BlackLine’s third quarter results met Wall Street expectations, but the market responded negatively following management’s update on customer and revenue trends. Management attributed the quarter’s performance to strong new customer acquisitions and larger deal sizes, with CEO Owen Ryan highlighting that new customer bookings were up 45% and the average new deal size more than doubled. However, the company faced headwinds from a strategic shift away from lower-end customers and a slowdown in user growth as existing clients evaluated platform pricing and new AI offerings.
Is now the time to buy BL? Find out in our full research report (it’s free for active Edge members).
BlackLine (BL) Q3 CY2025 Highlights:
- Revenue: $178.3 million vs analyst estimates of $178.1 million (7.5% year-on-year growth, in line)
- Adjusted EPS: $0.51 vs analyst estimates of $0.51 (in line)
- Adjusted Operating Income: $38.14 million vs analyst estimates of $36.75 million (21.4% margin, 3.8% beat)
- Revenue Guidance for Q4 CY2025 is $183 million at the midpoint, roughly in line with what analysts were expecting
- Management lowered its full-year Adjusted EPS guidance to $2.11 at the midpoint, a 3.7% decrease
- Operating Margin: 4.3%, in line with the same quarter last year
- Customers: 4,424, down from 4,451 in the previous quarter
- Net Revenue Retention Rate: 103%, down from 105% in the previous quarter
- Annual Recurring Revenue: $685 million vs analyst estimates of $693 million (7.4% year-on-year growth, 1.2% miss)
- Billings: $161.7 million at quarter end, up 4.4% year on year
- Market Capitalization: $3.34 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From BlackLine’s Q3 Earnings Call
- Patrick O'Neill (Wolfe Research) asked about the impact of paused user growth due to customer evaluation of Studio360 and AI offerings. CFO Patrick Villanova confirmed some deals slipped into the next quarter, but the pipeline for larger enterprise opportunities is expanding.
- Robert Oliver (Baird) questioned whether logo and seat churn were expected as part of the shift to platform pricing. CEO Owen Ryan acknowledged that both factors were at play, emphasizing that these changes align revenue with value delivered and should stabilize over time.
- Christopher Quintero (Morgan Stanley) inquired about the main drivers for expected bookings acceleration next year. Ryan highlighted elevated customer conversations, product-led growth, and deepened partner relationships as key contributors.
- Alexander Sklar (Raymond James) asked how BlackLine is working with SAP to unlock further opportunities. Ryan pointed to joint AI proof-of-concept work and improved customer success alignment as drivers for reduced attrition and deeper client relationships.
- Adam Hotchkiss (Goldman Sachs) requested details on automating implementation to shorten sales cycles. Ryan explained that internal changes and new AI-powered implementation agents are expected to cut time-to-value for customers, with more details to come next quarter.
Catalysts in Upcoming Quarters
Looking forward, our team will be monitoring (1) the pace at which existing customers transition to platform-based pricing and adopt Verity AI solutions, (2) signs of stabilization in net revenue retention and customer count as the transition matures, and (3) continued progress in public sector contracts and expansion of SAP-led international partnerships. Progress on operational leverage and tangible improvements in sales productivity will also be important markers of execution.
BlackLine currently trades at $56.15, down from $56.81 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).
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