SAP is part of the reseller channel that we use in the ordinary course of business. SAP has the ability to resell our agreement withsolutions, as an SAP solution-extension (“SolEx”), for which we receive a percentage of the revenues. In the first quarter of 2022, we entered into an agreement with Google Cloud in 2013, we pay SAP a fee basedwhich the two companies will collaborate on a percentage of revenues from ourjoint selling and go-to-market activities and bring enhanced automation solutions for finance and accounting to new customers that use a SAP ERP system. We continue to pay SAP a fee for these customers over the term of their subscription agreements. For the quarter and nine months ended September 30, 2017, revenues from our customers that use a SAP ERP solution accounted for $8.8 million, or 19%, and $23.5 million, or 19%, respectively, of our total revenues. Additionally, we are expanding our channel of resellers, particularly in markets outside of the United States.We target our sales and marketing efforts at both enterprise and mid-market businesses. We define the enterprise market as companies with greater than $500 million in annual revenue, and we define mid-market as companies with between $50 and $500 million in annual revenue. For the quarter ended September 30, 2017, sales to enterprise and mid-market customers represented 83% and 17% of our revenues, respectively. For the nine months ended September 30, 2017, sales to enterprise and mid-market customers represented 84% and 16% of our revenues, respectively. Additionally, we target our efforts at both new customers and existing customers. Existing customers may renew their subscriptions and broaden the deployment of our platform across their organizations by increasing the number of users accessing our platform or by adding additional products.17In the second quarter of 2017, we began an initiative to align our sales team to help streamline the customer experience. abilitywillingness of customers to purchase additional user licenses and products from us. We rely on our sales teamand customer success teams to support new and grow our existing customers by maintaining high customer growthsatisfaction and maintain customer satisfaction. Ineducating customers on the quarter ended September 30, 2017, as we continue to alignvalue all our sales efforts, our dollar-based net revenue retention rate declined.thea potential customer and deal,contract, as well as the type of solution or product being purchased. The sales cycle for our global enterprise customers is generally longer thandealscontracts and for more complex, strategic products like Intercompany Hub.Financial Management. As we continue to focus on increasing our average dealcontract size and selling more strategic products, we expect our sales cycle to lengthen and become less predictable, which could cause variability in our results for any particular period.higherhigh 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. This can be attributed to buying patterns typical in the software industry. As the terms of most of our customer agreements are measured in full year increments, agreements initially entered into during the fourth quarter or last month of any quarter will generally come up for renewal at that same time in subsequent years. This seasonality is reflected in our revenues, though the impact to overall annual or quarterly revenues is minimal due to the fact that we recognize subscription revenue ratably over the term of the customer contract.September 30, 2017March 31, 2023 and 2016,2022, we had revenues of $45.9totaling $139.0 million and $32.2$120.2 million, respectively, and we incurred net losses attributable to BlackLine, Inc. of $13.1$12.0 million and $6.6$10.0 million, respectively.Fornine months ended September 30, 2017impact of changes in our industry or the global economy on us or our customers. General macroeconomic conditions, such as a recession or rising inflation rates, an economic downturn in the United States or internationally, adverse business conditions and 2016,liquidity concerns, or bank failures or instability in the financial services section, could adversely affect demand for our products and make it difficult to accurately forecast and plan our future business activities. In recent quarters, as a result of economic uncertainty, we had revenueshave seen customers delay and defer purchasing decisions, which has adversely impacted our near-term demand.$126.8 millionthe COVID-19 pandemic on our business, operating results, and $87.8 million, respectively,overall financial performance remains uncertain. While the COVID-19 related restrictions have eased in many locations, we are and will continue to actively monitor the situation and may take further actions that alter our business operations, as may be required by federal, state, or local authorities, or that we determine are in the best interests of our employees, customers, partners, suppliers, and stockholders.net lossesin the fourth quarter of $32.2 millionfiscal 2022 and $23.5 million, respectively. Each of the metrics below exclude the impact of the Runbook Acquisition.Mar. 31, 2022 Jun. 30, 2022 Sep. 30, 2022 Dec. 31, 2022 Mar. 31, 2023 Dollar-based net revenue retention rate 110 % 110 % 109 % 107 % 106 % Number of customers 3,897 4,003 4,060 4,188 4,236 Number of users 337,939 347,932 354,924 366,522 369,493 an entity with an activea company that contributes to our subscription agreementand 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 ended March 31, 2023 and nine months ended September 30, 2017 and 2016,2022, no single customer accounted for more than 10% of our total revenues.18WeWhile the fees for the majority of the products we sell are also beginning to selluser-based, we are seeing an increasing numbervolume of transactions for our non-user based strategic products.Quarter Ended March 31, 2023 2022 (in thousands, except percentages) GAAP gross profit $ 103,713 $ 89,563 GAAP gross margin 74.6 % 74.5 % GAAP net loss attributable to BlackLine, Inc. $ (12,008) $ (10,011) Non-GAAP Revenues. Non-GAAP revenues are defined as GAAP revenues adjusted for the impact of purchase accounting resulting from the Runbook Acquisition. The impact of purchase accounting reduced recorded GAAP revenues during the quarters ended September 30, 2016 and December 31, 2016 but did not impact GAAP revenues for the quarter and nine months ended September 30, 2017. We believe that presenting non-GAAP revenues is useful to investors as it eliminates the impact of the purchase accounting adjustment to Runbook revenues to allow for a direct comparison of revenues between periods.Quarter Ended March 31, 2023 2022 (in thousands, except percentages) Non-GAAP gross profit $ 109,672 $ 93,886 Non-GAAP gross margin 78.9 % 78.1 % Non-GAAP net income attributable to BlackLine, Inc. $ 25,100 $ 702 Margin.Margin. Non-GAAP gross profit is defined as non-GAAPGAAP revenues less GAAP cost of revenue adjusted for the impact of purchase accounting resulting from the Runbook Acquisition, the amortization of acquired developed technology, resulting fromtransaction-related costs (including, but not limited to, accounting, legal, and advisory fees related to the 2013 Acquisition and the Runbook Acquisitiontransaction, as well as transaction-related retention bonuses), and stock-based compensation. Non-GAAP gross margin is defined as non-GAAP gross profit divided by non-GAAPGAAP revenues. We believe that presenting non-GAAP gross margin is useful to investors as it eliminates the impact of certain non-cash expenses and allows a direct comparison of gross margin between periods.Loss.Income (loss) attributable to BlackLine and Diluted Non-GAAP Net Income (loss) attributable to BlackLine, Inc. per share. Non-GAAP net lossincome (loss) attributable to BlackLine is defined as GAAP net lossincome (loss) attributable to BlackLine adjusted for the impact of the benefit fromprovision for (benefit from) income taxes that we were ablerelated to recognize as a resultacquisitions, amortization of the deferred tax liabilities associated with the intangible assets, established uponstock-based compensation, the 2013 Acquisition and the Runbook Acquisition, the impact of purchase accounting to revenues resulting from the Runbook Acquisition, amortization of acquired intangible assets resultingdebt issuance costs from the 2013 Acquisition and the Runbook Acquisition, stock-based compensation, accretion of debt discount pertaining to the 2013 Term Loan, accretion of warrant discount relating to warrants issued in connection with the 2013 Term Loan,our convertible notes, the change in the fair value of contingent consideration, transaction-related costs, legal settlement gains or costs, impairment of cloud computing implementation costs, restructuring costs, the change in fairadjustment to the value of the common stock warrant liability, acquisition costs relatedredeemable non-controlling interest to the Runbook Acquisition,redemption amount, and costs incurred in connection with our secondary offering.loss on extinguishment oflossincome (loss) attributable to BlackLine is useful to investors as it eliminates the impact of items that have been impacted by the 2013 Acquisition and the Runbook Acquisition, purchase accountingCompany’s acquisitions and other related costs in order to allow a direct comparison of net loss between current and future periods.19 revenues, gross profit, gross margin and net loss, the most comparable GAAP measures, to non-GAAP revenues, non-GAAP gross profit, non-GAAP gross margin and non-GAAP net loss:income:Quarter Ended March 31, 2023 2022 (in thousands, except percentages) Non-GAAP Gross Profit: Gross profit $ 103,713 $ 89,563 Amortization of acquired developed technology 2,949 2,337 2,797 1,714 Transaction-related costs 213 272 Total non-GAAP gross profit $ 109,672 $ 93,886 Gross margin 74.6 % 74.5 % Non-GAAP gross margin 78.9 % 78.1 % Non-GAAP Net Income Attributable to BlackLine, Inc.: Net loss attributable to BlackLine, Inc. $ (12,008) $ (10,011) Benefit from income taxes (181) (13,136) Amortization of intangible assets 5,085 4,162 20,740 15,840 Amortization of debt issuance costs 1,362 1,357 Change in fair value of contingent consideration 3,106 (1,816) Transaction-related costs 790 7,033 Legal settlement costs — 690 Restructuring costs 1,014 — Adjustment to redeemable non-controlling interest 5,192 (3,417) Total non-GAAP net income attributable to BlackLine, Inc. $ 25,100 $ 702 20indicated.indicated:Quarter Ended March 31, 2023 2022 (in thousands) Revenues Subscription and support $ 130,426 $ 113,525 Professional services 8,558 6,711 Total revenues 138,984 120,236 Cost of revenues Subscription and support 28,512 24,156 Professional services 6,759 6,517 Total cost of revenues 35,271 30,673 Gross profit 103,713 89,563 Operating expenses Sales and marketing 61,931 60,027 Research and development 27,105 25,248 General and administrative 28,976 29,652 Restructuring costs Restructuring costs 1,014 — Total operating expenses 119,026 114,927 Loss from operations (15,313) (25,364) Other income (expense) Interest income 10,665 518 Interest expense (1,455) (1,447) Other income (expense), net 9,210 (929) Loss before income taxes (6,103) (26,293) Provision for (benefit from) income taxes 628 (12,862) Net loss (6,731) (13,431) Net income (loss) attributable to redeemable non-controlling interest Net income (loss) attributable to redeemable non-controlling interest 85 (3) Adjustment attributable to non-controlling interest Adjustment attributable to non-controlling interest 5,192 (3,417) Net loss attributable to BlackLine, Inc. Net loss attributable to BlackLine, Inc. $ (12,008) $ (10,011) QuarterQuarters Ended March 31, 2023 and Nine Months Ended September 30, 2017 and 2016Total 2022Quarter Ended March 31, Change 2023 2022 $ % (in thousands, except percentages) Subscription and support $ 130,426 $ 113,525 $ 16,901 15 % Professional services 8,558 6,711 1,847 28 % Total revenues $ 138,984 $ 120,236 $ 18,748 16 % March 31, 2023 2022 Dollar-based net revenue retention rate 106 % 110 % Number of customers 4,236 3,897 Number of users 369,493 337,939 21and nine months ended September 30, 2017,March 31, 2023, compared to the quarter and nine months ended September 30, 2016,March 31, 2022, was primarily due to ana net increase in the number of customers an increase in the number ofand users added by existing customers and an increase in the number of products purchased by existing customers in the period.customers. The total number of customers and users at March 31, 2023, increased by 29% while the total number9% and 9%, respectively, as compared to March 31, 2022.users increased by 19% between September 30, 2016 and September 30, 2017.Total cost of revenuesQuarter Ended March 31, Change 2023 2022 $ % (in thousands, except percentages) Subscription and support $ 28,512 $ 24,156 $ 4,356 18 % Professional services 6,759 6,517 242 4 % Total cost of revenues $ 35,271 $ 30,673 $ 4,598 15 % Gross margin 74.6 % 74.5 % September 30, 2017,March 31, 2023, compared to the quarter ended September 30, 2016,March 31, 2022, was primarily due to a $2.2 million increase in salaries, benefits and stock-based compensation; a $0.3the following:technology; a $0.2technology due to net additions to software placed into service;increase in depreciation and amortization; a $0.2 million increase in data center costs; a $0.1 millionnet increase in computer software expenses; and a $0.1 milliondata center expenses due to higher spend on cloud hosting services as customers continue to migrate to the Google Cloud Platform, as well as an increase in travel-related costs. Salaries, benefits and stock-based compensation increased primarily due to growth in headcount, which increased by 22% between September 30, 2016 and 2017. Amortization of our capitalized software development costs increased due to larger total capitalized costs as we expanded the functionality of our solutions. Amortization of developed technology increased due to the Runbook Acquisition, which closed on August 31, 2016.The increase in cost of revenues for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, was primarily due to a $6.0purchases;increase in salaries, benefits and stock-based compensation; a $0.7 million increase in amortization of developed technology; a $0.7 million increase in depreciation and amortization; a $0.6 million increase in data center costs; a $0.4 million increase in overhead-related expenses; a $0.3 million increase in computer software expenses; and a $0.3 million increase in travel-related costs. Thenet increase in salaries, benefits, and stock-based compensation wasdriven primarily driven by anhigher cost of revenues-related headcount; andheadcount. Amortization of our capitalized software development costs increased duedepreciation and amortization attributed to larger total capitalized costs as we expanded the functionality of our solutions. Amortization of developed technology increased due tofrom the Runbook Acquisition, which closed on August 31, 2016.Gross margin remained relatively flat during the quarter and nine months ended September 30, 2017, compared to the quarter and nine months ended September 30, 2016.Quarter Ended March 31, Change 2023 2022 $ % (in thousands, except percentages) Sales and marketing $ 61,931 $ 60,027 $ 1,904 3 % Percentage of total revenues 44.6 % 49.9 % September 30, 2017,March 31, 2023, compared to the quarter ended September 30, 2016,March 31, 2022, was primarily due to a $7.3the following:compensation; a $3.9compensation driven primarily by higher bonuses and commissions;salaries, sales commissionstrade show expenses; and incentives; a $1.5and trade shows; a $1.0expenses; partially offset byincreasedecrease in commissions payable to third-party partners;professional fees; and a $0.5increasedecrease in travel-related costs. The increase in our stock-based compensation was primarilytransaction-related costs related to modifications made to Australian stock option awards in the quarter ended September 30, 2017. The increase in salaries, sales commissions and incentives was primarily driven by an increase in headcount and revenue growth. Our sales and marketing headcount increased by 29% between September 30, 2016 and 2017. The increases in commissions payable to third party-partners was primarily driven by the expansion of our relationships with technology vendors, including SAP. The increase in advertising and trade shows was primarily22due to an increase in our marketing efforts. Travel-related costs have increased due to the expansion of our sales organization.The increase in sales and marketing expenses for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, was primarily due to a $9.9 million increase in salaries, sales commissions and incentives; a $7.3 million in stock-based compensation; a $3.6 million increase in advertising and trade shows; a $2.8 million increase in commissions payable to third-party partners; a $1.0 million increase in travel-related costs; a $0.6 million increase in overhead-related expenses; and a $0.4 million increase in computer software expenses. The increase in salaries, sales commissions and incentives was primarily driven by an increase in headcount and revenue growth. The increase in our stock-based compensation was primarily related to modifications made to Australian stock option awards in the quarter ended September 30, 2017. The increases in commissions payable to third party-partners was primarily driven by the expansion of our relationships with technology vendors, including SAP. The increase in advertising and trade shows was primarily due to an increase in our marketing efforts. Travel-related costs have increased due to the expansion of our sales organization.Quarter Ended March 31, Change 2023 2022 $ % (in thousands, except percentages) Research and development, gross Research and development, gross $ 32,879 $ 29,571 $ 3,308 11 % Capitalized internally developed software costs Capitalized internally developed software costs (5,774) (4,323) (1,451) 34 % Research and development, net Research and development, net $ 27,105 $ 25,248 $ 1,857 7 % Percentage of total revenues 19.5% 21.0% September 30, 2017,March 31, 2023, compared to the quarter ended September 30, 2016,March 31, 2022, was primarily due to a $0.9the following:and benefits, and a $0.3 million increase in professional services expense, partially offset by a $0.6 million decrease in capitalized software costs. Our research and development headcount increased by 9% between September 30, 2016 and 2017.The increase in research and development expenses for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, wasstock-based compensation driven primarily due to a $2.5 million increase in salaries and benefits; a $0.5 million increase in professional services expense; and a $0.2 million increase in travel-related costs, partially offset by a $1.0 million decrease in capitalized software costs. The increase in salaries and benefits was primarily driven by an increase in average headcount; andQuarter Ended March 31, Change 2023 2022 $ % (in thousands, except percentages) General and administrative $ 28,976 $ 29,652 $ (676) (2)% Percentage of total revenues 20.8% 24.7% increasedecrease in general and administrative expenses for the quarter ended September 30, 2017,March 31, 2023, compared to the quarter ended September 30, 2016,March 31, 2022, was primarily due to a $1.3the following:compensation; a $0.6 millioncompensation due to an increase in bad debt expenses primarily related to older receivables for on-premise license receivables; and a $0.2 million increase in depreciation and amortization. average headcount. Quarter Ended March 31, Change 2023 2022 $ % (in thousands, except percentages) Restructuring costs $ 1,014 $ — $ 1,014 N/M salaries, benefits and stock-based compensation was primarily driven by a 32% increase in our general and administrative headcount between September 30, 2016 and 2017. The increases in general and administrative expenses were partially offset by a $0.6 million decrease in professional services expense and a $0.4 million increase in foreign currency gains primarily related to foreign-denominated cash andrestructuring costs during the timing of accounts receivable settlements between quarters. 