Ladies and gentlemen, thank you for standing by and welcome to the Q3 2019 BlackLine Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

[Operator Instructions] I would now like to hand the conference over to your speaker today, Alexandra Geller, Vice President of Investor Relations. Please go ahead, madam..

Good afternoon and thank you for your participation today. With me on the call is Therese Tucker, Founder and Chief Executive Officer of BlackLine; and Mark Partin, Chief Financial Officer.

Before we get started, I would like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans, objectives and expected performance, are forward-looking statements within the meaning of the Private Securities Litigation 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 we have made are reasonable, actual results could differ materially because the statements are based on our current expectations and are subject to risks and uncertainties.

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. Also, unless otherwise stated, all financial measures discussed on this call will be non-GAAP.

A discussion of why we use non-GAAP financial measures and information regarding reconciliations of our GAAP versus non-GAAP results is currently available in our press release, which may be found on our Investor Relations website at investors.blackline.com or on our Form 8-K filed with the SEC today.

Now, I will turn the call over to Therese to begin..

Good afternoon everyone and thank you for joining us today. We are pleased with our performance in Q3, which saw strong demand across all areas of the business as more companies embrace digital transformation.

We continue to drive success for our customers and demonstrated another quarter of solid execution on our strategic initiatives and long-term goals. This September, we hosted our North America InTheBlack User Conference with more than 1,700 attendees, representing our largest conference to-date.

The event was held in Los Angeles and generated significant value for our customers, partners, and prospects. Many of you that attended our Investor Day were able to witness this firsthand.

The four-day conference continues to be one of the great thought leadership opportunities for finance and accounting professionals to gain best practices from BlackLine experts, employees, partners, and their peers.

This year at the conference, more than ever, I noticed a recurring theme that companies are seeking guidance on best practices from BlackLine in order to execute on their digital transformation journeys. Our customers are at all different stages of their accounting and finance journey.

For customers who have been with us for years and have recognized the value of an automated financial close, they're beginning to shift towards process improvement and value creation.

That next step includes better engagement with their existing products to increase automation and efficiency in line with that of our leading customers, expanding global usage of their existing products and reevaluating additional BlackLine products.

For newer customers and prospects, their next step may simply be to solve for a specific pain point in their financial close or increasingly going to market for a full financial transformation solution out of the gate.

In all of these instances, BlackLine's leadership, experience, and technology gives us a unique ability to unlock value for these companies at all stages of the accounting and finance transformation journey.

Since pioneering this market many years ago, we have consistently invested in educating CFOs, controllers, and accountants to modernize their financial close and drive greater efficiency and stronger internal controls with less time and fewer resources.

In recent years, we have invested millions of dollars in global customer success teams and accounting transformation specialists to accelerate that pace of education and engagement. We believe these investments drive significant value for our customers as they look to transform their operations and anticipate continued investment in this area.

Some specific examples include a newly established workshop to optimize usage of our account reconciliation product. Year-to-date, we have hosted 60 of these workshops for a large group of enterprise and mid-market customers. Nearly all who attended realized an average 15% increase in their auto certification rate.

In line with increased demand for our Transaction Matching product, we recently launched a Transaction Matching Optimization workshop to drive greater automation and efficiency for customers. We plan to roll out additional optimization workshops to better support and educate our customers across all BlackLine products.

This commitment to our customers' success was validated in Q3 by a strong renewal rate, a healthy net dollar retention rate, growth in strategic products, and continued expansion of users and products amongst our existing customers.

A few examples include, a global oil and gas company first became a BlackLine customer in 2009, with account reconciliations and task management. Following a spin off, the company was able to pursue their digital transformation goals and sought functionality beyond their homegrown intercompany solution.

In Q3, they chose BlackLine's intercompany hub due to our unique ability to oversee intercompany processes and transactions from start to finish. It was incredibly important for this customer to integrate all global entities to process transactions, validate them, clear out open items send invoices to customers; and finally, get paid.

In Q3, this customer also added more account reconciliation users to their BlackLine instances. Today, this company is one of our largest customers with room to add more users and products. Next, a Fortune 200 household products manufacturer first became a customer in 2006, with account reconciliations and task management.

