BlackLine, Inc (NASDAQ: BL) Q4 2025 Earnings Call dated Feb. 10, 2026
Corporate Participants:
Matt Humphries — SVP of Investor Relations
Owen Ryan — Co-Chief Executive Officer & Chairman
Patrick Villanova — Chief Financial Officer
Jeremy Ung — Chief Technology Officer
Analysts:
Chris Quintero — Analyst
Steve Enders — Analyst
Alex Sklar — Analyst
Patrick Walravens — Analyst
Adam Hotchkiss — Analyst
Patrick Seuss — Analyst
Daniel Jester — Analyst
Matt Vendley — Analyst
Robert Simmons — Analyst
Billy Fitzsimmons — Analyst
Presentation:
operator
Good day and thank you for standing by. Welcome to the Blackline fourth quarter 2025 earnings conference call. At this time, all participants are in a listen only mode. Please be advised that today’s conference is being recorded. After the speaker’s presentation, there will be a question and answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. I would now like to hand the conference over to your speaker today. SVP of Investor Relations Matt Humphries.
Matt Humphries — SVP of Investor Relations
Good. Afternoon and thank you for joining us today. With me on the call are Owen Ryan, Chief Executive Officer of blackline, as well as Patrick Villanova, Chief Financial Officer for the Q and a portion of today’s call, we’ll also have Jeremy Ng, blackline’s Chief Technology Officer, join us. Before we get started, I’d like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans, objectives and expected performance. In particular, our guidance for Q on the full year 2026 are forward looking statements within the meaning of the Private Security Litigations Reform act of 1995.
These forward looking statements represent our outlook only as of the date of this call. While we believe any forward looking statements made during the call are reasonable, actual results could differ materially as these statements are based on our current expectations as of today and are subject to risks and uncertainties, including those stated in our periodic reports filed with the securities and Exchange Commission, in particular our Form 10K and Form 10Q. We do not undertake and expressly disclaim any obligation to update or alter our forward looking statements, whether as a result of new information, future events or otherwise.
Except as required by applicable law. All comparisons we make on the call today relate to the corresponding period of last year unless otherwise noted. Unless otherwise stated, our financial measures disclosed on this call will be non gaap. A discussion of these non GAAP financial measures and information regarding reconciliations of Our Historical GAAP vs Non GAAP results is available in our earnings release and presentation which may be found on our Investor relations website@investors.blackline.com or in our Form 8K filed with the SEC today. Now I’ll turn the call over to Blackline’s Chief Executive Officer, Owen Ryan. Owen?
Owen Ryan — Co-Chief Executive Officer & Chairman
Thank you, Matt. Good afternoon everyone. Over two years ago we committed to a fundamental transformation of blackline. We have been executing a methodical multi year plan to reposition this company to drive revenue growth back into the double digits while expanding operating margins in line with our multi year financial targets. It began in the fall of 2023 when we laid out a new strategic vision to evolve from a suite of solutions for the controller into a unified intelligent platform for the CFO. By early 2024, we implemented a new operating model to support this vision. We modernized our go to market engine, introduced industry specific sales motions.
We focused our efforts on larger mid market enterprise and mega enterprise customers where our value is most differentiated and shifted to a partner first approach with the world’s leading System Integrators and SAP. Throughout 2024 and into early 2025 we completed the build out of our new leadership team to drive this strategy forward. As we enter 2026, our 25th anniversary, we believe the business is structurally stronger than it has ever been. Supported by a healthy growing pipeline, a disciplined and cohesive team, an amazing partner network and our most comprehensive product portfolio to date. We are well positioned to execute our strategy and extend our market leadership.
Today we are pleased to report that those intentional choices are translating into tangible results. We have established blackline as a critical partner for the world’s most complex organizations, now serving approximately 70% of the Fortune 100 up from 50% in 2022. This validation supports our strategic goal of elevating our conversation within the Office of the cfo. We saw broad based success in the fourth quarter driven by our platform strategy and strategic products. By combining the innovation of Studio 360 with a commercial model aligned to value and not seats, we delivered our strongest booking quarter and year in our history with full year bookings growth of 22%.
We believe this performance validates the investments we made to grow our pipeline, modernize our go to market engine and accelerate innovation. We finished the year with higher close rates and solid demand, confirming that our execution is gaining traction. We saw notable strength within our install base with nearly 3/4 of our bookings coming from existing customers. Blackline customers are realizing immediate value from our platform which allows them to fully leverage our latest innovations without user constraints. They are also investing in the future, specifically our Verity AI agents. This is translating directly into predictability and visibility. Remaining performance obligations OR RPO grew 23% driven by platform adoption and continued success driving multi year renewals.
Simply put, customers are making long term contractual commitments to blackline as their strategic partner in the Office of the cfo. While our expansion motion shows solid progress, we remain clear eyed on retention. We believe Q4 was the peak of our churn and attrition cycle driven largely by the expected impact from our strategic choices in the lower middle market. However, our underlying business remains healthy. To underscore the strength of our core, our enterprise customer cohort maintained a revenue renewal rate of 95% and also delivered a net revenue retention rate of 107% this quarter. We are actively bending the arc on retention through deliberate structural changes.
First, our shift to a platform model and success with multi year renewals is fundamentally changing the nature of our customer relationships. We are moving away from transactional subscriptions based on seats towards long term strategic partnerships anchored on business value. Second, we have optimized our customer success model, leveraging technology and aligning compensation internally and with key partners to ensure the ecosystem is financially incentivized to drive adoption. As we move through the first half of 2026, we expect the lower mid market headwinds to subside. Combined with these structural initiatives, we have high confidence in improving retention profile in 2026.