23The increase in general and administrative expenses for the nine monthsquarter ended September 30, 2017,March 31, 2023, compared to the nine monthsquarter ended September 30, 2016,March 31, 2022, was primarily due to a $2.9 million increase in salaries, benefits and stock-based compensation; a $2.5 million increase in professional services expense; a $0.5 million increase in depreciation and amortization; a $0.5 million increase in bad debtseverance costs for which there were no expenses primarily related to older receivables for on-premise license receivables; and a $0.5 million increase in other taxes. The increase in salaries, benefits and stock-based compensation was primarily driven by an increase in headcount. The increase in professional services expense comprised primarily of legal, accounting and consulting costs associated with being a public company and costs associated with the secondary offering that was completed in the quarter ended June 30, 2017. The increases in general and administrative expenses were partially offset by a $1.2 million increase in foreign currency gains primarily relatedprior comparative quarter. Refer to foreign-denominated cash and the timing of accounts receivable settlements between quarters. Quarter Ended March 31, Change 2023 2022 $ % (in thousands, except percentages) Interest income $ 10,665 $ 518 $ 10,147 N/M forduring the quarter and nine months ended September 30, 2017,March 31, 2023, compared to the quarter and nine months ended September 30, 2016,March 31, 2022, was primarily due to increased average interest earned fromrates on our investments in marketable securities. In November 2016, we completed our initial public offering and used a portion of the proceeds to invest in marketable securities.Quarter Ended March 31, Change 2023 2022 $ % (in thousands, except percentages) Interest expense $ 1,455 $ 1,447 $ 8 1 % The decrease in interestforduring the quarter and nine months ended September 30, 2017,March 31, 2023, compared to the quarter ended March 31, 2022, was essentially flat and nineconsisted of interest expense on our convertible senior notes. We do not expect interest expense to fluctuate significantly over the next 12 months ended September 30, 2016, was due toas the termination ofinterest rates on our credit facility and associated repayment of term loans in November 2016.Change in fair value of common stock warrant liabilityWe valued our common stock warrants using a binomial lattice model. The primary input into the binomial lattice model was the fair value of our common stock. The fair value of our common stock increased by approximately 26% between January 1, 2017 and May 26, 2017, the date the warrants were exercised, increasing our common stock liability by $3.5 million. There was no significant change in the value of our common stock during the quarter and nine months24ended September 30, 2016. The stock warrants were exercised on May 26, 2017 and, accordingly, there will be no future changes in the fair value recorded through earnings.Quarter Ended March 31, Change 2023 2022 $ % (in thousands, except percentages) Provision for (benefit from) income taxes $ 628 $ (12,862) $ 13,490 (105) % OurFor the quarter ended March 31, 2023, our annual estimated effective tax rate differsdiffered from the U.S. federal statutory rate of 34%21% primarily as a result of state taxes, foreign taxes, and changes in our valuation allowance for domestic income taxes.quarterquarters ended September 30, 2017March 31, 2023 and 2016, we2022, the Company recorded $0.2$0.6 million in income tax expense and $1.8$12.9 million in income tax benefit.benefit, respectively. The decrease in$13.5 million difference between the $0.6 million income tax expense for the quarter ended March 31, 2023, and the $12.9 million income tax benefit for the quarter ended September 30, 2017, compared toMarch 31, 2022, resulted primarily from the partial release of $14.0 million of existing valuation allowance recognized during the quarter ended September 30, 2016, was related to the full valuation allowance recorded against our U.S. federal and state net deferred tax assetsMarch 31, 2022, along with changes in the fourth quartermix of 2016 when our deferred tax assets exceeded our deferred tax liabilities. We continue to maintain a full valuation allowance on our U.S. federal and state net deferred tax assets as it is more likely than not that those deferred tax assets will not be realized.For the nine months ended September 30, 2017 and 2016, we recorded $0.1 million in income tax expense and $4.6 million in income tax benefit, respectively. The decrease in the income tax benefit for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, was related to the full valuation allowance recorded against our U.S. federal and state net deferred tax assets in the fourth quarter of 2016 when our deferred tax assets exceeded our deferred tax liabilities. We continue to maintain a full valuation allowance on our U.S. federal and state net deferred tax assets as it is more likely than not that those deferred tax assets will not be realized.September 30, 2017,March 31, 2023, our principal sources of liquidity were $109.8 millionan aggregate of $1.1 billion of cash and cash equivalents and marketable securities, which primarily consist of short-term, investment-grade U.S. treasury securities, corporate bonds, commercial paper corporate bonds, U.S. treasury bonds, and asset-backedgovernment agency securities. We had $1.4 billion aggregate principal amount of Notes outstanding at March 31, 2023. Total Less than 1 Year 1-3 Years 3-5 Years Thereafter Letters of credit $ 338 $ — $ 34 $ 242 $ 62 WeFrom 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 couldwould 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.Historical 25Quarter Ended March 31, 2023 2022 (in thousands) Net cash provided by operating activities $ 22,867 $ 176 Net cash provided by (used in) investing activities $ 8,999 $ (171,223) Net cash used in financing activities $ (10,233) $ (2,904) interestlease expense, related to accretion and write-offamortization of debt discounts, paid in kind interest,issuance costs, and deferred taxes.nine monthsquarter ended September 30, 2017,March 31, 2023, cash provided by operations was $3.7$22.9 million, resulting from net non-cash expenses of $32.0approximately $31.2 million, andless net cash flow provided byflows used as a result from changes in operating assets and liabilities of $3.9$1.6 million, largelypartially offset by our net loss of $32.2$6.7 million. The $3.9$1.6 million of net cash flows used as a result of changes in our operating assets and liabilities reflected primarily the following:a $13.5primarily the following:increase in deferred revenue as a result of the growth of our customer and user base, which are billed in advance of our revenue recognition. This change in our operating assets and liabilities was partially offset by a $4.2 million decrease in accounts payable, a $3.5 million increase in accounts receivable due to the growth of our customer and user base; a $1.3increased collections;deferred sales commissions;accounts payable;a $0.4other current assets; andassets.For the nine months ended September 30, 2016, cash provided by operations was $1.0 million resulting from our net cash flows provided by changes in net non-cash expenses of $14.5 million and net cash flow provided by changes in operating assets and liabilities of $10.1 million, largely offset by our net loss of $23.5 million. The $10.1 million of net cash flows provided as a result oflong-term liabilities.reflected a $17.5were partially offset by the following:increase in deferred revenue as a result of the growth of our customer and user base which are billed in advance of our revenue recognition; a $3.3 million increase in accounts payable associated with the growth of our business and professional fees associated with our initial public offering; and a $1.9 million increasedecrease in accrued expenses and other current liabilities. This change in our operating assets and liabilities was partially offset by a $9.9liabilities;accounts receivable alsoother assets due to the growth of our customerhigher prepaid commissions related to increased sales; and user base; a $1.0 million increase in deferred sales commissions; a $0.9 million increase in prepaid expenses and other current assets; and a $0.6other long-termoperating lease liabilities.Used InProvided By (Used In) Investing Activitiesequipment andequipment.costs.nine monthsquarter ended September 30, 2017,March 31, 2022, cash used in investing activities was $9.2$171.2 million as a result of $3.7the following:equipment, $3.3 millionequipment.payments of costs related to capitalized software development activities, and $2.1 million in net purchases of marketable securities.nine monthsquarter ended September 30, 2016,March 31, 2023, cash used in investingfinancing activities was $35.1$10.2 million primarily as a result of the Runbook Acquisition with a total purchase pricefollowing:$34.1 million, subject to a working capital adjustment, andcommon stock for tax withholding obligations, partially offset by cash acquired in the amount of $2.6 million. During the period, we also paid $2.3costs related to capitalized software development costs and $1.3 million in purchasesproceeds from exercises of property and equipment.Net Cash Provided By Financing Activitiesnine monthsquarter ended September 30, 2017,March 31, 2022, cash provided byused in financing activities was $8.0$2.9 million primarily as a result of $8.7the following:the exercisesexercise of stock options, partially offset by $0.5 million of principal payments on capital lease obligations.For the nine months ended September 30, 2016, cash provided by financing activities was $38.5 million primarily as a result of proceeds from our 2016 acquisition term loan and 2016 term loan amendment in the amount of $34.5 million, net of issuance costs. During the period, we also received proceeds for the issuance of shares of common stock to former employees of Runbook in the amount of $3.1 million and received $2.2 million in proceeds from exercises of stock options. These proceeds were partially offset by payments of $1.2 million for initial public offering costs.26Contractual Obligations and CommitmentsThe following table summarizes our contractual obligations at September 30, 2017:(1)Operating leases include total future minimum rent payments under non-cancelable operating lease agreements.We are required to pay up to a maximum of $8 million of contingent consideration relating to our 2013 Acquisition if we realize a tax benefit from the use of net operating losses generated from the stock option exercises concurrent with the 2013 Acquisition. We have not included this obligation in the table above because there is a high degree of uncertainty regarding the amount and timing of future cash flows to extinguish this liability. The settlement of this liability depends on our ability to generate taxable income in the future to realize this tax benefit.Off-Balance Sheet ArrangementsAs 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. As of September 30, 2017, 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.Policies and Estimatesaccounting principles generally accepted in the United States. The preparation of these consolidated financial statements requiresGAAP, which require us to make estimates and assumptions about future events that affect the amounts reported amounts of assets, liabilities, revenue, costsin our unaudited condensed consolidated financial statements and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Changesthe accompanying notes included elsewhere in these estimates and assumptions or conditions could significantly affect our financial condition and results of operations.nine monthsquarter ended September 30, 2017,March 31, 2023, there were no significant changes to our critical accounting policies and estimates from those previously reported and disclosedas detailed in our Annual Report on Form 10-K. “Management’s Discussion and AnalysisItem 7 of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K filed withfor the SEC on March 10, 2017 provides a more complete discussion of our critical accounting policies and estimates.presentationPresentation, Significant Accounting Policies and summary of significant accounting policies”Recently-Issued Accounting Pronouncements” contained in the “Notes to Unaudited Condensed Consolidated Financial Statements” in Item 1 of Part I of this Quarterly Report on Form 10-Q for a full description of the recent accounting pronouncements and our expectation of their impact, if any, on our results of operations and financial condition.27clientscustomers and limit credit exposure by collecting in advance and setting credit limits as we deem appropriate. In addition, our investment strategy has historically been to invest in financial instruments that are highly liquid and readily convertible into cash and that mature within three months from the date of purchase. To date, we have not used derivative instruments to mitigate the impact of our market risk exposures. We have also not used, nor do we intend to use, derivatives for trading or speculative purposes.$109.8 million as of September 30, 2017.$1.1 billion at March 31, 2023. Our cash equivalents and marketable securities consist of highly liquid, investment-grade commercial paper, corporate bonds, and U.S. treasury bonds, and asset-backed securities.bonds. The carrying amount of our cash equivalents and marketable securities reasonably approximates fair value due to the highly liquid nature of these instruments. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs and the fiduciary control of cash and investments. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to fluctuations in interest rates, which may affect our interest income and the fair market value of our investments. Due to the short-term nature of our investment portfolio, however, we do not believe an immediate 10% increase or decrease in interest rates would have a material effect on the fair market value of our portfolio. We therefore do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.haveexpect to continue to grow our foreign currency risks related to our revenueoperations and operating expensescustomer sales. Our international subsidiaries maintain certain asset and liability balances that are denominated in currencies other than the U.S. Dollar. Our historical revenues have primarily been denominated in U.S. Dollars, and a significant portionfunctional currencies of our current revenues continue to be denominated in U.S. Dollars. However, we expect an increasing portion of our future revenues to be denominated in currencies other thanthese subsidiaries, which is the U.S. Dollar primarilyfor all international subsidiaries, with the Euroexception of the Company's Japanese subsidiary, for which the Japanese Yen is the functional currency. Changes in the value of foreign currencies relative to the U.S. Dollar can result in fluctuations in our total assets, liabilities, revenue, operating expenses, and British pound.cash flows. The effect of an immediatea hypothetical 10% adverse changeincrease or decrease in foreign currency exchange rates on foreign-denominated accounts receivable at September 30, 2017 would not be materialapplicable to our financial conditionbusiness would have reduced by $4.0 million or results of operations. Our operating expenses are generally denominated in the currencies of the countries in whichincreased by $4.0 million, respectively, our operations are located, primarily the United States and, to a much lesser extent, the United Kingdom, other European Union countries, Canada, Australia, and Singapore. Increases and decreases in our foreign-denominated revenue from movements in foreign exchange rates are partially offset by the corresponding decreases or increases in our foreign-denominated operating expenses.ourthe current international structure,level of foreign operations and customer sales, we do not plan on engaging in hedging activities in the near future.28(the “Exchangeor “the Exchange Act”) means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms; and that such information is accumulated and communicated to theofficerofficers and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officerofficers and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2017,at March 31, 2023, the last day of the period covered by this Quarterly Report. Based on this evaluation, our principal executive officerofficers and principal financial offerofficer have concluded that, as of September 30, 2017,at March 31, 2023, our disclosure controls and procedures were effective at thea reasonable assurance level.waswere no changechanges in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the quarter ended September 30, 2017March 31, 2023 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.Disclosure Controls and Procedures.ourand internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and our management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures and internal control over financial reporting also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.Item 1.Item 1A. unaudited condensed consolidated financial statements and related notes, before making a decision to invest in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risk and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. If any of the events or circumstances described in the following risk factors actually occurs, our business, operating results, financial condition, cash flows, and prospects could be materially and adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.29Risks RelatedOur Businessnumerous risks and Industrybusiness growth could be slower than we expect and our business may be harmed. in the future will depend, in large part, upon the effectiveness of our sales and marketing efforts, both domestically and internationally. We may have difficulty attracting a potential clientcustomers that hasrely on tools such as Excel, or that have already invested substantial personnel and financial resources to integrate on-premise or other software into its business,their businesses, as such organizations may be reluctant or unwilling to invest in a new product. If we fail to attract new customers or maintain and expand those customer relationships, our revenues will grow more slowly than expected and our business will be harmed. future growth also depends upon our ability to add users and sell additional products to our existing customers. It is important for the future growth of our business that our existing customers make additional significant purchases of our products and add additional users to our platform. Although our customers, users, and revenue have grown rapidly in the past, in recent periods our slower growth rates have reflected the size and scale of our business, as well as our focus on our strategic products. We cannot be assured that we will achieve similar growth rates in future periods as our customers, users, and revenue could decline or grow more slowly than we expect. Our business also depends on retaining existing customers. If we do not retain customers, including due to the acquisition of our customers by other companies, or our customers do not purchase additional products or we do not add additional users to our platform, our revenues may grow more slowly than expected, may not grow at all or may decline. Additionally, increasing incremental sales to our current customer base may require additional sales efforts that are targeted at senior management.management, which efforts are often associated with complex customer requirements and additional time to evaluate and test our products, and can lead to long and unpredictable sales cycles, particularly in the current macroeconomic environment. There can be no assurance that our efforts wouldwill result in increased sales to existing customers or additional revenues.future operating results.initial contract term expires. Although our agreements typically include automatic renewal language, our customers may cancel their agreements at the expiration of the initial term. In addition, our customers may renew for fewer users, renew for shorter contract lengths or renew for fewer products or solutions. Our customers’ renewalRenewal rates may decline or fluctuate as a result of a variety of factors, including their satisfaction or dissatisfaction with our software or professional services, our pricing or pricing structure, the pricing or capabilities of products or services offered by our competitors, the effects of economic conditions, or reductions in our customers’ spending levels. AsFor example, macroeconomic trends and the economic effects of COVID-19 have impacted and may continue to impact our renewal rate. Any prolonged shutdown of a significant portion of global economic activity or a downturn in the global economy would adversely affect the industries in which our customers operate, which could adversely affect our customers’ ability or willingness to renew their subscription agreements or could cause our customers to downgrade the terms of their subscription agreements.historynegative effect on the overall macro economy and our customers, which could have an adverse impact on our operating results.lossesBrexit also continues to cause significant political and economic uncertainty in recent periodsboth the UK and the European Union ("EU"). As a result, the level of economic activity generally in this region could be adversely impacted, negatively affecting customer demand for our products and our operating results.not be able to generate sufficient revenue to achieve or sustain profitability.We have incurred net losses in recent periods, including $32.2 million and $23.5 million for the nine months ended September 30, 2017 and 2016, respectively. We had an accumulated deficit of $119.6 million at September 30, 2017. We may not be able to generate sufficient revenue to achieve and sustain profitability. We also expect our costs to increase in future periods as we continue to expend substantial financial and other resources on:development of our cloud-based platform, including investments in research and development, product innovation to expand the features and functionality of our software solutions and improvements to the scalability and security of our platform;sales and marketing, including expansion of our direct sales force and our relationships with technology vendors, professional services firms, business process outsourcers and resellers;additional international expansion in an effort to increase our customer base and sales; andgeneral administration, including legal, accounting and other expenses related to being a public company.These investments may not result in increased revenue or growth of our business. If we failunable to continue to grow our revenue, we may not achievein the event of prolonged economic uncertainty or sustain profitability.30have experiencedcontinue to experience rapid growth in our operations, and organizational change, in recent periods and if we fail to manage our growth effectively, we may be unable to execute our business plan.We increasednumber of full-time employees from 183 as of December 31, 2013 to 726 as of September 30, 2017 as we have experienced growth in number of customerscustomer base and expanded our operations. Our growthoperations has placed, and may continue to place, a significant strain on our managerial, administrative, operational, financial and other resources.resources, particularly as we focus on cost discipline and efficiency. We intendanticipate that additional investments in our infrastructure will be necessary to further expandsupport the growth of our headcount and operations both domestically and internationally,internationally. These additional investments will increase our costs, with no assurance that our business or revenue will continuegrow sufficiently to grow. Continuingcover these additional costs. Labor shortages and increased employee mobility may make it more difficult to createhire and retain a sufficient number of employees to support our growth. For example, labor shortages have created even greater competition for engineering talent, and we have had to expend additional resources to respond to attrition and to hire and retain new engineers. Additionally, our workforce continues to be partially remote, and we expect that it will remain partially remote for the near term. We may experience difficulties onboarding new employees remotely, and maintaining a global organization and managing a geographically dispersed workforce will requirerequires substantial management effort, the allocation of valuable management resources, and significant additional investment in our infrastructure. We willmay be requiredunable to continually improve our operational, financial and management controls and our reporting procedures to effectively manage our operations and we may not be able to do so effectively,growth, which could negatively affect our results of operations and overall business. Inany particular quarter.order to improve operational efficiency, which may include a slowdown in hiring or reduction in force, such as the reduction in force announced in the fourth quarter of 2022. Moreover, if we fail to manage our anticipated growth and changeor any realignment of resources, such as a restructuring or reduction in force, in a manner that preserves the key aspects of our corporate culture, employee morale, productivity and the quality of our software solutions may suffer, which could negatively affect our brand and reputation and harm our ability to retain and attract customers.Our quarterly results may fluctuate, and if we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially.Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control. If our quarterly financial results fall below the expectations of investors or any securities analysts who may follow our stock, the price of our common stock could decline substantially. Some of the important factors that may cause our revenue, operating results and cash flows to fluctuate from quarter to quarter include:our ability to attract new customers and retain and increase sales to existing customers;the number of new employees added;the rate of expansion and productivity of our sales force;long sales cycles and the timing of large deals;changes in our or our competitors’ pricing policies;the amount and timing of operating costs and capital expenditures related to the operations and expansion of our business;new products, features or functionalities introduced by us and our competitors;significant security breaches, technical difficulties or interruptions to our platform;the timing of customer payments and payment defaults by customers;general economic conditions that may adversely affect either our customers’ ability or willingness to purchase additional products or services, delay a prospective customer’s purchasing decision or affect customer retention;changes in foreign currency exchange rates;the impact of new accounting pronouncements;the timing and the amount of grants or vesting of equity awards to employees;seasonality of our business; andchanges in customer buying patterns.Many of these factors are outside of our control, and the occurrence of one or more of them might cause our revenue, operating results, and cash flows to vary widely. As such, we believe that quarter-to-quarter comparisons of our revenue, operating results and cash flows may not be meaningful and should not be relied upon as an indication of future performance.31enterprise resource planning, or ERP systems such as NetSuite,Microsoft Dynamics, Oracle, SAP and Workday,SAP, and will require modifications and enhancements as these systems change over time. Any failure of our solutions to operate effectively with future platforms and technologies could reduce the demand for our solutions or result in customer dissatisfaction. Furthermore, uncertainties about the timing and nature of new solutions or technologies, or modifications to existing solutions or technologies, could increase our research and development expenses. If we are not successful in developing modifications and enhancements to our solutions or if we fail to bring them to market in a timely fashion, our solutions may become less marketable, less competitive or obsolete, our revenue growth may be significantly impaired and our business could be adversely affected.future growth is dependent on their success.substantially alla majority of our revenues from our Close Process Management solution. As such,a result, the continued growth in market demand for this solution is critical to our continued success. We have recently introduced two new software solutions, Intercompany Hub and Smart Close, and one new software product, Insights, but cannot be certain that theyany new software solutions or products we introduce will generate significant revenues. Accordingly, our business and financial results have been and will be substantially dependent on a limited number of solutions.If our relationships with technology vendors and business process outsourcers are not successful, our business and growth will be harmed.We depend on, and anticipate that we will continue to depend on, various strategic relationships in order to sustain and grow our business. We have established strong relationships with technology vendors such as SAP and NetSuite to market our solutions to users of their ERP solutions, and professional services firms such as Deloitte and KPMG, and business process outsourcers such as Cognizant, Genpact and IBM to supplement delivery and implementation of our applications. We believe these relationships enable us to effectively market our solutions by offering a complementary suite of services. In particular, we have a strategic relationship with SAP to market our solution to users of SAP’s ERP solutions. Our solution is a SAP-endorsed business solution that integrates with SAP’s ERP solutions. Under our agreement with SAP, which we entered into in 2013, we pay SAP a fee based on a percentage of revenues from our new customers that use a SAP ERP system. We continue to pay SAP a fee for these customers over the term of their subscription agreements. For the nine months ended September 30, 2017, revenues from our customers that use a SAP ERP solution accounted for $23.5 million, or 19%, of our total revenues. For the year ended December 31, 2016, revenues from our customers that use a SAP ERP solution accounted for $20.7 million, or 17%, of our total revenues. If we are unsuccessful in maintaining our relationship with SAP, or if we are unsuccessful in supporting or expanding our relationships with other companies, our business would be adversely affected.Identifying, negotiating and documenting relationships with other companies require significant time and resources. Our agreements with technology vendors are typically limited in duration, non-exclusive, cancellable upon notice and do not prohibit the counterparties from working with our competitors or from offering competing services. For example, our agreement with SAP can be terminated by either party upon six months’ notice and there is no assurance that our relationship with SAP will continue. If we are no longer a SAP-endorsed business solution, our business could be adversely affected. Our competitors may be effective in providing incentives to third parties to favor their products or services or to prevent or reduce subscriptions to our platform. If we are unsuccessful in establishing or maintaining our relationships, our ability to compete in the marketplace or to grow our revenue could be impaired and our operating results would suffer. Even if we are successful, we cannot assure you that these relationships will result in improved operating results.32regardingof their customers or employees. Additionally, we maintain our own proprietary, confidential and otherwise sensitive information. Our platform is at risk for security breaches and incidents as a result of third-party action, employee, vendor or contractor error, malfeasance, ransomware and other malicious software, or other factors. The risk of a cybersecurity incident occurring has increased as more companies and individuals work remotely, potentially exposing us to new, complex threats. Additionally, due to political uncertainty and military actions associated with the war in Ukraine, we and our service providers are vulnerable to heightened risks of cybersecurity incidents and security and privacy breaches from or affiliated with nation-state actors. If any unauthorized or inadvertent access to, or a security breach ofor incident impacting our platform or other systems or networks used in our business occurs, or is believed to occur, such an event could result in the loss, alteration, or unavailability of data, unauthorized access to, or use or disclosure of data, and any such event, or the belief or perception that it has occurred, could result in a loss of business, severe reputational damage adversely affecting customer or investor confidence, regulatory investigations and orders, litigation, indemnity obligations, and damages for contract breach or penalties for violation of applicable laws or regulations. Additionally, service providers who store or otherwise process data on our behalf, including third party and public-cloud infrastructure, also face security risks. As we rely more on third-party and public-cloud infrastructure, such as Google Cloud Platform, and other third-party service providers, we will become more dependent on third-party security measures to protect against unauthorized access, cyberattacks and the mishandling of customer, employee and other confidential data and we may be required to expend significant timefor remediation thatincurred in order to remediate or otherwise respond to a breach