In April 2018, their accounting leadership team was given a directive to drastically reduce annual FTE hours by 150,000 hours. Overwhelmed by the scale of this initiative, the customer turned to BlackLine for advice.

Our account transformation specialists spent two days on-site with the client, mapped out all of their processes, and developed a plan to realize their goal by leveraging BlackLine's tools. This customer's aha moment came when they realized that what had seemed nearly impossible, could be accomplished with BlackLine.

After that, the customer was all in on BlackLine and in Q3, they added journal entries, Transaction Matching, Variance Analysis, and Smart Close to further optimize their business processes with enhanced visibility and automation.

This customer expansion story is a perfect example of how we invest in our customer success, which drives them to invest in us as their strategic partner for the long-term. A large agricultural company has a company-wide initiative to move their financial applications to the cloud as part of their digital transformation journey.

They first became a BlackLine customer at the start of this year with a small handful of account reconciliations users. Since then, they have had a series of user expansions and continued to roll out BlackLine across their global accounting team in Q3, resulting in a user growth of more than 20x in the past nine months.

This rapid adoption is directly correlated to the early returns that they have been able to capture from BlackLine, which includes the centralization of data, visibility, transparency, and overall improvements in their reconciliation process. This company believes that BlackLine will be able to reduce their manual workload by as much as 60%.

In Q3, we expanded our customer base to nearly 2,900 enterprise and mid-market companies around the world with accounts such as a leading global asset management firm, was introduced to BlackLine through one of our partners.

They were using a point solution, but functionality gaps and a lack of customer support resulted in significant manual work and heavy over time.

In Q3, this company replaced their point solution with our account reconciliations, task management, variance analysis and transaction matching products BlackLine on the account due to our superior functionality, specifically exception handling and routing capabilities that enable segregation of duties as well as our single code base and ability to integrate with all ERPs.

Given the partner involvement, this deal closed in a short four months. One of the largest tire manufacturers in the world has a very complex general ledger environment as the result of various mergers and acquisitions, multiple ERP instances, and numerous offshore shared services facilities to manage their account reconciliations.

In Q3, this company purchased BlackLine's account reconciliations and task management products across their North, Central, and South American offices for improved efficiency, visibility across the shared service locations from their U.S. headquarters, and most importantly, accountability of responsibilities.

Additionally, since the company is undergoing an initiative to consolidate their disparate ERP systems and transition to S/4HANA, they saw enormous value in BlackLine as the vehicle helping to clean up their data as they move into their future HANA environment.

Finally, one of the world's top chemical producers ran a manual financial close which resulted in a time-consuming and inefficient close process as dozens of global entities had to manually roll up to corporate.

After vetting ERP and point solution vendors, they chose to move forward with BlackLine in Q3, and purchased Transaction Matching plus the Account Reconciliations and journal entry products across nearly 75% of their global finance and accounting workforce.

Beyond superior functionality, they chose BlackLine for a more efficient close process, driven by integration of their global entities, greater visibility for corporate, and automation of formerly manual processes. Our new logos in the quarter included a small, but growing number of SAP wins in the U.S.

and Europe, including our first SOLEX deal in the U.K. As the partnership continues to ramp, so does our expectation for the volume of SOLEX deals and corresponding revenue contribution over the long-term. In Q3, we saw increasing demand from our SOLEX partnership with a growing pipeline of future deals.

At this stage in the partnership, the most effective way to drive long-term success is to focus on joint enablement to drive alignment across SAP's global go-to-market teams. We held our first ever dedicated SAP track at the InTheBlack Conference in September.

The track spanned two days with breakout sessions jointly presented by SAP and BlackLine executives. We also held sessions for SAP and BlackLine customers to articulate their successes, transforming finance with SAP and BlackLine to BlackLine prospects. These sessions were well attended, and the feedback has been very positive.

Year-to-date, we've had more than 2,000 enablement touch points at 63 events across 13 countries. While we were pleased with the breadth of activity so far, this is just the beginning of a growing enablement effort.

We see continued demand for BlackLine among SAP customers with an increasing number of conversations centering around BlackLine as an important first step in the S/4HANA journey. With less than one year under our belt, we believe this partnership remains a large global opportunity over the long-term.