We are also proving that trust, partnership and innovation command a premium. With new customer deal sizes up 35% driven largely by enterprise wins, we’re seeing solid growth in the number of customers paying over 1 million in ARR, up 20% to 85 and notably customers paying over 250,000 were up 14%. This confirms that when we focus on transformational outcomes rather than features, customers invest more deeply in blackline. We continue to balance this acceleration with discipline. Even as revenue growth accelerated to 8% in the quarter, we delivered a 25% non GAAP operating margin along with a 25% non GAAP net income margin.
This efficiency is by design. Over the last three years we have grown revenue by approximately 34% while our total headcount has grown by only just 2%, adding 40 net new roles. We believe we have effectively broken the linear relationship between headcount and revenue growth, establishing a model that allows us to scale more efficiently. Importantly, sales productivity continues to improve, driving a notable 30% decrease in customer acquisition costs this quarter. Additionally, with our Google Cloud migration now complete, we are beginning to stand down legacy data centers, unlocking further margin potential and opportunities for strategic investments. While the team and I are pleased with this progress, we are far from satisfied.
We expect to continue to drive revenue growth back into the double digits along with further operating margin expansion in line with our multi year financial targets. Let’s dig deeper into how we are winning. First, Platform Strategy we have aligned our commercial model with our platform vision. Our shift to platform pricing is the mechanism that unlocks the value of Studio 360. It aligns with how CFOs want to buy, focusing on outcomes and value, not seats. In Q4, nearly 3/4 of all new bookings leveraged our platform. With existing customers also accelerating their migrations. This platform first approach changes the customer relationship.
Once customers standardize on blackline as their financial operating system, it becomes the natural foundation for broader transformation. This is helping to drive demand for our strategic products which represented 33% of sales, intercompany and Invoice to Cash each had record quarters and years as customers trust us to deliver end to end outcomes. A prime example is Brown and Brown, a long standing customer who expanded their financial close relationship with us by adopting our full Invoice to cash suite in 2026. We are moving towards a standard initial offering for all new customers that includes reconciliations, tasks matching, journal risk analyzer and consolidation underpinned by Studio360 and AI all on platform pricing.
We expect this approach will drive larger initial deal sizes, enhance customer stickiness and create more opportunities to cross sell and drive AI adoption. Second, Enterprise Momentum we are winning deals with complex global enterprises by speaking their language. Our focus on industry specific outcomes is delivering results allowing us to demonstrate unique operational and domain expertise that differentiates blackline in the market. In the fourth quarter we signed multiple large platform deals driving average new enterprise deal sizes up 41%. Nearly every one of these deals focused on how customers can leverage our Verity AI offerings. Let’s look at a few notable examples.
In the consumer sector, we signed a seven figure ACV deal with a global leader in food services. Operating in an industry defined by massive transaction volumes and decentralized operations. They needed to centralize visibility across thousands of locations. They leveraged our full financial close solutions with Studio 360 and platform pricing to drive that efficiency. In the oil and gas industry, we secured a large enterprise win with national oil well Varco where our deep industry expertise and platform approach were critical to drive their digital finance transformation. In technology, we also signed a platform deal with a global leader in memory and data storage.
Facing the financial complexity inherent in global manufacturing and supply chains. They chose blackline because they wanted to see value today but also have a framework to adopt AI going forward. This initial win validates our core value proposition and we are already engaged in strategic discussions to expand their footprint with our intercompany solutions and Verity AI. And in financial services, we resigned Invesco, a former blackline customer who had moved to a lower cost ERP competitor. They recognized the need for automation, scale and auditor trust that blackline provides. Third Partners Our partner ecosystem is a critical differentiator, driving demand and extending our global reach.
In 2025, every single deal over $500,000 was won with a partner and our two largest deals of the year were direct partner referrals. These firms are now evangelizing Studio 360, our Verity AI offerings and our strategic products, helping us secure major wins at companies like Raytheon and National Australia Bank. 4th SAP Our golden architecture strategy is beginning to deliver results. Solect’s bookings performance was strong, highlighted by new wins with Siemens Energy and Caterpillar and a large expansion with Hitachi Energy, proving that our joint pipeline is maturing into significant commercial value. Coming into 2026, I believe our alignment with SAP has never been stronger.
We secured full product qualification for Studio360, unlocking the ability to sell directly into SAP’s installed base of advanced financial Close customers through our AFC integration. We are currently engaged with SAP leaders to Explore integrations for SAP’s dual copilot with Blackline Verity agents to create a single unified digital workforce for finance. The objective is to create a seamless user experience while establishing a commercial framework to directly sell and monetize our Verity agents through a strategic proof of concept. Our shared goal is to define the future of the AI powered autonomous close. Critically, we have aligned Blackline’s KPIs as one of the measures of the compensation plans for both Blackline and SAP customer success managers, ensuring our post sales teams are financially incentivized to drive joint customer success.
We are also deepening our channel strategy in the public sector by partnering with SAP and a leading public sector reseller to accelerate growth and adoption in this large market. And last, we have expanded globally, launching dedicated coverage in the Kingdom of Saudi Arabia where the combination of SAP, our local team and our new local Google Cloud instance has already helped us sign our first deals in the region. We expect our deepening and broadening collaboration with SAP to continue to drive momentum throughout 2026. Beyond we are seeing the early stages of an important evolution in the Office of the CFO as leaders look to move beyond simple automation toward intelligent AI driven orchestration.
The requirements for success are clear. AI in finance and accounting must be accurate, transparent, auditable and secure. We believe Blackline is uniquely positioned to lead because we have built our platform on three essential pillars, data, context and agency. Together these form a proprietary intelligence layer that allows Blackline to build on its reputation and expand its market leadership. The foundation of our AI strategies are data and connectivity. For over 20 years, Blackline has served as the centralized hub where the world’s most complex organizations turn raw data into financial truth. The scale of this continues to grow.