or incident, which may include liability for stolen assets or information and repair of system damage that may have been caused, incentives offered to customers or other business partners in an effort to maintain business relationships after a breach, and other costs, expenses and liabilities.preventminimize the risk of security breaches, including deploying additional personnel and protection technologies, training employees annually, and engaging third-party experts and contractors. We continually increase our investments in cybersecurity to counter emerging risks and threats. If a high profile security breach or incident occurs with respect to another Software as a Service (“SaaS”) provider or other technology companies, our clientscurrent and potential clientscustomers may lose trust in the security of our platform or in the SaaS business model generally, which could adversely impact our ability to retain existing clientscustomers or attract new ones. Such a breach or incident, or series of breaches or incidents, could also result in regulatory or contractual security requirements that could make compliance challenging. Even in the absence of any security breach or incident, customer concerns about privacy, security, privacy, or data protection may deter them from using our platform for activities that involve personal or other sensitive information.Because the techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period. From time to time, we experience cyber security events including directed “phishing” attacks against our employees, web attacks and other information technology incidents that are typical for a SaaS company of our size. These threats continue to evolve and are difficult to predict due to advances in computer capabilities, new discoveries in the field of cryptography and new and sophisticated methods used by criminals including phishing, social engineering or other illicit acts. There can be no assurances that our defensive measures will prevent cyber-attacks and any incidents could damage our brand and reputation and negatively impact our business.Because data security is a critical competitive factor in our industry, we make numerous statements in our privacy policy and customer agreements, through our certifications to privacy standards and in our marketing materials, providing assurances about the security of our platform including detailed descriptions of security measures we employ. Should any of these statements be untrue or become untrue, even through circumstances beyond our reasonable control, we may face claims of misrepresentation or deceptiveness by the U.S. Federal Trade Commission, state and foreign regulators and private litigants. Our errors and omissions insurance coverage covering security and privacy damages and claim expenses may not be sufficient to compensate for all liabilities.existingcurrent and potential customers to access our platform at any time. Our platform is proprietary, and we rely on the expertise of members of our engineering, operations and software development teams for its continued performance. We have experienced, and may in the future experience, disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints due to an overwhelming number of users accessing our platform simultaneously, denial of service attacks or other security related incidents. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. Because of the seasonal nature of financial close activities, increasing complexity of our platform and expanding user population, it may become difficult to accurately predict and timely address performance and capacity needs during peak load times. If our platform is unavailable or if our users are unable to access it within a reasonable amount of time or at all, our business wouldwill be harmed. In addition, our infrastructure does not currently include the real-time mirroring of data. Therefore, in the event of any of the factors described above, or other failures of our infrastructure, customer data may be permanently lost. Our customer33In particular, our founder and Chief Executive Officer provides our strategic direction and has built and maintained what we believe is an attractive workplace culture. Any failure to preserve our culture could negatively affect our ability to recruit and retain personnel. From time to time, there may be changesChanges in our executive management team resulting from the hiring or departure of executives, which could disruptor our business. Key members of our current management and finance teams have only been working together for a relatively short period of time. If we are not successful in integrating these key employees into our organization, such failureleadership structure, could disrupt our business, operations. We doand could impact our ability to preserve our culture, which could negatively affect our ability to recruit and retain personnel. For example, we recently appointed co-Chief Executive Officers, our founder Therese Tucker and former Lead Independent Director Owen Ryan, which is a unique structure for our company, and such structure may not have employment agreements with ourachieve the benefits we intend. Our executive officers orand other key personnel that require them to continue to work for us for any specified periodare at-will employees and, therefore, they could terminate their employment with us at any time. TheAny such departure could be particularly disruptive in light of the recent leadership transition and to the extent we experience management turnover, competition for executive management is high, it may take months to find a candidate that meets our requirements, and such recruiting efforts could divert the attention of our existing management team. Accordingly, the loss of one or more of our executive officers or key employees especially our founder and Chief Executive Officer, could have an adverse effect on our business.qualifications.qualifications, and this difficulty may be heightened by labor shortages, higher employee turnover and slower hiring rates associated with hybrid work. In addition, we may need to increase our employee compensation levels in response to competition, rising inflation or labor shortages, which would increase our operating costs and reduce our profitability. Many of the companies with which wetheir legal obligations, resulting in a diversion of our time and resources. Likewise, if competitors hire our employees, we may divert time and resources to deterringdeter any breach by our former employees or their new employers of their respective legal obligations. Given the competitive nature of our industry, we have both received and asserted such claims in the past. In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, due to volatile market conditions, stock price fluctuations or otherwise, it may adversely affect our ability to recruit and retain highly-skilled employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be adversely affected.wouldwill not grow as quickly as expected, or at all, and our business and operating results and financial condition would be adversely affected.34FutureDuring the past twelve months, primarily due to the uncertain macroeconomic environment, we have seen certain new and existing customers halt or decrease investment in work transformation, which has negatively impacted our business. Further deterioration in general economic conditions in the United States or worldwide, including as a result of continued uncertainty in the financial markets, increased inflation or interest rates, or uncertainty in the financial services markets associated with recent bank failures, a resurgence of COVID-19, or geopolitical events such as the war in Ukraine, may also cause our customers to cutreduce their overall information technology spending, and such cutsreductions may disproportionately affect software solutions like ours to the extent customers view our solutions as discretionary. If our sales and revenue doesdo not increase for any of these reasons, or any other reason, our business, financial condition and operating results may be materially adversely affected.such as Trintech. Weand we also compete with large, well-established, enterprise application software vendors such as Oracle, whose Hyperion software contains components that compete with our platform. In the future, a competitor offering ERP software could include a free service similar to ours as part of its standard offerings or may offer a free standalone version of a service similar to ours. Further, other established software vendors not currently focused on accounting and finance software and services, including some of our partners, resellers, and other parties with which we have relationships, may expand their services to compete with us.dealcontract and the type of solution or product being purchased. The sales cycle for our global enterprise customers is generally longer than that of our mid-market customers. In addition, the length of the sales cycle tends to increase for larger dealscontracts and for more complex, strategic products like Intercompany Hub.Financial Management. As we continue to focus on increasing our average dealcontract size and selling more strategic products, we expect our sales cycle to lengthen and become less predictable. This could cause variability in our operating results for any particular period.customers.35transactiontransactions would otherwise have been recognized, may be adversely affected.relatingrelated to subscriptions entered into during previous quarters. Consequently, a decline in new or renewed subscriptions in any single quarter may have a small impact on our revenue results for that quarter. However, such a decline will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our platform, and potential changes in our pricing policies or rate of expansion or retention, may not be fully reflected in our results of operations until future periods. We may also be unable to reduce our cost structure in line with a significant deterioration in sales. In addition, a significant majority of our costs are expensed as incurred, while revenue is recognized over the life of the agreement with our customer. As a result, increased growth in the number of our customers could continue to result in our recognition of more costs than revenue in the earlier periods of the terms of our agreements. Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers must be recognized over the applicable subscription term.previously identified material weaknessesface exposure to foreign currency exchange rate fluctuations that could harm our results of operations.internal control over financial reporting. Although we believe these material weaknesses have since been remediated, we may identify material weaknessesresults of operations. As a result of such foreign currency exchange rate fluctuations, it could be more difficult to detect underlying trends in our business and results of operations. In addition, to the future or otherwise fail to maintain an effective system of internal control over financial reportingextent that fluctuations in the future and may not be able to accurately or timely reportcurrency exchange rates cause our financial condition or results of operations which may adversely affect investor confidence in us andto differ from our expectations or the priceexpectations of our common stock.As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Section 404 ofinvestors, the Sarbanes-Oxley Act of 2002(“the Sarbanes-Oxley Act”), requires that we evaluate and determine the effectiveness of our internal control over financial reporting and, beginning with our Annual Report on Form 10-K for the year ending December 31, 2017, provide a management report on internal control over financial reporting. During 2015, we identified material weaknesses in our internal control over financial reporting. Although we have remediated these material weaknesses as of December 31, 2016, we cannot assure you that additional material weaknesses in our internal control over financial reporting will not be identified in the future.The process of designing and implementing internal control over financial reporting required to comply with Section 404 of the Sarbanes-Oxley Act will be time consuming, costly and complicated. If, during the evaluation and testing process, we identify one or more material weaknesses in our internal control over financial reporting, our management will be unable to assert that our internal control over financial reporting is effective. Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses with respect to our internal controls or the level at which our internal controls are documented, designed, implemented, or reviewed. If we are unable to assert that our internal control over financial reporting is effective, or when required in the future, if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the markettrading price of our common stock could be adversely affected,affected.becomeresult in a change to the estimation of fair value that could result in an impairment charge to our goodwill or intangible assets. Any such charges may have a material negative impact on our operating results.litigationlimitations.investigationsother unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future taxable income. For these reasons, we may not be able to realize a tax benefit from the use of our NOLs, whether or not we attain profitability. The legislation commonly referred to as the Tax Cuts and Jobs Act of 2017, as modified by the stock exchangeCoronavirus Aid, Relief, and Economic Security Act, includes changes to the U.S. federal corporate income tax rate and changes to the rules governing the deductibility of certain NOLs, which may impact our ability to utilize such NOLs.securitiesrelationship with SAP, if our reseller arrangement with SAP is less successful than we anticipate, if our customers that use an SAP ERP solution do not renew their subscriptions directly with us and instead purchase our solution through the SAP reseller channel or if we are listed,unsuccessful in supporting or expanding our relationships with other companies, our business would be adversely affected.SEC,counterparties from working with our competitors or other regulatory authorities, whichfrom offering competing services. For example, our agreement with SAP can be terminated by either party upon six months’ notice and there is no assurance that our relationship with SAP will continue. If our solution is no longer resold by SAP as a solution extension, our business could require additional financialbe adversely affected. Our competitors may be effective in providing incentives to third parties to favor their products or services or to prevent or reduce subscriptions to our platform. If we are unsuccessful in establishing or maintaining our relationships, or if the counterparties to our relationships offer competing solutions, our ability to compete in the marketplace or to grow our revenue could be impaired and management resources.a limited number ofGoogle Cloud Platform (GCP), Microsoft Azure (Azure), Amazon Web Services (AWS) and third-party data centers (collectively, “public cloud providers”) to deliver our cloud-based software solutions, and any disruption of service at these centersour use of public cloud providers could negatively impact our operations and harm our business.ishas historically been operated byin a limited number of third-party data center facilities in North America and Europe. We are developing plans to migrate some of our third-party data centers to GCP, increasing our reliance on this cloud provider. Additionally, we rely on Azure to serve Rimilia customers, and we rely on AWS to serve FourQ customers. As we implement the transition to GCP, there could be occasional planned or unplanned downtime for our cloud-based software solutions and potential service delays, all of which will impact our customers’ ability to use our solutions. We may also need to divert resources away from other important business operations, which could harm our business and growth. Additionally, if the costs to migrate to GCP are greater than we expect or take significantly more time than we anticipate, our business could be harmed.these facilities.our public cloud providers. Any changes in third-party service levels at our data centers or any disruptions or delays from errors, defects, hacking incidents, security breaches, computer viruses, or other intentionalDDoS attacks, bad acts or performance problems could harm our reputation, damage our customers’ businesses, and adversely affect our business and operating36data centerspublic cloud providers are also vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, war, public health crises, such as COVID-19, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events. We may have limited remedies against third-party providers in the event of any service disruptions. If our data centers werethird-party public cloud providers are compromised or unavailable or our users werecustomers are unable to access our solutions for any reason, our business and operations would be materially and adversely affected. in the future experience disruptions, outages, and other performance problems. Although we expend considerable effort to ensure that our platform performance is capable of handling existing and increased traffic levels, the ability of our cloud-based solutions to effectively manage any increased capacity requirements depends on our third-partypublic cloud providers. Our third-party data centerpublic cloud providers may not be able to meet such performance requirements, especially to cover peak levels or spikes in traffic, and as a result, our customers may experience delays in accessing our solutions orthese facilities.our customers. Interruptions in our services might reduce our revenue, cause us to issue credits to customers, subject us to potential liability, and cause customers to terminate their subscriptions or harm our renewal rates.and data center infrastructure requires lead time. As we continue to add data