Moving on to our consulting and financial transformation partners, buying decisions are expanding beyond the accounting buyer to include IT, CIOs, CFOs, and sometimes even Board members, Audit Committee members and Auditors.

We believe a healthy partner ecosystem is critical for BlackLine to cross the chasm as a valued strategic partner to the largest companies in the world. Throughout the year, we have grown our partner ecosystem and now have almost half of our certified partner consultants outside of the U.S., driving increased global coverage for our clients.

We have also seen improvement in partner investment and engagement with nearly 70% growth in the number of completed partner certification courses of BlackLine modules in the first nine months of this year as compared to the same period in 2018.

We anticipate the partner ecosystem will continue to grow as more companies turn to digital transformation to unlock value for the accounting and finance function. We believe that BlackLine is the partner of choice for customers undergoing digital finance transformation.

We are purpose-built for accountants with a demonstrated track record of success and have earned the trust of nearly 2,900 global companies. These competitive advantages have enabled BlackLine to maintain its leadership position in the market.

This was further validated in October when we were recognized as a leader in Gartner's 2019 Magic Quadrant for cloud financial close solutions for a fourth consecutive year.

BlackLine is ranked highest based on our ability to execute for a third consecutive year and scored in the highest quartile for customer experience and overall product capabilities. We are pleased with our performance in Q3, the success we are driving for our customers and the progress we have made on our strategic initiatives.

And with that, I'll turn the call over to Mark..

Thank you, Therese and good afternoon everyone. As a quick reminder, unless otherwise noted, all numbers mentioned during my remarks today are non-GAAP. As Therese mentioned, Q3 was another strong quarter of execution on our strategic initiatives to drive long-term sustainable growth.

At the September Investor Day, we identified five growth drivers that will enable BlackLine to capture the large and underpenetrated market in front of us.

These growth drivers include our initiative to lead our customers as a strategic partner to the CFO, the SAP SOLEX partnership, upsell and cross-sell of the install base, a collaborative partner ecosystem and international expansion. Total third quarter revenue grew 28% year-over-year to reach $74.9 million.

Higher revenue in the quarter was driven by a higher retention rate, deal timing, and accelerating services revenue. A few other notes on revenue. International business continues to grow on pace with our expectations, representing 22% of the total in Q3, up from 20% in the prior year.

We continue to invest in both direct sales and partner support in our major markets in Europe and Asia-Pac. Revenue from our SAP partnership was 23% of total revenue in Q3, in line with Q3 of last year. This metric represents our revenue with SAP customers under existing and former partnership agreements.

Services revenue came in at the high end of our revenue guide at $4.6 million or 6% of total revenue. We are pleased with this result as it is driven by our customers undergoing digital transformation, adoption of our strategic products and continued engagement from our partner ecosystem.

We view this as a leading indicator of success in our business with broader deployment of our products.

More than 60% of our large deals in the quarter included a partner, representing a good balance of partner participation, driven by increased adoption of Transaction Matching and ICH; our strategic products represented 21% of sales for the quarter, slightly above our expected range of 15% to 20% of sales.

Our goal to be a strategic partner is further unlocking BlackLine's value proposition and driving demand of our solution. In Q3, we grew the average ARR per customer in both the enterprise and mid-market.

We also saw expansion of large accounts, with continued growth in the number of customers with an ARR of $250,000 or more as well as the number of customers with an ARR of $1 million or more. Moving on to our key performance metrics for the quarter. We serve 2,871 customers globally. We added 87 net new customers in the quarter.

Consistent with the first half of the year, the quality of new logos was strong and included companies undergoing digital finance transformation. In Q3, we reduced our total customer number by 29 when we consolidated a large global enterprise with 30 separate subsidiaries into one customer.

We have been working with this customer for a while and made this change at their request to consolidate all their divisions into a single entity to centralized billings. This change had no impact to ARR or dollar-based net revenue retention.

Driven by a strong account expansion and a strong renewal rate of 98%, our dollar-based net revenue retention rate improved to 109%. Gross margin for the quarter was 83%, with subscription gross margins at 87%. In Q3, we generated net income attributable to BlackLine of $7 million.