Last year we processed tens of billions of transactions across our platform. We ingest data from thousands of disparate ERPs, subledgers and third party financial systems. We cleanse it, sanitize it and normalize it, creating a unified financial data set that acts as a single source of truth. To extend this further, we continue to expand connectivity via APIs and connectors. We have launched new connectors for Microsoft Dynamics, 365, Oracle Fusion and Workday and are leveraging deeper integrations with Snowflake and upcoming integrations with Databricks. This allows us to harness data from across the enterprise, creating the high quality fuel required for trusted AI.
We supplement this with intelligence and context. A generic model can summarize a document, but it lacks the specific human enriched processing data needed to reconcile a balance sheet or manage industry specific accounting challenges. Blackline has two decades of operational context from thousands of customers, including historical reconciliation decisions, justification narratives and review and approval actions, along with successful and failed transaction matches and historical exception handling auditor interactions. This proprietary intelligence allows us to deliver context aware predictions and automation, providing the necessary context to turn generative text into financial truth. And importantly, our AI operates within a framework of proven governance with embedded controls, audit trails, segregation of duties and institutional experience that gives us the brand permission to be the trusted choice in the market.
We offer a managed digital workforce via our Verity agents which are prepackaged, pre trained and fully auditable with clear chain of thought. We’ve architected our platform so that every action the AI takes leaves a digital footprint identical to a human user. This directly addresses the single biggest barrier to AI adoption in finance, the trust gap. CFOs cannot sign off on financial statements generated by a black box. By ensuring every AI agent leaves a standard immutable audit trail, providing the clear chain of thought that auditors require. We transform AI from an unacceptable risk into a compliant asset.
This allows our customers to pursue productivity gains without compromising their controls environment. We are leveraging these three pillars to evolve our platform from traditional automation to agentic workflow orchestration. By embedding intelligence directly into workflows, we deliver the outcomes customers prioritize speed, accuracy and continuous audibility. We’re seeing the impact in the field Nearly every deal in Q4 involved discussions around Verity and our innovation roadmap. Customers are focused on how we are developing AI for them and how it naturally fits into their unique processes to deliver ROI quickly and safely. We are also seeing growing adoption of our AI with customer usage of our AI capabilities, more than doubling quarter over quarter.
With nearly 20% of all customers now using at least some form of our AI features. We have an accelerating product cycle this year with an emphasis on launching and monetizing our Verity AI agents. A key part of our platform strategy first is Verity Prepare. This is our AI powered reconciliation agent that we previewed in Q4 and is now in early access for our platform customers. Several large enterprise customers are already using it. With even more planning to adopt this In Q1, customers can elevate their users from preparers to reviewers, offloading repetitive work and freeing accountants to focus on high judgment analysis.
This helps to bridge the talent gap and allows customers to handle growing complexity without adding headcount. Next is Verity collect plan for Q2. This agent automates many of the manual tasks of the collections process like predicting payment behaviors and autonomous dunning. The excitement from our partner ecosystem is notable as this targets high volume repetitive work where agents thrive, directly impacting working capital and finally rarity accruals. This agent targets high judgment areas within the accruals process. Unlike standard rules based automation, this agent interprets context to manage complex estimates. We are actively selling this today and it pairs perfectly with our existing journal solution to drive automation into the last mile of the close.
We look forward to sharing a deeper dive into these capabilities at a virtual investor session in March. Beyond commercial products, we are using AI to transform our own delivery. We have released a new category of implementation agents for our partners and professional services team. These agents standardize the engagement process from qualification to architecture and testing, rapidly accelerating time to value and ROI for customers. Internal usage of AI is also allowing our engineering teams to accelerate product delivery and further enhance and expand our existing solutions across financial close, intercompany and invoice to cash. This transformation goes beyond our products.
By modernizing both our technology and our delivery models, we are building a significantly more agile and efficient company. We are increasingly excited and confident in our ability to win in this rapidly shifting market and I want to thank our partners and my fellow blackliners for their extraordinary efforts. With that, I’ll turn it over to Patrick to discuss the financial results and outlook in more detail. Patrick thank you Owen.
Patrick Villanova — Chief Financial Officer
Our fourth quarter financial results and metrics reflect the progress we’ve made and the confidence we have in the business as we focus on delivering in 2026 and into 2027. Turning to our financial results this quarter total revenue grew to $183 million, up 8%. Subscription revenue grew 8% with services revenue growth of 17% due to accelerated customer go lives and implementations, a direct result of our improved services delivery engine. Annual recurring revenue or ARR was $702 million, up nearly 10% with an approximate 1.5 point benefit from FX in the quarter. We saw material strength with customers doubling down on their commitment and partnership with blackline in the quarter driven by platform adoption and continued success with multi year renewals.
As a result, total RPO grew 23% to $1.1 billion. Additionally, current RPO accelerated further to 13% reflecting current market demand. At the end of Q4 platform pricing ARR was 11% of eligible ARR. This is ARR that excludes SOLX and Public sector. This was up from 4% at the end of the third quarter, illustrating the market’s initial acceptance of our new commercial model and the momentum we are seeing. Calculated billings grew by over 9% in the quarter. Our trailing twelve month billings growth which helps normalize for quarterly variations improved to 9%. Our customer count of 4,394 remains in line with our expectations as we move to the end of our strategic shift further upmarket.