centers, restructure our data management plans, and increase our cloud hosting capacity, we have and expect to in existing andthe future data centers, we may move or transfer our data and our customers’ data. For example, in early 2016 we began hosting customers at a data facility located in Las Vegas, Nevada. Despite precautions taken during such processes and procedures, any unsuccessful data transfers may impair the delivery of our service, and we may experience costs or downtime in connection with the transfer of data to other facilities which may lead to, among other things, customer dissatisfaction and non-renewals. The owners of our data center facilitiesOur public cloud providers have no obligationobligations to renew their agreements with us on commercially reasonable terms, or at all. If we are unableany of our public cloud providers increases pricing terms, terminates or seeks to renew these agreements on commercially reasonableterminate our contractual relationship, establishes more favorable relationships with our competitors, or changes or interprets their terms of service or policies in a manner that is unfavorable with respect to us, we may be required to transfer to new data center facilities, andother providers. If we mayare required to transfer to other providers, we would incur significant costs and experience possible service interruption in connection with doing so.Failure to effectively organize or expand our sales capabilities could harm our ability to increase our customer base.Increasing our customer base and sales will depend, to a significant extent, on our ability to effectively organize and expand our sales and marketing operations and activities. From January 1, 2014 to September 30, 2017, our sales and marketing teams increased from 68 to 365 employees. As we’ve grown and scaled our operations, we have aligned our sales team to help streamline the customer experience. We rely on our direct sales force to obtain new customers and on our enterprise field sales team and account management team to maximize the lifetime value of our customer relationships through retention and upsell efforts. Our success will depend, in part, on our ability to support new and existing customer growth and maintain customer satisfaction. If we cannot provide the tools and training to our teams to efficiently do their jobs and satisfy customer demands, we may not be able to achieve anticipated revenue growth as quickly as expected.In addition, we plan to continue to expand our direct sales force both domestically and internationally. We believe that there is significant competition for experienced sales professionals with the sales skills and technical knowledge that we require. Our ability to achieve significant revenue growth in the future will depend, in part, on our success in recruiting, training, and retaining a sufficient number of experienced sales professionals. New hires require significant training and time before they achieve full productivity, particularly in new sales segments and territories. Our recent hires and planned hires may not become as productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the future in the markets where we do business. Our business will be harmed if our sales expansion efforts do not generate a significant increase in revenue. small but growing network of resellers and to add new resellers, in particular to help grow our mid-market business globally. Our agreements with our existing resellers are non-exclusive, meaning resellers may offer customers the products of several different companies, including products that compete with ours. They may also cease marketing our solutions with limited or no notice and with little or no penalty. We expect that any additional resellers we identify and develop will be similarly non-exclusive and not bound by any requirement to continue to market our solutions. If we fail to identify additional resellers in a timely and cost-effective manner, or at all, or are unable to assist our current and future resellers in independently selling our37If we are not able to maintain and enhance our brand, our business, operating results and financial condition may be adversely affected.We believe that maintaining and enhancing our reputation for accounting and finance software is critical to our relationships with our existing customers and to our ability to attract new customers. The successful promotion of our brand attributes will depend on a number of factors, including our marketing efforts, our ability to continue to develop high-quality software, and our ability to successfully differentiate our platform from competitive products and services. Our brand promotion activities may not ultimately be successful or yield increased revenue. In addition, independent industry analysts provide reviews of our platform, as well as products and services offered by our competitors, and perception of our platform in the marketplace may be significantly influenced by these reviews. If these reviews are negative, or less positive as compared to those of our competitors’ products and services, our brand may be adversely affected.The promotion of our brand requires us to make substantial expenditures, and we anticipate that the expenditures will increase as our market becomes more competitive, as we expand into new markets and as more sales are generated. To the extent that these activities yield increased revenue, this revenue may not offset the increased expenses we incur. If we do not successfully maintain and enhance our brand, our business may not grow, we may have reduced pricing power relative to competitors, and we could lose customers or fail to attract potential customers, all of which would adversely affect our business, results of operations and financial condition.Our long-term success depends, in part, on our ability to expand the sales of our solutions to customers located outside of the United States, and thus our business is susceptible to risks associated with international sales and operations.We currently maintain offices and/or have sales personnel in Australia, Canada, France, Germany, Malaysia, Netherlands, Poland, Singapore, South Africa, and the United Kingdom, and we intend to build out our international operations. As part of our ongoing international expansion strategy, in August 2016, we acquired Runbook, a Netherlands-based provider of financial close automation software solutions to SAP customers. We derived approximately 20% of our revenues from sales outside the United States in the nine months ended September 30, 2017, and we derived approximately 16% of our revenues from sales outside the United States in the year ended December 31, 2016. Any international expansion efforts that we may undertake, including our Runbook Acquisition, may not be successful. In addition, conducting international operations in new markets subjects us to new risks that we have not generally faced in the United States. These risks include:localization of our solutions, including translation into foreign languages and adaptation for local practices and regulatory requirements;lack of familiarity and burdens of complying with foreign laws, legal standards, regulatory requirements, tariffs and other barriers;unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions;differing technology standards;longer accounts receivable payment cycles and difficulties in collecting accounts receivable;difficulties in managing and staffing international operations and differing employer/employee relationships;fluctuations in exchange rates that may increase the volatility of our foreign-based revenue;potentially adverse tax consequences, including the complexities of foreign value-added tax (or other tax) systems and restrictions on the repatriation of earnings;uncertain political and economic climates, including the significant volatility in the global financial markets; andreduced or varied protection for intellectual property rights in some countries.38These factors may cause our international costs of doing business to exceed our comparable domestic costs. Operating in international markets also requires significant management attention and financial resources. Any negative impact from our international business efforts could negatively impact our business, results of operations and financial condition as a whole.In addition, the President of the United States and Congress have proposed, formally or informally, various changes, including regulatory and tax reform that would have uncertain and potentially adverse effects on our business. Potential tax reforms in the United States may result in significant changes in the rules governing United States federal income taxation. Such changes may have an adverse effect on our business, financial condition and results of operations.We use third-party contractors outside of the United States to supplement our research and development capabilities, which may expose us to risks, including risks inherent in foreign operations.We use third-party contractors outside of the United States to supplement our research and development capabilities. We currently use third-party contractors located in Romania and China. Managing operations that are remote from our U.S. headquarters is difficult and we may not be able to manage these third-party contractors successfully. If we fail to maintain productive relationships with these contractors generally, we may be required to develop our solutions in a less efficient and cost-effective manner and our product release schedules may be delayed while we hire software developers or find alternative contract development resources. Additionally, while we take precautions to ensure that software components developed by our third-party contractors are reviewed and that our source code is protected, misconduct by our third-party contractors could result in infringement or misappropriation of our intellectual property. Furthermore, any acts of espionage, malware attacks, theft of confidential information or other malicious cyber incidents attributed to our third-party contractors may compromise our system infrastructure, expose us to litigation and lead to reputational harm that could result in a material adverse effect on our financial condition and operating results.Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.Our success and ability to compete depend, in part, upon our intellectual property. We currently have one patent application, which may not result in an issued patent. We primarily rely on copyright, trade secret and trademark laws, trade secret protection, and confidentiality or license agreements with our employees, customers, partners and others to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be inadequate.In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. In the past, we have utilized demand letters as a means to assert and resolve claims regarding potential misuse of our proprietary or trade secret information. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Our failure to secure, protect and enforce our intellectual property rights could adversely affect our brand and adversely impact our business.Suits by third parties for alleged infringement of their proprietary rights could cause us to incur significant expenses or liabilities.There is considerable patent and other intellectual property development activity in our industry. Our future success depends in part on not infringing upon the intellectual property rights of others. From time to time, our competitors or other third parties may claim that our solutions and underlying technology infringe or violate their intellectual property rights, and we may be found to be infringing upon such rights. We may be unaware of the intellectual property rights of others that may cover some or all of our technology. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our solutions or require that we comply with other unfavorable terms. We may also be obligated to indemnify our customers or other companies in connection with any such litigation and to obtain licenses, modify our solutions, or refund subscription fees, which could further exhaust our resources. In addition, we may incur substantial costs to resolve claims or litigation, whether or not successfully asserted against us, which could include payment of significant settlement, royalty or license fees, modification of our solutions, or refunds to customers of subscription fees. Even if we were to prevail in the event of claims or litigation against us, any claim or litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and other employees from our business operations. Such disputes could also disrupt our solutions, adversely impacting our customer satisfaction and ability to attract customers.39We use open source software in our products, which could subject us to litigation or other actions.We use open source software in our products and may use more open source software in the future. From time to time, there have been claims challenging the use of open source software against companies that incorporate open source software into their products. As a result, we could be subject to suits by parties claiming misuse of, or a right to compensation for, what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional research and development resources to change our products. In addition, if we were to combine our proprietary software products with open source software in a certain manner, we could, under certain of the open source licenses, be required to release the source code of our proprietary software products. If we inappropriately use open source software, we may be required to re-engineer our products, discontinue the sale of our products or take other remedial actions.Privacy and data security concerns, and data collection and transfer restrictions and related domestic or foreign regulations may limit the use and adoption of our solutions and adversely affect our business.Personal privacy, information security, and data protection are significant issues in the United States, Europe and many other jurisdictions where we offer our platform. The regulatory framework governing the collection, processing, storage and use of business information, particularly information that affects financial statements, and personal data, is rapidly evolving and any failure or perceived failure to comply with applicable privacy, security, or data protection laws or regulations may adversely affect our business.The U.S. federal and various state and foreign governments have adopted or proposed requirements regarding the collection, distribution, use, security and storage of personally identifiable information and other data relating to individuals, and federal and state consumer protection laws are being applied to enforce regulations related to the online collection, use and dissemination of data. Some of these requirements include obligations on companies to notify individuals of security breaches involving particular personal information, which could result from breaches experienced by us or by organizations with which we have formed strategic relationships. Even though we may have contractual protections with such organizations, notifications related to a security breach could impact our reputation, harm customer confidence, hurt our expansion into new markets or cause us to lose existing customers.Further, many foreign countries and governmental bodies, including the European Union, or EU, where we conduct business and have offices, have laws and regulations concerning the collection and use of personal data obtained from their residents or by businesses operating within their jurisdiction. These laws and regulations often are more restrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of data that identifies or may be used to identify or locate an individual, such as names, email addresses and, in some jurisdictions, Internet Protocol, or IP, addresses. With regard to data transfers of personal data from our European employees and customers to the United States, we historically relied on the U.S. Department of Commerce’s Safe Harbor Privacy Principles and compliance with the U.S.-EU and U.S.-Swiss Safe Harbor Frameworks as agreed to and set forth by the U.S. Department of Commerce, and the European Union and Switzerland, which established means for legitimizing the transfer of personal data by companies doing business in Europe from the EU to the U.S. As a result of the October 6, 2015 European Court of Justice opinion in Case C-362/14 (Schrems v. Data Protection Commissioner) or, the ECJ Ruling, the U.S.