Despite this headline number, we saw net customer growth versus the prior quarter and year in our enterprise customer base. Our revenue renewal rate in the fourth quarter was 92% with continued impact from lower middle market churn. Additionally, we saw some expected churn associated with external M and A this quarter which impacted this rate by about 2 points. Net revenue retention for the quarter was 105% reflecting strength from expansion with existing customers, particularly those moving to our platform. Notably, NRR for enterprise customers saw material improvement to 107% this quarter. This reflects the health of our core business and our success in cross selling into our largest accounts.
The strategic products attach rate was healthy again representing 33% of sales this quarter. This growth is a direct result of our go to market teams leveraging our platform to drive larger deals. Demand was notably strong for intercompany and invoice to cash which both had record years. We had a strong close to the year with our Solax partnership as we are starting to see our joint efforts materialize in bookings. At the end of the quarter, SAP customers accounted for 26% of revenue. Turning to margin, our non GAAP subscription gross margin remained strong at 82%. Our non GAAP gross margin was approximately 80%.
As mentioned earlier, we have completed our GCP migration and expect to see improvement in gross margin as we move through the year. Non GAAP operating margin was nearly 25% driven by better productivity across the business especially within our GTN teams, which showed material improvement in productivity and lower customer acquisition costs. This quarter, non GAAP net income attributable to Blackline was $45 billion, representing a 25% non GAAP net income margin. We delivered operating cash flow of $27 million and free cash flow of $20 million, largely driven by variability in working capital. For 2026 we expect free cash flow growth in the mid teens with free cash flow per share growth in the high teens.
Regarding our balance sheet, we have approximately $778 million in cash, cash equivalents and marketable securities versus 896 million in debt. As a reminder, our 2026 notes are due in March of this year and we expect to retire them with cash on hand. This will decrease our fully diluted share count by approximately 1 million shares and is incorporated into our guidance. Finally, we continue to execute our capital allocation strategy. In the quarter, we returned approximately $34 million to shareholders through the repurchase of 632,000 shares. This brings our full year 2025 total repurchases to over $235 million or 4.5 million shares and underscores our confidence in the long term value of our business.
Turning to Guidance our outlook for 2026 reflects a prudent approach. We are confident in the momentum we are seeing with platform adoption and the launch of our agentiq AI offerings. Our guidance assumes a steady ramp as these growth levers continue to gain traction in the market. For the first quarter of 2026, we expect total GAAP revenue to be in the range of $180 million to $182 million, representing approximately 8 to 9% growth. We expect non GAAP operating margin to be in the range of 18.5% to 19.5% and we expect non GAAP net income attributable to Blackline to be in the range of 31 to $33 million or $44 to $0.46 on a per share basis.
Our share count is expected to be about 74.5 million diluted weighted average shares and for the full year 2026, we expect total GAAP revenue to be in the range of 764 to $768 million, representing approximately 9.1% to 9.6% growth. We expect non GAAP operating margin to be in the range of 23.7 to 24.3%. And finally, we expect our non GAAP net income attributable to Blackline to be $172 to $180 million or $2.37 to $2.48 on a per share basis. Our share count is expected to be about $75 million. Diluted weighted average shares. Owen.
Questions and Answers:
operator
Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions. And our first question comes from Chris Quintero with Morgan Stanley. He may proceed.
Chris Quintero
Hey, Owen. Hey, Patrick. Thanks for taking the questions and congrats on the acceleration here. I know it’s been a long time coming. I wanted to ask about RPO and the Customer adds above 250k. I thought those were the two most interesting metrics in the quarter. Can you unpack the drivers there? And what really drove that kind of inflection on those two?
Owen Ryan
I think on the rpo it was obviously the multi year renewal strategy that we’ve had in place, which is working out pretty well. In addition, a lot of the newer customers we brought in have tended to have longer contracts.
So we’ve seen both of those coming together, which has been very positive development. I think it tells the story of us really trying to take customers on a digital finance transformation journey, not just looking for a quick fix. And so we’re certainly seeing a lot of the buildup in regards to that. And so that was the first piece of it.
Patrick Villanova
Yes, Owen, to elaborate on that, we’re landing bigger with our platform pricing model and having product led growth. So we’re seeing a significant increase in our average selling price and our new customers. And more importantly, those customers are signing longer term contracts because they want to be part of the finance transformation and partner with us over multiple years. You combine that with our strategy to extend renewals longer and those two factors, more importantly, our product led growth is what’s driving that 23% that you’re seeing there.
Chris Quintero
Chris. Got it. That’s super helpful. And then I want to ask about AI and your strategy there. We’ve seen some Data points that 50 to 65% of an accountant’s time can be automated and saved by leveraging AI. So I’m curious if that’s kind of similar, what you’re seeing and how you ultimately capture some of that value, whether that’s through Verity or the Wise Layer acquisition.
Owen Ryan
Yeah, look, I think Jeremy and I will tag team this together a little bit, but certainly there’s a lot of opportunity to help take out some of the mundane work that some of the accountants go through.
And so we are certainly seeing that that is becoming more and more part of the conversation with our customers. You know, as you think about, you know, how our AI footprint has grown so far, you know, over the past year, we certainly saw more of a pickup in the generative use of generative AI with our customers. And, you know, we expect now to see that shift more into a gentic AI. I think, you know, from my experiences so far, our customers are being very measured and methodical in how they’re thinking about the use of AI.
And so there’s definitely lots of cost savings that we see are there, but it’s also the value and the accuracy and the timeliness of what we think we’re going to be able to provide, provide for our customers going forward. Remember, Chris, the way we’ve gone about building our AI capabilities was really with the world’s leading companies out there, as well as the world’s leading auditing and accounting firm. So we think we’ve got the right model that will help our customers achieve more savings for what they’re trying to do. But, Jeremy, anything you want to add to that?