-EU Safe Harbor Framework was deemed an invalid method of compliance with EU restrictions on data transfers. We have taken certain measures to legitimize our transfers of personal data, both internally and on behalf of our customers, from the EU to the United States in the wake of the ECJ Ruling. Additionally, EU and U.S. political authorities adopted the U.S. EU Privacy Shield on July 12, 2016, which may provide a new mechanism for companies to transfer EU personal data to the United States. While we now have Privacy Shield certification in place that we believe allow for the lawful transfer of personal data from the EU to the United States, it is possible that these mechanisms may be challenged or evolve to include new legal requirements that could have an impact on data transfers. It is unclear at this time whether the U.S. EU Privacy Shield will serve as an appropriate means for us to transfer EU personal data from the EU to the United States. Our means for transferring personal data from the EU may not be adopted by all of our customers and may be subject to legal challenge by data protection authorities, and we may experience reluctance or refusal by European customers to use our solutions due to potential risk exposure as a result of the ECJ Ruling. We and our customers face a risk of enforcement actions taken by EU data protection authorities regarding data transfers from the EU to the United States.We also expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States, the EU, and other jurisdictions. For example, the European Commission recently adopted a General Data Protection Regulation, effective in May 2018, that will supersede current EU data protection legislation, impose more stringent EU data protection requirements and provide for greater penalties for noncompliance. We cannot yet determine the impact such future laws, regulations and standards may have on our business. Such laws and regulations are often subject to differing interpretations and may be inconsistent among40jurisdictions. These and other requirements could reduce demand for our service, increase our costs, impair our ability to grow our business, or restrict our ability to store and process data or, in some cases, impact our ability to offer our service in some locations and may subject us to liability. Further, in view of new or modified federal, state or foreign laws and regulations, industry standards, contractual obligations and other legal obligations, or any changes in their interpretation, we may find it necessary or desirable to fundamentally change our business activities and practices or to expend significant resources to modify our software or platform and otherwise adapt to these changes. We may be unable to make such changes and modifications in a commercially reasonable manner or at all, and our ability to develop new products and features could be limited.Further, following a referendum in June 2016 in which voters in the United Kingdom approved an exit from the EU, the United Kingdom government initiated a process to leave the EU in March 2017 (often referred to as “Brexit”), which is expected to be completed within the next two years. The Brexit has created uncertainty with regard to the regulation of data protection in the United Kingdom. In particular, it is unclear whether the United Kingdom will enact data protection laws or regulations designed to be consistent with the pending EU General Data Protection Regulation and how data transfers to and from the United Kingdom will be regulated. In the immediate term, the United Kingdom will remain bound by the European General Data Protection Regulation (“GDPR”) following its exit from the EU since the U.K. government has announced its intention to enact a ‘Great Repeal Bill’ which enshrines all EU law into domestic U.K. legislation. While the U.K. Information Commissioner’s Office has announced that there are no plans to dilute U.K. data protection laws, it is less certain how data protection laws or regulations will develop in the medium to longer term, and how data transfers to and from the U.K. will be regulated.Our customers also expect that we comply with regulatory standards that may place additional burdens on us. Our customers expect us to meet voluntary certifications or adhere to standards established by third parties, such as the SSAE 16, SOC1 and SOC2 audit processes, and may demand that they be provided a report from our auditors that we are in compliance. If we are unable to maintain these certifications or meet these standards, it could adversely affect our customers’ demand for our service and could harm our business.The costs of compliance with and other burdens imposed by laws, regulations and standards may limit the use and adoption of our service and reduce overall demand for it, or lead to significant fines, penalties or liabilities for any noncompliance. Privacy, information security, and data protection concerns, whether valid or not valid, may inhibit market adoption of our platform, particularly in certain industries and foreign countries.onupon SaaS applications from third parties in order to operate critical functions of our business, including billing and order management, enterprise resource planning, and financial accounting services. If these services become unavailable due to extended outages, interruptions, or because they are no longer available on commercially reasonable terms, our expenses could increase, our ability to manage finances could be interrupted and our processes for managing sales of our solutions and supporting our customers could be impaired until equivalent services, if available, are identified, obtained, and implemented, all of which could adversely affect our business.results of operations.face exposure to foreign currency exchange rate fluctuations that could harm our results of operations.We conduct transactions, particularly intercompany transactions,currently maintain offices and/or have personnel in currencies other thanAustralia, Canada, France, Germany, India, Japan, Mexico, the U.S. dollar, primarily the British poundNetherlands, Poland, Romania, Singapore, and the Euro. AsUnited Kingdom, and we growintend to build out our international operations, we expect the amountoperations. We have also executed several acquisitions and strategic transactions as part of our ongoing international expansion strategy. We derived approximately 28% and 29% of our revenues that are denominated in foreign currencies to increasefrom sales outside the United States in the future. Accordingly,quarters ended March 31, 2023 and 2022, respectively. Any international expansion efforts that we may undertake, such as our Japanese Joint Venture, our Rimilia Acquisition, or our FourQ Acquisition may not be successful. In addition, conducting international operations in new markets subjects us to new risks that we have not generally faced in the United States. These risks include:valuewar in Ukraine;currencies relativevalue-added tax (or other tax) systems and restrictions on the repatriation of earnings;dollarThis ruling from the CJEU and recent rulings from various EU member state data protection authorities have created complexity and uncertainty regarding processing and transfers of personal data from the EEA to the U.S. and certain other countries outside the EEA. Moreover, on June 4, 2021, the European Commission adopted new Standard Contractual Clauses (“SCCs”), which impose additional obligations relating to personal data transfers out of the EEA. The new SCCs, and similar standard contractual clauses adopted in the UK, may increase the legal risks and liabilities associated with cross-border data transfers, and result in material increased compliance and operational costs. A U.S. Executive Order has been issued that is anticipated to lead to the adoption of a new EU-U.S. Privacy Framework under which personal data can legally be transferred to the U.S. from the EEA. It remains uncertain whether, and when, such a framework will be formally established, and uncertainty may continue about the legal requirements for transferring customer personal data to and from the EEA and other regions, an integral process of our business. Other countries such as Russia, China, and India have also passed or are considering passing laws imposing varying degrees of restrictive data residency requirements, which have created additional costs and complexity, and any new requirements may result in additional costs and complexity.affect ouremerge, creating costs and complexity. Actual or alleged failure to comply with the GDPR or the UK GDPR can result in private lawsuits, reputational damage, loss of customers, and regulatory enforcement actions, which can result in significant fines, including, under the GDPR, fines of up to EUR 20 million (or GBP 17.5 million under the UK GDPR) or four percent (4%) of global revenue, whichever is greater.operating results duethe California Privacy Rights Act (“CPRA”), which expands upon the CCPA, was passed in November 2020 and became effective on January 1, 2023. The CCPA and CPRA give California consumers, including employees, certain rights similar to transactionalthose provided by the GDPR, and translational remeasurementsalso provide for statutory damages or fines on a per violation basis that are reflected in our results of operations. As a result of such foreign currency exchange rate41fluctuations, it could be very large depending on the severity of the violation. Numerous other states, including Virginia, Colorado, Connecticut, and Iowa have also enacted or are in the process of enacting or considering comprehensive state-level data privacy and security laws, rules and regulations. Furthermore, the U.S. Congress is considering privacy legislation, and the U.S. Federal Trade Commission continues to fine companies for unfair or deceptive data protection practices and may undertake its own privacy rule making exercise.difficultrestrictive than those in the U.S. Regulatory developments in these countries may require us to detect underlying trendsmodify our policies, procedures, and data processing measures in our businessorder to address requirements under these or other applicable privacy, data protection, or cybersecurity regimes, and results of operations. we may face claims, litigation, investigations, or other proceedings regarding them, initiated by private parties and governmental authorities, and may incur related liabilities, expenses, costs, and operational losses. Our compliance efforts are further complicated by the fact that laws and regulations relating to privacy, data protection, and cybersecurity around the world are rapidly evolving, may be subject to uncertain or inconsistent interpretations and enforcement, and may conflict among various jurisdictions.the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors, the trading price of our common stock could be adversely affected.Additionally, as a result of Brexit, global markets and foreign currencies were adversely impacted. In particular, the value of the British pound declined as compared to the U.S. dollargovernment activity, privacy advocacy, and other currencies. This volatility in foreign currencies is expectedindustry groups have established or may establish various new, additional, or different self-regulatory standards that may place additional burdens on us. Our customers may require us, or we may find it advisable, to continuemeet voluntary certifications or adhere to other standards established by them or third parties, such as the U.K. negotiatesSSAE 18, SOC1, and executes its exit from the European Union, but it is uncertain over what time period this will occur. A significantly weaker British pound compared to the U.S. dollar could have a negative effect on our business, financial condition and results of operations.We do not currently maintain a program to hedge transactional exposures in foreign currencies. However, in the future, we may use derivative instruments, such as foreign currency forward and option contracts, to hedge exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place. Moreover, the use of hedging instruments may introduce additional risks ifSOC2 audit processes. If we are unable to structure effective hedgesmaintain such certifications, comply with such instruments.Controls.Control. Obtaining the necessary authorizations, including any required license, for a particular export or sale may be time-consuming, is not guaranteed, and may result in the delay or loss of sales opportunities. The U.S. export control laws and economic sanctions laws prohibit the export, re-export or transfer of specific products and services to U.S. embargoed or sanctioned countries, regions, governments and persons. Even though we take precautions to prevent our solutions from being provided to U.S. sanctions targets, our solutions could be sold by resellers or could be used by persons in sanctioned countriesregions despite such precautions. Failure to comply with the U.S. export control, sanctions and import laws could have negative consequences, including government investigations, penalties and reputational harm. We and our employees could be subject to civil or criminal penalties, including the possible loss of export or import privileges;privileges, fines, and, in extreme cases, the incarceration of responsible employees or managers. In addition, if our resellers fail to obtain appropriate import, export or re-export licenses or authorizations, we may also be adversely affected through reputational harm and penalties.regulate the import of encryption technology, including through import permitting/licensing requirements, and have enactedcould enact laws that could limit our ability to distribute our solutions or could limit our customers’ ability to implement or access our solutions in those countries. Changes in our solutions or changes in export sanctions and import regulations may create delays in the introduction and sale of our solutions in international markets, prevent our customers with international operations from accessing our solutions or, in some cases, preventingprevent the export or import of our solutions to some countries, governments or persons altogether. Any change in export or import regulations, economic sanctions or related laws, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our solutions, or in our decreased ability to export or sell our solutions to existingcurrent or potential customers with international operations. Any decreased use of our solutions or limitation on our ability to export or sell our solutions would likely adversely affect our business, financial condition and results of operations.We may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such transactions.On August 31, 2016, we completed the Runbook Acquisition. We expect to evaluate and consider potential strategic transactions, including acquisitions of, or investments in, businesses, technologies, services, products, and other assets in the future. We also may enter into relationships with other businesses to expand our products and services, which could involve preferred or exclusive licenses, additional channels of distributions or discount pricing.42The Runbook Acquisition or any future acquisition, investment or business relationship may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, products, personnel or operations of the acquired companies, such as Runbook, particularly if the key personnel of the acquired company choose not to work for us, their software is not easily adapted to work with our platform, or we have difficulty retaining the customers of any acquired business due to changes in ownership, management or otherwise. In addition, Runbook offers an on-premise solution to its customers. If we are unable to migrate those customers to our cloud solution or if we are unable to integrate Runbook’s on-premise software with our platform, our business may be adversely affected. Acquisitions may also disrupt our business, divert our resources, and require significant management attention that would otherwise be available for development of our existing business. Moreover, the anticipated benefits of any acquisition, investment, or business relationship may not be realized or we may be exposed to unknown risks or liabilities.Negotiating these transactions can be time-consuming, difficult, and expensive, and our ability to complete these transactions may often be subject to approvals that are beyond our control. Consequently, these transactions, even if announced, may not be completed. For one or more of those transactions, we may:issue additional equity securities that would dilute our existing stockholders;use cash that we may need in the future to operate our business;incur large charges or substantial liabilities;incur debt on terms unfavorable to us or that we are unable to repay;encounter difficulties retaining key employees of the acquired company or integrating diverse software codes or business cultures; andbecome subject to adverse tax consequences, substantial depreciation, and amortization, or deferred compensation charges.The nature of our business requires the application of complex revenue and expense recognition rules and the current legislative and regulatory environment affecting generally accepted accounting principles is uncertain. Significant changes in current principles could affect our financial statements going forward and changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and harm our operating results.The accounting rules and regulations that we must comply with are complex and subject to interpretation by the FASB, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. Recent actions and public comments from the FASB and the SEC have focused on the integrity of financial reporting and internal controls. In addition, many companies’ accounting policies are being subject to heightened scrutiny by regulators and the public. Further, the accounting rules and regulations are continually changing in ways that could materially impact our financial statements. For example, in May 2014, the FASB issued Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended, which will supersede nearly all existing revenue recognition guidance. Although the new standard permits early adoption as early as January 1, 2017, the effective date of the new revenue standard is January 1, 2018. The new standard permits adoption either by using (i) a full retrospective approach for all periods presented in the period of adoption or (ii) a modified retrospective approach with the cumulative effect of initially applying the new standard recognized at the date of initial application and providing certain additional disclosures. We will adopt the new revenue guidance in the first quarter of 2018 using the full retrospective method to restate each prior reporting period presented. We are currently assessing the impact of the new revenue guidance on our arrangements, we anticipate this standard will have a material impact on our consolidated financial statements. We currently believe that the new guidance will impact the amount and timing of incremental costs of obtaining a contract, such as sales commissions. We generally do not pay sales commissions upon contract renewal. Accordingly, under the new revenue guidance, the sales commissions will be recognized over an estimated period of benefit rather than over the non-cancelable term under current guidance. The new guidance is also expected to impact the our on-premise solutions subject to current software revenue recognition