Jeremy Ung
Yeah, the increasing adoption from AI, specifically, you saw Owen call out earlier, is really resonating with our customers. They’re excited about adopting it, but they understand they need to do so cautiously with respect to policies and controls. So there’s a lot of interest, there’s a lot of excitement. It’s a validation that there’s work and time to be saved from our AI solutions.
Chris Quintero
Excellent. Thank you so much.
operator
Thank you. Our next question comes from Steve Enders with Citi. You may proceed.
Steve Enders
Okay, great. Thanks for taking the questions here. Maybe just following up on the AI question. You know, I think you’ve called out what 20% of customers are. So adopting some level of AI, I guess, what are kind of the things that you’re typically seeing them taking on? And I guess as you’re kind of having those conversations, in talking through the customer’s AI strategy, what is kind of the typical guild dynamic or discussion look like? And is there kind of any other, I guess, competitor considerations when you’re having those conversations?
Owen Ryan
I think from what we’re seeing, again, we talked about more of the generative AI versus agentic. And so you can think about things like our journal Risk Analyzer, our Verity Flag, the ability to sort of help summarize documents, those things where you still have a pretty good level of human interaction to review and understand what’s come out without just sort of accepting it. So that’s sort of the biggest piece of what we’ve seen. But again, I think interestingly, after we released our visions around Verity Prepare at Beyond the Black in the fall, there was a lot of interest in that and we saw that really manifest itself in the fourth quarter and now in the beginning of this year.
So there’s definitely a lot of interest. There are still some complexities though, Steve, just to be clear, you know, it’s not just what the CFO and the controller want to do. It’s the CIO as well as the Chief Legal officer. So that’s that triumphant you’re working through as companies are trying to figure out how quickly to move forward with AI, particularly given, you know, the requirements that they have to deal with with their auditors and the FCC and things of that nature. So. But Jeremy, again, anything you want to add?
Jeremy Ung
It’s about the customer journey on AI. I think when we land with our solutions, I think there’s a spectrum of AI capabilities that they’re able to adopt and I think that’s helping them meet them where they are in terms of their customer journey from a digital transformation standpoint. So whether it’s our matching solutions and traditional matching or whether it’s the AI extensions to those capabilities, we can meet them where they are in their customer journey, but they can see the acceleration that they’re going to get from these AI products as well.
Steve Enders
Okay, great, that’s helpful. And then I guess maybe just on the guide dynamics, I think primarily looking at kind of in the margin profile, just anything that we should kind of keep in mind for maybe the 1Q margin dynamics versus the rest of the year or maybe some kind of expense timing, you know, dynamics as we look at how 26 might play out.
Patrick Villanova
Yeah. So I mean if you look back over the years, Q1 has always historically been probably the lowest operating market margin for this company. And there’s a very explainable reason for one, payroll taxes. We bear the highest burden like most companies in the first quarter of the year as you pay out year end bonuses and commissions. And then the second element to that is we do our sales kickoff in January of each year around the world and that carries a cost to it as well. I think more importantly though, like if you look through throughout the rest of the year, there is a very high confidence model to reach 24% operating margin with that margin growing throughout the year.
So this is not unlike any other year and you’ll see expansion of that margin notably in the next three quarters.
Steve Enders
Okay, perfect. Great to hear. Thanks for taking the questions.
Owen Ryan
Thanks, Steve.
operator
Thank you. Our next question comes from Alex Clar with Raymond James. You may proceed.
Alex Sklar
Great, thank you. Oh, and maybe one more AI question for me here. Just in terms of what are you seeing in terms of defined AI budgets at some of your enterprise customer base, how incremental of an area is that for blackline to tap into and how are you positioning your solutions? Maybe not just the Verity one, but your solutions broadly to capture those budgets?
Owen Ryan
I’m not sure I can tell you that it’s necessarily a defined budget, but I think in the conversations that we’re having and our teams are having in the field is if we can show real demonstrable value for what our AI can bring, then the CFOs and their team seem to be able to find the budget for what they’re looking to accomplish. So I think the hurdle for us is really being able to demonstrate a very strong roi, along with the reliability, trust, accuracy and security that our customers have already come to expect from us long time.
But Jeremy, again, I don’t know what you’re seeing when you’re out talking to customers.
Jeremy Ung
What I see is, especially with our acquisition of Wise Layer and Verity Cruels, is that there’s an opportunity for us to expand upstream in some of the use cases that have traditionally not happened in blackline, but see data in blackline. So accruals is a great example of this and so there’s appetite for customers to take that work on with blackline as they see the value and ROI from these solutions.
Alex Sklar
All right, great. And Patrick, I appreciate the disclosure on the 11% of the eligible base on new platform pricing. Can you help provide some color what’s embedded in the 26 outlook in terms of the percent of the base that will adopt in 26 and any change to how the sales force is approaching renewals this year on platform pricing versus last year?
Patrick Villanova
Yeah, it’s really been embedded in the motion over the last year. If you recall, we launched platform pricing in North America in the first quarter, then we introduced it to the rest of the world in the second quarter. And as you could see from where we went in the fourth quarter, that acceleration is really picking up. So when you think through the guide for this year, we expect to see about 25 to 35% of our customers on platform pricing by the end of this year. I do want to be clear though, our largest renewal cohorts throughout the year are in the second and fourth quarter.
So that’s not going to be linear throughout the year. But by the end of the year that’s where we expect to be and that’s what’s embedded in the guide.
Alex Sklar
All right, great, thank you.
Owen Ryan
Thanks, Alexi.
operator
Our next question comes from Patrick Walravens with Citizens. You may proceed.
Patrick Walravens
Oh, great. Thank you and congratulations, you guys. So, Owen, can we address the whole issue of creating shareholder value and maybe do it from the perspective of if you’re a long term shareholder, can you just talk about how Blackline thinks about it, what government mechanisms you have in place, how open you are to considering strategic options if they come your way? I think that would be super helpful for everyone.
Owen Ryan
Pat. As you can imagine, those are the issues that the board is dealing with. And I think they well understand their fiduciary responsibilities, take that very seriously, and will exercise their responsibilities appropriately for the management team. What I talk to them about is we can only control what we can control. We don’t necessarily have the ability to influence the stock market other than through the performance that we deliver on behalf of our customers and then the benefits hopefully accruing to our shareholders as appropriate. So I don’t know that I can say much more about it than that, Pat.
I think that’s really all I’ll say at this point.
Patrick Walravens
Okay, fair enough. And then, so I did though, and I think I sent you this yesterday. It was interesting to me that, you know, people are so doom and gloom about how AI is going to impact SaaS companies like you. Yet, interestingly, one of the competitors who went out of business yesterday was a tiny company. And so if you look at Rob, you’ll see the transition. The last transition was from on Prem to SaaS. This one’s from SaaS to AI. Who do you think makes it through that transition in the best shape? Owen, what are the characteristics you look for or that we should look for? And then how does Blackline fit into that?
Owen Ryan
I think you start with a very simple premise, which is do you have a mission critical platform or not? It’s got to be beyond basic features and functionality. Do you really have the domain knowledge that your customers require? So for us, it’s in the office of the cfo, as well as understanding the particular industries that we serve our customers with. You have to have a trusted, reliable brand. Your systems have to be secure. You have to deliver accuracy, efficiency, intelligence. All those things matter. You have to have the data that’s proprietary to what you’re trying to do with your customer set.
Somebody told me, I’m not sure I know the exact number, but we’re approaching upwards of a trillion transactions that we have in our own data that we use to help figure out things with our customers. So I think those are the things that matter more than anything else. You have to have a partner network that is very comfortable because many of our customers rely on the professional opinions of implementation partners, of what are they seeing in the marketplace and things of that nature. So all that factors together, I think, for us, Pat, we’re in business 25 years.
I think the original slogan of Blackline was something where trust is in the balance. And I think that’s still true today. We want to make sure that we do things that are secure, reliable, accurate, intelligent customers, and that goes a long, long way. And I think one last thing that I’ve observed in the last couple years that we’ve really focused on within blackline is to be very client centric, customer centric, and understanding where they were trying to get to and then working to create solutions that support that. So all of that is, I think, what matters today, and I think that’s where we’re going to thrive as an organization.
Patrick Walravens
Thank you very much.
Owen Ryan
Thanks, Pat.
operator
Our next question comes from Adam Hotchkiss with Goldman Sachs. You may proceed.
Adam Hotchkiss
Great. Thanks so much for taking the question. I wanted to ask Pat’s question in a bit of a different way. When you’re hearing from your customers about the broader landscape of technology offerings in the office of the cfo, what is your process for. For ingesting customer feedback for features that they’ve seen either from smaller companies, upstarts, companies like LLMs, financial analyst assistance. How do you go about prioritizing which investment areas make the most sense for putting them into your product and driving ROI for the business?
Owen Ryan
I think Jeremy and I will tag team this a little bit, but I think there’s a couple pieces to it. One is, as you know, we work with the world’s leading companies, right? So we spend a lot of time with them on site getting their feedback both on the existing product and what they’d like to see. We get feedback from them, from what they’re seeing in the marketplace, so that all factors in. We have a very strong customer advisory board that meets on a regular basis that helps inform us. Our partners are amazing in helping us to understand what they’re seeing in the marketplace.
And that helps influence what we do because they tend to see things not just company specific, but across an industry or cohort in a way that no individual company can sort of look at. There are things that we do internally. We have a competitive intelligence group that tracks and Tries to understand what everyone else is doing out there, from maybe more traditional competitor to upstart. And then we’re looking to see how does our roadmap compare to that. So if we haven’t, we haven’t figured it out before, somebody else has. How do we become a fast follower to make sure that there’s no gap, that somebody else gets ahead of us on something? So those are all the things that we’re trying to do.
But Jeremy, I’m sure there’s more that you’ve certainly experienced.
Jeremy Ung
Yeah. Customer obsession is a key part of what drives our product development. Listening to customers, but also gathering data from how they operate within our system. So across the cohort of customers that we have, we have a great operational lens into how these different customers across oil and gas, financial services and other industries operate. And that allows us to see trends and build benchmarks and optimize processes that then ultimately go into our SaaS product, but also our AI offerings as well. And this provides what you might have heard about as context that informs our agents to operate more accurately, more efficiently, and that these ultimately help drive more effective outcomes for our customers as well.
Adam Hotchkiss
Okay, great. That’s really helpful. And then I guess on the Wise Layer acquisition, I know it looked like it was a pretty small acquisition, but just maybe talk a little bit about that, what that brings to Blackline, and then maybe what it tells us about your build versus buy mentality as you look at AI in the ecosystem.
Owen Ryan
Thank you. Yeah, look, I think there was really a couple things that made Wise Layer very attractive for us. And I’ll sort of say 1a and 1b. 1a was the quality of the people that they had. I mean, really good, smart, innovative people doing some very, very interesting things. And then the second was the quality of the product. And we actually were using the product and we could see the value that it was bringing for our own team. And so it took the combination of what they were trying to accomplish in the marketplace with how we could see the usability of that product and how it fit into the things we were doing across our own financial close capabilities, particularly sort of marrying this with our journals capabilities, all made it very, very attractive.