guidance, as we may be required to recognize as revenue a significant portion of the contract consideration upon delivery of the software compared to the current practice of recognizing the contract consideration ratably over time for certain arrangements. The new guidance will also require incremental disclosures of our revenue arrangements. We are in process of quantifying the impact of these changes. Adoption of this standard will also require changes to our business processes, systems and controls to support the new revenue recognition guidance. We are in the process of identifying and implementing such changes.43We cannot predict the impact of future changes to accounting principles or our accounting policies on our financial statements going forward, which could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of the change. In addition, if we were to change our critical accounting estimates, including those related to the recognition of license revenue and other revenue sources, our operating results could be significantly affected.Incorrect or improper implementation or use of our solutions could result in customer dissatisfaction and negatively affect our business, results of operations, financial condition, and growth prospects.Our platform is deployed in a wide variety of technology environments and into a broad range of complex workflows. Our platform has been integrated into large-scale, enterprise-wide technology environments, and specialized use cases, and our success depends on our ability to implement our platform successfully in these environments. We often assist our customers in implementing our platform, but many customers attempt to implement even complex deployments themselves or use a third-party service firm. If we or our customers are unable to implement our platform successfully, or are unable to do so in a timely manner, customer perceptions of our platform and company may be impaired, our reputation and brand may suffer, and customers may choose not to renew or expand the use of our platform.Our customers and third-party resellers may need training in the proper use of our platform to maximize its potential. If our platform is not implemented or used correctly or as intended, including if customers input incorrect or incomplete financial data into our platform, inadequate performance may result. Because our customers rely on our platform to manage their financial close and other financial tasks, the incorrect or improper implementation or use of our platform, our failure to train customers on how to efficiently and effectively use our platform, or our failure to provide adequate product support to our customers, may result in negative publicity or legal claims against us. Also, as we continue to expand our customer base, any failure by us to properly provide these services will likely result in lost opportunities for additional subscriptions to our platform.Any failure to offer high-quality product support may adversely affect our relationships with our customers and our financial results.In deploying and using our solutions, our customers depend on our support services team to resolve complex technical and operational issues. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for product support. We also may be unable to modify the nature, scope and delivery of our product support to compete with changes in product support services provided by our competitors. Increased customer demand for product support, without corresponding revenue, could increase costs and adversely affect our operating results. Our sales are highly dependent on our business reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality product support, or a market perception that we do not maintain high-quality product support, could adversely affect our reputation, our ability to sell our solutions to existing and prospective customers, our business, operating results, and financial position.If the market for SaaS solutions develops more slowly than we expect or declines, our business would be adversely affected.The market for SaaS solutions is less mature than the market for on-premise software applications, and the adoption rate of SaaS solutions may be slower at companies in industries with heightened data security interests or business practices requiring highly customizable application software. Many organizations have invested substantial personnel and financial resources to integrate traditional on-premise solutions into their businesses, and therefore may be reluctant or unwilling to purchase SaaS solutions. In addition, some organizations have been reluctant to use cloud-based solutions because they have concerns regarding the risks associated with the reliability or security of the technology delivery model associated with these solutions. Because our solutions involve the aggregation, storage and use of confidential information and related data, including highly confidential financial data, some customers may be reluctant or unwilling to migrate to our cloud-based solutions.44It is difficult to predict customer adoption rates and demand for our software solutions, the future growth rate and size of the market or the entry of competitive products or services. The expansion of the SaaS solutions market depends on a number of factors, including the cost, performance and perceived value associated with SaaS, as well as the ability of SaaS providers to address data security and privacy concerns. Government agencies have adopted, or may adopt, laws and regulations regarding the collection and use of personal information obtained from consumers and other individuals, or may seek to access information on our platform, either of which may reduce the overall demand for our platform. If we or other SaaS providers experience data security incidents, loss of customer data, disruptions in delivery, or other problems, the market for SaaS solutions, including our platform, may be negatively affected. If SaaS solutions do not continue to achieve market acceptance, or there is a reduction in demand for SaaS solutions caused by a lack of customer acceptance, technological challenges, data security or privacy concerns, governmental regulation, competing technologies and products, or decreases in information technology spending, it would result in decreased revenue and our business would be adversely affected.Unfavorable conditions in our industry or the global economy could limit our ability to grow our business and negatively affect our operating results.Our operating results may vary based on the impact of changes in our industry or the global economy on us or our customers. The revenue growth and potential profitability of our business depend on demand for business software applications and services generally and for accounting and finance systems in particular. Weak economic conditions affect the rate of accounting and finance and information technology spending and could adversely affect our customers’ or potential customers’ ability or willingness to purchase our cloud platform, delay purchasing decisions, reduce the value or duration of their subscription contracts, or affect attrition rates, all of which could adversely affect our operating results. If economic conditions deteriorate, our customers and prospective customers may elect to decrease their accounting and finance and information technology budgets, which would limit our ability to grow our business and negatively affect our operating results. future success of our business depends upon the continued use of the internet as a primary medium for commerce, communication, and business applications. Federal, state, or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium. Regulators in some industries have also adopted and may in the future adopt regulations or interpretive positions regarding the use of SaaS and cloud computing solutions. For example, some financial services regulators have imposed guidelines for the use of cloud computing services that mandate specific controls or require financial services enterprises to obtain regulatory approval prior to utilizing such software. Changes in these laws or regulations could require us to modify our solutions in order to comply with these changes. In addition, government agencies or private organizations have imposed and may impose additional taxes, fees, or other charges for accessing the internet or commerce conducted via the internet. These laws or charges could limit the growth of internet-related commerce or communications generally, or result in reductions in the demand for internet-based solutions and services such as ours. In addition, the use of the internet as a business tool could be adversely affected due to delays in the development or adoption of new standards and protocols to handle increased demands of internet activity, security, reliability, cost, ease-of-use, accessibility, and quality of service. The performance of the internet and its acceptance as a business tool has been adversely affected by “viruses,” “worms,” and similar malicious programs and the internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure. If the use of the internet is adversely affected by these issues, demand for our solutions could decline.We provide service level commitments under our customer contracts, and if we fail to meet these contractual commitments, our revenuesbe adversely affected.Our customer agreements typically provide service level commitments. If we are unable to meetdecrease the stated service level commitments or suffer extended periods of unavailabilitydemand for our applications, we may be contractually obligated to provide these customers with service credits, refunds for prepaid amounts related to unused subscription services, or we could face contract terminations. Our revenues could be significantly affected if we suffer unscheduled downtime that exceeds the allowed downtimes under our agreements with our customers. Any extended service outages could adversely affect our reputation, revenuesproducts and operating results.45Seasonality could causeincrease our operating resultscosts. The current legislative and financial metrics to fluctuate from quarter to quarterregulatory landscape regarding the regulation of the internet and, make them more difficult to predict.We typically add fewer customersin particular, internet neutrality, in the first quarterUnited States is subject to uncertainty. The Federal Communications Commission ("FCC") had previously passed Open Internet rules in February 2015, which generally provided for internet neutrality with respect to fixed and mobile broadband internet service. On December 14, 2017, the FCC voted to repeal Openyear thanrepeal; thus the future impact of the FCC's repeal and any changes thereto remains uncertain. In addition, in September 2018, California enacted the California Internet Consumer Protection and Net Neutrality Act of 2018, making California the fourth state to enact a state-level net neutrality law since the FCC repealed its nationwide regulations. This act mandated that all broadband services in California be provided in accordance with California's net neutrality requirements. The U.S. Department of Justice has sued to block the law going into effect, and California has agreed to delay enforcement until the resolution of the FCC's repeal of the federal rules. A number of other quarters.states are considering legislation or execution action that would regulate the conduct of broadband providers. In its recent decision on the FCC’s repeal, the D.C. Circuit Court of Appeals also ruled that the FCC does not have the authority to bar states from passing their own net neutrality rules. It is uncertain whether the FCC will argue that some state net neutrality laws are preempted by federal law and challenge such state net neutrality laws on a case-by-case basis. We also experience a higher volume of sales atcannot predict whether the end of each quarter and year, which is often the result of buying decisionsFCC order or state initiatives will be modified, overturned or vacated by our customers. Seasonality may be reflected to a much lesser extent, and sometimes may not be immediately apparent, in our revenue, due to the fact that we recognize subscription revenue over the term of our agreements. We may also increase expenses in a period in anticipation of future revenues. Changeslegal action. Additional changes in the numberlegislative and regulatory landscape regarding internet neutrality, or otherwise regarding the regulation of customers and users in different periods will cause fluctuations inthe internet, could also harm our financial metrics and, to a lesser extent, revenues. Those changes and fluctuations in our expenses will affect our results on a quarterly basis, and will make forecasting our future operating results and financial metrics difficult.Recent changes to U.S. tax laws, including limitations on the ability of taxpayers to claim and utilize foreign tax credits, as well as changes to U.S. tax laws that may be enacted in the future, could impact the tax treatment of our foreign earnings. Due to expansion of our international business activities, anysuchour activities may increase our worldwide effective tax rate and adversely affect our financial position and results of operations.Our ability to use our net operating losses to offset future taxable For example, the Inflation Reduction Act includes, among other provisions, an alternative minimum tax on adjusted financial statement income may be subject to limitations.Asand a 1% excise tax on stock buybacks. The Organization for Economic Cooperation and Development has proposed a global minimum tax of December 31, 2016, we had federal15%, which has been adopted by the European Union effective from January 1, 2024. These and state net operating loss carryforwards,other proposed or NOLs, of $94.7 million and $90.9 million, respectively. In general, under Section 382 of the Internal Revenue Code of 1986, as amended (“the Code”) a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs to offset future taxable income. Our existing NOLs may be subject to limitations arising from previous ownership changes, and if we undergo an ownership change, our ability to utilize NOLs could be further limited by Section 382 of the Code. Futureimplemented changes in the U.S. and global taxation could adversely impact our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Code. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. For these reasons, we may not be able to realize a tax benefit from the use of our NOLs, whether or not we attain profitability.We might require additional capitalsupport business growth, and this capital might not be available on acceptable terms, if at all.We intendOur Intellectual Propertycontinue to make investments to supportprotect our business growth and may require additional funds to respond to business challenges, including the need to develop new features or enhance our existing solutions, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or46convertible debt securities, our existing stockholdersintellectual property rights could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it,impair our ability to continue to supportprotect our business growth and to respond to business challenges could be significantly impaired.Natural disasters and other events beyond our control could harm our business.Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control. Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our solutions to our customers, and could decrease demand for our solutions. The majority of our research and development activities, corporate headquarters, informationproprietary technology systems and other critical business operations are located in California, which has experienced major earthquakes in the past. Significant recovery time could be required to resume operations and our financial conditionbrand.operating results couldability to compete depend, in part, upon our intellectual property. We currently have two patents and primarily rely on copyright, trade secret and trademark laws, trade secret protection, and confidentialityharmed in the event of a major earthquake or catastrophic event.Ifinadequate.goodwill or intangible assets become impaired,intellectual property rights, we may be required to recordspend significant resources to monitor and protect these rights. In the past, we have utilized demand letters as a significant chargemeans to earnings.We review our goodwillassert and intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. As of September 30, 2017, we had goodwill and intangible assets with a net book value of $229.3 million related to the 2013 Acquisition and the Runbook Acquisition. An adverse change in market conditions, particularly if such change has the effect of changing oneresolve claims regarding potential misuse of our critical assumptionsproprietary or estimates,trade secret information. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Our failure to secure, protect and enforce our intellectual property rights could adversely affect our brand and adversely impact our business.changeresult, we could be subject to the estimationsuits by parties claiming misuse of, fair value thator a right to compensation for, what we believe to be open source software. Litigation could result in an impairment chargebe costly for us to our goodwill or intangible assets. Any such charges maydefend, have a material negative impacteffect on our operating results.ourOur Common Stock47those resulting from war,instability in the banking and financial services sector, geopolitical events such as Russia's invasion of Ukraine, incidents of terrorism, outbreaks of pandemic diseases such as COVID-19, presidential elections, civil unrest, or responses to these events.involvedthe target of this type of litigation in securities litigation,the future, it could subject us to substantial costs, divert resources and the attention of management, from operating our business, and adversely affect our business, results of operations, financial condition and cash flows.The Company is controlled by certain of our Principal Stockholders, whose interests may differ from those of other stockholders.As of September 30, 2017, our Principal Stockholders beneficially owned, in the aggregate, approximately 63% of our outstanding common stock and directors affiliated with our Principal Stockholders comprise a majority of our board of directors. Further, we entered into a Stockholders’ Agreement with the Principal Stockholders which provides that the Principal Stockholders are entitled to designate members of our board of directors. We anticipate that the parties to the Stockholders’ Agreement will agree to vote for these nominees as well as other directors recommended by our nominating and corporate governance committee.Under the Stockholders’ Agreement and subject to our amended and restated certificate of incorporation and amended and restated bylaws and applicable law, for so long as the Principal Stockholders collectively own or hold of record, directly or indirectly, in the aggregate at least 40% of their collective “Post-IPO Shares” (as defined in the Stockholders’ Agreement), as adjusted for any reorganization, recapitalization, stock dividend, stock split, reverse stock split or similar changes in our capitalization, the following actions will require the approval of our board of directors, including the affirmative vote of at least two directors designated by Silver Lake Sumeru:any voluntary liquidation, winding up or dissolution or any action relating to a voluntary bankruptcy, reorganization or recapitalization of the company or its subsidiaries;certain dispositions of assets in excess of $50 million or entry into joint ventures requiring a capital contribution in excess of $50 million, in each case, by the company or its subsidiaries;fundamental changes in the nature of the company’s or its subsidiaries’ existing lines of business or the entry into a new significant line of business;any amendments to the company’s amended and restated certificate of incorporation and amended and restated bylaws;incurrence of indebtedness in excess of $150 million;appointment or termination of the Chief Executive Officer; andchange of control transactions.Following our initial public offering, the Principal Stockholders are able to determine the outcome of all matters requiring stockholder approval, including mergers and other material transactions, and will be able to cause or prevent a change in the composition of our board of directors or a change in control of our company that could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.Further, our amended and restated certificate of incorporation provides that, to the fullest extent permitted by law, the doctrine of “corporate opportunity” will not apply to Silver Lake Sumeru, Iconiq, their respective affiliates or the48directors they designate, pursuant to their rights under the Stockholders’ Agreement in a manner that would prohibit them from investing in competing businesses or doing business with our partners or customers. Accordingly, these directors will have the rights to pursue business opportunities that may be of interest to the company and which they would otherwise need to provide to the company.Although we do not expect to rely on the “controlled company” exemption, we are a “controlled company” within the meaning of the stock exchange rules and we qualify for exemptions from certain corporate governance requirements.Because our Principal Stockholders collectively own a majority of our outstanding common stock, we are considered a “controlled company” as that term is set forth in the stock exchange rules. Under these rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a “controlled company” and may elect not to comply with certain stock exchange rules regarding corporate governance, including:the requirement that a majority of its board of directors consist of independent directors;the requirement that its nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; andthe requirement that its compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.These requirements will not apply to us as long as we remain a “controlled company.” Although we qualify as a “controlled company,” we do not expect to rely on this exemption and intend to fully comply with all corporate governance requirements under the stock exchange rules. However, if we were to utilize some or all of these exemptions, you may not have the same protections afforded to stockholders of companies that are subject to all of the stock exchange rules regarding corporate governance.Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.The market price of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers and significant stockholders, a large number of shares of our common stock becoming available for sale or the perception in the market that holders of a large number of shares intend to sell their shares.Under the Stockholders’ Agreement, each of Iconiq, Ms. Tucker and Mr. Spanicciati have agreed, subject to certain limited exceptions, including in a registered public offering, not to transfer, sell, exchange, assign, pledge, hypothecate, convey or otherwise dispose of or encumber any shares of our common stock without the consent of Silver Lake Sumeru until the earlier of (i) two years following the completion of our initial public offering, or November 2, 2018, and (ii) Silver Lake Sumeru’s reduction of its holdings of common stock following our initial public offering by 50%; provided, however that each of Ms. Tucker and Mr. Spanicciati has the right to sell a number of shares equal to up to 1% of the total outstanding shares of our common stock annually pursuant to Rule 144 of the Securities Act.Additionally, certain stockholders, including our Principal Stockholders, can require us to register shares of our capital stock owned by them for public sale in the United States. If our Principal Stockholders were to register all or a portion of our capital stock owned by them on a registration statement, the shares would not be subject to the transfer restrictions under the Stockholders’ Agreement described above and would be available for immediate resale in the United States in the open market.Sales of our common stock by our current stockholders may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These sales also could cause the market price of our common stock to decline and make it more difficult for you to sell shares of our common stock.49(“DGCL”(the “DGCL”) contain provisions that could make it more difficult for a third-party to acquire us, even if doing so might be beneficial to our stockholders. Among other things:will be prohibited from and after the date on which the Principal Stockholders beneficially own, in the aggregate, less than 35% in voting power of our stock entitled to vote generally in the election of directors;for as long as the Principal Stockholders beneficially own, in the aggregate, at least 40% in voting power of our stock entitled to vote generally in the election of directors, any amendment, alteration, rescission or repeal of our amended and restated bylaws or our amended and restated certificate of incorporation by our stockholders will require the affirmative vote of 60% of the voting power of our stock entitled to vote thereon, voting together as a single class and at any time when the Principal Stockholders beneficially own, in the aggregate, less than 40% in voting power of our stock entitled to vote generally in the election of directors, •any amendment, alteration, rescission or repeal of our amended and restated bylaws or of certain provisions of our amended and restated certificate of incorporation by our stockholders will requirerequires the affirmative vote of the holders of at least 75% of the voting power of our stock entitled to vote thereon, voting together as a single class outstanding; andmeetings; provided, however, that such advance notice procedures will not apply to the Principal Stockholders at any time such person or entity owns in the aggregate at least 10% of the voting power of our stock entitled to vote generally in the election of directors.are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicabledo not intend to emerging growth companies will makepay dividends on our common stock less attractive to investors.We are an “emerging growth company,” as defined in the federal securities laws, and we have taken advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but notso any returns will be limited to not being required to comply withchanges in the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we have relied on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We will remain an “emerging growth company” until the last day of the fiscal year following the five-year anniversary of the completion of our initial public offering, although if the market value of our common stock.heldgoverned by non-affiliates exceeds $700 million asthe internal affairs doctrine shall be the Court of Chancery of the endState of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants and provided that this exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act.second quarterSecurities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated bylaws also provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. However, while the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are "facially valid" under Delaware law, there is uncertainty as to whether other courts will enforce our federal forum provision. If the federal forum provision is found to be unenforceable, we may incur additional costs associated with resolving such matters.fiscal yearfundamental change before the applicable maturity date at a repurchase price equal to 100% of the principal amount of such Notes to be repurchased, plus accrued and unpaid interest or special interest, if any, as described in the applicable indenture governing such Notes. In addition, upon conversion of the Notes of the applicable series, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of such Notes being converted, as described in the applicable indenture governing such Notes. Moreover, we will be required to repay the Notes of the applicable series in cash at their respective maturity unless earlier converted, redeemed, or repurchased. However, we may not have enough available cash on hand or be able to obtain financing at the time we are required to make repurchases of such Notes surrendered therefor or pay cash with respect to such series of Notes being converted or at their respective maturity. Our ability to repay or refinance the Notes will depend on market conditions and our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Further, if either series of the Notes convert and we elect to issue common stock in lieu of cash upon conversion, our existing stockholders could suffer significant dilution.five-year anniversary, we would cease to be an “emerging growth company” asrespective maturity of the following December 31.50(“the Exchange(the “Exchange Act”) the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), the Dodd-Frank Wallthe exchanges and other markets upon which our common stock is listed,Nasdaq, and other applicable securities rules and regulations. Compliance with these rules and regulations will increaseincreases our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.”resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. We will beare required to disclose changes made in our internal control and procedures on a quarterly basis and we will beare required to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the fiscal year 2017. However,on an annual basis. Additionally, our independent registered public accounting firm will not beis required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the later of the year following our first annual report required to be filed with the SEC, or the date we are no longer an “emerging growth company.”404. As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results. Although we have already hired additional employees to assist us in complying with these requirements, we may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses.affectedWe also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.As a result of disclosure of information in the filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and operating results.We do not intend to pay dividends on our common stock so any returns will be limited to changes in the value of our common stock.We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation, and expansion of our business, and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the increase, if any, of our stock price, which may never occur.51us or our business.us. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our common stock would be negatively affected. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline.amended and restated bylaws designate a state or federal court located within the State of Delawarebusiness operations are subject to interruption by natural disasters, climate-related events, pandemics, such as COVID-19, terrorism, political unrest, geopolitical instability, war, such as the exclusive forumwar in Ukraine, and other events beyond our control. Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for certain litigationus to deliver our solutions to our customers, could decrease demand for our solutions, and could cause us to incur substantial expense. The majority of our research and development activities, corporate headquarters, information technology systems and other critical business operations are located in California, which has experienced, and is projected to continue to experience, major earthquakes, droughts, heat waves, wildfires, and power shutoffs associated with wildfire prevention. Significant recovery time could be required to resume operations and our business could be harmed in the event of a major earthquake or other catastrophic event. Our insurance may not be sufficient to cover related losses or additional expenses that we may sustain. In addition, we may be initiated by our stockholders, which could limit our stockholders’ abilitysubject to obtain a favorable judicial forum for disputes with us.Pursuant to our amended and restated bylaws, unless we consent in writing toincreased regulations, reporting requirements, standards, or expectations regarding the selection of an alternative forum, the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by anyenvironmental impacts of our directors, officersbusiness, and failure to comply with such regulations, requirements, standards or other employees to usexpectations could adversely affect our reputation, business or our stockholders, (3) any action asserting a claim against us arising pursuant to any provision of the DGCL, or (4) any action asserting a claim against us that is governed by the internal affairs doctrine shall be a state or federal court located within the State of Delaware, in all cases subject to the court’s having personal jurisdiction over indispensable parties named as defendants. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to this provision. The forum selection clause in our amended and restated bylaws may have the effect of discouraging lawsuits against us or our directors and officers and may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.Item 2.None.On October 27, 2016, the Registration Statement on Form S-1 (File No. 333-213899) for our initial public offering was declared effective by the SEC. On November 2, 2016, we closed our initial public offering and sold 9,890,000 sharesour common stock at a public offering priceEquity Securities$17.00 per share for an aggregate offering price of approximately $168.1 million. Upon completion of the sale of the shares of our common stock, our initial public offering terminated.The underwriters for our initial public offering were Goldman, Sachs & Co., J.P. Morgan Securities LLC, Pacific Crest Securities, a division of KeyBanc Capital Markets Inc., Raymond James and Associates, Inc., William Blair & Company, L.L.C. and Robert W. Baird & Co. Incorporated. We paid to the underwriters of our initial public offering underwriting discounts and commissions totaling approximately $11.8 million and incurred offering expenses of approximately $4.5 million which, when added to other underwriting discounts and commissions, amount to total expenses of approximately $16.3 million. Thus, the net offering proceeds, after deducting underwriting discounts and commission and other offering expenses, were approximately $151.9 million.There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus, dated October 27, 2016, pursuant to Rule 424(b)(4) of the Securities Act.ITEM 6.52ExhibitIncorporated by ReferenceNumberDescriptionFormFile No.ExhibitFiling Date31.131.232.1†101.INSXBRL Instance Document101.SCHXBRL Taxonomy Extension Schema Document101.CALXBRL Taxonomy Extension Calculation Linkbase Document101.DEFXBRL Taxonomy Extension Definition Linkbase Document101.LABXBRL Taxonomy Extension Label Linkbase Document101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentExhibit
NumberDescription Form File No. Exhibit Filing Date 3.1 8-K 001-37924 3.1 March 13, 2023 10.1 8-K 001-37924 10.1 March 6, 2023 10.2 8-K 001-37924 10.2 March 6, 2023 10.3 8-K 001-37924 10.3 March 6, 2023 31.1 31.2 31.3 32.1† 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
†The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of BlackLine, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.†The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of BlackLine, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.53BlackLine, Inc.BlackLine, Inc. By:By: /s/ Therese Tucker Therese Tucker ChiefCo-Chief Executive Officer ( PrincipalCo-Principal Executive Officer)Date: May 5, 2023 Date: November 8, 2017By:By: /s/ Owen Ryan Owen Ryan Co-Chief Executive Officer (Co-Principal Executive Officer) Date: May 5, 2023 By: /s/ Mark Partin Mark Partin Chief Financial Officer (Principal Financial Officer) Date: May 5, 2023 Date: November 8, 201754