And it helped to accelerate a lot of what we were trying to do. And so from the build versus buy perspective, we’re always thinking about, can we build it? How long will it take? And we really thought this was a very good accelerant to what we were trying to do in the marketplace. But Jeremy, you were up to your eyeballs in this, and so was Patrick.
Patrick Villanova
So, yeah, just to elaborate even further, our own internal accounting department did a proof of concept and to Owen’s point, really impressive technology, very impressive team. It was just an overall very impressive company. And just to provide a little more clarity around the numbers of that, the contribution to the guide that was provided earlier today is de minimis. This is largely a technology buy. You’ll see in our 10k in a couple weeks that the purchase price was a little under $25 million. But you know, there’s a lot of enthusiasm internally in terms of what this company, what this technology can do and how we’re going to incorporate it into our overall platform.
Jeremy Ung
Just add it’s rapidly demonstrable AI ROI to our customers. Rapid time of value driven by an AI solution. And that was extremely exciting.
Adam Hotchkiss
Okay, great. Thank you very much.
Owen Ryan
Thanks, Adam.
operator
Our next question comes from Patrick Soss with Baird. You may proceed.
Patrick Seuss
Hey guys. Yeah, thanks for taking my question this afternoon. Maybe first on the platform pricing and appreciate all the disclosures you provided here. But for those customers who have already transitioned to the new platform pricing model, can you talk about what kind of spending uplift you have realized? And I think last quarter you guys called out some larger customers, maybe pausing their buying decision to have more strategic conversations around platform pricing and AI. How did this play out during the quarter and what were some of the learnings from those customers?
Patrick Villanova
Yeah, so what we’re seeing is twofold here and very excited about the acceleration that we’ve seen in the uptake in platform pricing. And yes, there was a slight pause last quarter as some customers thought through if they want to add additional users to the traditional per seat pricing or if they want to move to the platform. What we’re seeing is with our customer base, the value is becoming more obvious to them. The product that we’re delivering to them has uptake and they’re willing to pay that additional price per year or base fee going forward. That fee is an immediate uplift on day one.
And that’s the first source of monetization as we move through this platform pricing transition. And then the second piece of that, as those customers access more and more of our agents through the platform, that will be the second level of monetization on a consumption basis. So it’s an immediate uplift on day one as they adopt the platform and then it provides future revenue growth through consumption as they use more and more of our agents.
Patrick Seuss
Okay, very helpful. Then maybe a quick follow up just on retention rates. I know you guys have called out Some moving pieces there, whether it’s, you know, Q4 maybe being the peak of attrition and in market turn cycle and at the same time seeing very strong net retention rates with the enterprise customers. Just as we look at that 26 guide, what are you guys assuming for both growth and net retention rates? Just any color there would be helpful. Appreciate it.
Patrick Villanova
Yeah, just to provide a little color there. I know we landed this quarter at 92% retention, but one thing that was highlighted at the enterprise level, that was 95% and I believe we signaled last quarter that we had some MA that was coming up in the fourth quarter and that was also a two point headwind. So when you look at our enterprise customer base, exclusive of these one off MA transactions, that retention rate was 97 plus percent. So when you think through our guide for this year and into the future, we see a transition of improvement throughout the year and that return to the mid-90s overall retention rate inclusive of mid market.
operator
Thank you. Our next question comes from Daniel Jester with BMO Capital Markets. You may proceed.
Daniel Jester
Great. Thank you for taking my question. Maybe another one on the platform. You know, in the fourth quarter, I think if I caught this right, you said 75% of new bookings chose the platform. I guess for the 25% that didn’t. Are there any sort of commonalities and as you shift to a more standardized bundle next year, what considerations did you have about sort of meeting customers where there are versus the platform approach?
Owen Ryan
Yeah, I think Patrick, you can take the second half of that question. I’ll take the first half. Which would I say there’s any commonality to it is I’ve tried to look through and understand it with our sales team.
I think we still had some customers that were a little bit of a larger size, but still trying to work their way through what digital finance transformation was truly going to mean for them as an organization. As you can imagine, you have companies from A to Z as the spread out where they are. And so for us, I think one of the things we’ve tried to be smarter about is selecting the right customers. And part of our evaluation is are these customers that will in our view move to the platform over time. And so we’re willing to invest in them, work through that with our partners typically.
And so that was sort of underlying. It is just customer where they were at as an organization, how much they thought they might want to be able to pipe off and start with at the very, very beginning. But for us recognizing we truly believe that they would Go on a digital finance transformation journey. We’ll cover the second half for 26 and how you’re thinking about it.
Patrick Villanova
Yeah, another part of that story. For that 25% that did not take up platform pricing within new logos, you still have the lower mid market and mid market contingent there where maybe they’re not ready for this level of finance transformation and delivery of a platform. And to be clear, that was something that we assumed and had been messaging over the last year that we knew long term the uptake of this model would lay largely in the upper mid market and enterprise space. So that was in line with our expectations as we think through 2026. And I think you used to comment how we meet customers where they are.
I think the one difference going to 2026 which is embedded in the guide is, you know, the platform itself and the agents that are built within and the value that they provide to our customers. And as customers see that and as they see the value that is delivered through the platform, they would be, it’s built into the guide that they are more willing to uptake our new model. So we expect that to be north of 75% going through 2026 and that is built into the guide.
Daniel Jester
Okay, that’s great context. Thank you. And then maybe Patrick, just sticking with you on the GTP finally coming to a inclusion. I’m sure you’re probably happy to not have to talk about that too much more with us. How should we be considering sort of the flow of the year for gross margin in 26 and maybe any puts and takes as you’re ramping up all of your AI capabilities and any impact or your precious view on impact on gross margin there. Thank you so much.
Patrick Villanova
Yeah, so as you think about gross margin throughout the year, it’s a similar story to operating margin, but for different reasons. We did complete the GCP migration in Q1 and there were some redundant costs as we shut down any redundant servers. And so what you’ll expect to see, or what you will see is a generally expanding gross margin throughout the year and an overall improvement in gross margin for the full year. I know or we realize the GCP migration has garnered quite a bit of attention, but there’s other elements within gross margin as well, such as improvement, improved case deflection through alternate technologies or AI, which is driving down our cost to serve.
So you will see as we message over the last year or two, generally improving gross margin throughout the year.
Daniel Jester
Great, thank you.
Owen Ryan
Thanks, Dan.
operator
Our next question comes from Matt Van Vliet with Cantor. You May proceed.
Matt Vendley
Good afternoon. Thanks for taking the question because Owen, since you’ve been here you’ve had definitely a lot more focus on kind of the rigor throughout the sales organization and execution there and certainly bringing in Stuart has reinforced that. But curious on where you feel like the business is today in terms of sort of reengineering some of that go to market process and getting the right people in the door versus now 26 being just sort of executing on that playbook and where you feel like that level of execution is coming in right now.
Owen Ryan
Yeah, I think it’s a good question. And believe it or not, Stuart is not even here technically a year yet. I think on Wednesday or tomorrow hits his one year anniversary. I think a lot of heavy lifting was done this past year and even part of the the prior year where we’ve made a lot of improvements in the underlying technology, the use of that technology, getting rid of things that didn’t matter and moving the organization forward. You know, in one of the stats we talked a little bit about, we’ve added 40 people over the last three years or 2% to drive 34% revenue growth.
But interestingly if you look underneath that, almost 60% of the Blackliners in the company are new. So we’ve done a lot of transformation to people in the organization and that’s no disrespect to those that were here previously. It’s just what we needed to move to that next level. We needed to bring in a new cohort of individuals. I don’t want to speak for Stuart and the leadership team, but I would say I think they feel pretty good by and large about the leadership they have in place around the globe. At this particular point in time there’s been a lot of changes made.
We’ve made a lot of upgrades in the individual quota carrying reps, the BDRs, customer success, all of that has been part of the transformation. I don’t know that you’re ever done because you’re always continuing to try to upgrade in that regard. We’ve done a lot of work around our business value architects and things of that nature pre sales and so I feel pretty good about it. But I recognize we’re never completely done and I think the one thing I’m continuing to focus on so we just did a sort of quick internal pulse survey for all of our people and a lot of really good feedback on the organization.
The biggest thing that they’re continuing to sort of push us on is further enabling them to keep driving all the things we’re trying to do in the organization because the level of innovation that’s coming out of Jeremy’s team and product and tech is pretty amazing. Then how do you make sure the rest of the organization can keep up with that and bring it into the marketplace? And I’m very encouraged by what we saw over the past year and pretty confident as we head into this year. But that will be the thing that will keep driving.
Matt Vendley
All right, thank you.
Owen Ryan
Thanks, Matt.
operator
Our next question comes from Robert Simmons with Rosenblatt. You may proceed.
Robert Simmons
Hey, thanks for taking my questions. I was wondering, how much revenue contribution are you assuming from your agentic offerings this year? How material can they be to your ECP bookings?
Patrick Villanova
So over the course of the year, the primary revenue contribution coming out of our agentiq offerings and other AI offerings is the uplift that we referenced earlier today in terms of moving to the platform. In that day one uplift throughout the year, we’re going to be releasing agents, I guess through each quarter and then evaluating how customers consume those agents, developing trust with our customers with those agents. And then once we get to that point, we will begin monetizing those agents through consumption. So within our guide, the prominent contribution from AI is the uplift and we call it platform pricing, but it is product led growth and that results in an uplift in platform pricing.
And then the contribution from consumption is not overly material for 2026, but it is definitely built into our target model.
Robert Simmons
Got it. That makes sense. And then I believe you Talked previously to 20% bookings, growth in 26. Are you still expecting that kind of growth this year?
Owen Ryan
Yes, I think, yes, we are.
Robert Simmons
Okay, great. Thank you very much.
Owen Ryan
Thanks, Rob.
operator
And our next question comes from Billy Fitzsimmons with Piper Sandler. You may proceed.
Billy Fitzsimmons
Hey guys, thanks for fitting me in. Appreciate it. Maybe I’ll ask about any color on what the guide implies from an SAP contribution perspective or anything notable in the. Flag within that pipeline. Any significant upticks or volatility in activity there. Thanks.
Owen Ryan
I think we’ve made good progress with SAP. We’re very, very proud of what we’ve been able to accomplish over the last couple of years. As you’ve seen a sort of steady state of SAP customers being roughly about 25, 26% of our revenue. I don’t think you’re going to see that materially change in the upcoming year. We’ve got a very strong pipeline. We’re seeing a lot of progress with what we’re doing. But I think interestingly we’re having really great success through non SAP customers as well. So I don’t think you should expect to see much of a shift in that mix of SAP versus non SAP over the course of this year.
That said, we’re going to keep doing everything we can to drive that partnership to be as successful as we possibly can on behalf of our customers and our shareholders.
Billy Fitzsimmons
Appreciate it. Thank you.
Owen Ryan
Thanks, Billy.
operator
Thank you. I would now like to turn the call back over to Owen Ryan for any final remarks.
Owen Ryan
Just thank you, operator, and thank you all for taking the time to listen tonight. Look forward to catching up with many of you tonight in the next couple days to answer further questions. So everybody take care, and we’ll talk soon. Thank you.
operator
Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.