This exceeded our expectations, primarily due to the revenue over-performance, interest income of approximately $1.4 million from the issuance of our convertible note and the timing of certain expenses shifting to 2020.

In Q3, we announced a $500 million convertible note, resulting in approximately $597 million of cash and cash equivalents and marketable securities at quarter end. This further strengthens our balance sheet and provides additional capital, continued growth through investing in innovation and potential acquisitions.

We generated $9.9 million in operating cash flow and $7.1 million in free cash flow for the quarter. Now, let's move on to our fourth quarter and full year 2019 outlook. For the fourth quarter of 2019, total GAAP revenue is expected to be in the range of $77.3 million to $78.3 million.

On the bottom-line, we expect to report non-GAAP net income attributable to BlackLine in the range of $7 million to $8 million or $0.12 to $0.13 on a per share basis. Our share count will be approximately 59.9 million diluted weighted average shares.

For the full year 2019, total GAAP revenue is expected to be in the range of $286 million to $287 million. Non-GAAP net income attributable to BlackLine in 2019 is expected to be in the range of $21.2 million to $22.2 million. Utilizing diluted weighted average shares of 58.9 million, we expect non-GAAP net income per share between $0.36 and $0.38.

This updated full year guidance includes a favorable impact from the issuance of the convertible notes of approximately $3 million in interest income.

Lastly, we plan to attend several upcoming investor conferences this quarter, including the Wells Fargo TMT Summit, the Credit Suisse Technology Conference and the Raymond James Technology Investors Conference. Please reach out to our Investor Relations team if you would like to participate in any of these events.

Therese and I will now take your questions..

[Operator Instructions] Our first question comes from the line of Rob Oliver of Baird. Your line is open..

My question -- good evening. My question is for Therese and I have a quick follow-up. Therese, you mentioned how you're seeing in the market, a shift to process improvements, and definitely, coming out of InTheBlack, we -- our take was that we saw a real focus on strategic products out of that.

And it sounds like that's starting to flow through into your results. So, I was wondering if you could talk a little bit about that, and couldn't help but note that your first customer example on the call was an ICH win, which also pull-through additional account rec seats.

So, I just wanted to understand kind of the pull-through on strategic products matching ICH in this new process-driven environment? And then I just had a quick follow-up. Thanks..

Great. Hi Rob. So, what's interesting to us is what we see happening is as companies start to undergo their digital transformation journeys, they do become more interested in the strategic products. It's almost like those areas are where they can get some really great process improvement that they may not have considered before.

So, we see that convergence as well, and that is across all of our strategic products..

Okay, great. Thanks.

And just on the pricing side on strategic products, if you could maybe give us some color around how that's shaping up, maybe without -- well, you can get as specific as you want, but I would love to get a little bit of color on how you guys are conceptualizing pricing as the pace of the lands on strategic continues to increase? Thanks very much..

We feel like we're in a good place on our pricing on strategic products right now. And the difference between that and sort of our core financial close suite of products is really that the core financial suite is based on a per user per month pricing mechanism, which is pretty standard for SaaS overall.

With the strategic products, we were really focused on trying to charge fairly for the value that our customers are receiving. And so that means that different products are sort of priced in different ways.

For example, Transaction Matching, you can buy rate plans, that if you are processing tens of millions of transactions every period, then you're going to obviously pay more than someone who's processing a few thousand transactions. So, that one is by rate plans.

With the Intercompany Hub, it's related to the number of different business entities that are acting as trading partners because that is very much at the heart of the complexity around intercompany.

And then finally, the Smart Close product is around the different processes and the different number of ERP instances that are actually being utilized in any one customer. So, again, the idea with pricing strategic products differently is really around how do we charge fairly for value that the customer is receiving..

Great, that's helpful color. Thank you very much..

Thank you..

Thank you. Our next question comes from the line of Alex Sklar of Raymond James. Your line is open..

Great. Thanks. I wanted to ask on the partner strategy. I think new for me coming out of InTheBlack was just the idea around opening up your platform, particularly as it relates to partners being able to innovate on it.

Could you just provide an example of what that might look like? And what the partner feedback was for this coming out of InTheBlack? And when we might actually see this in the market? Thanks..

Let me start with that. And I'll say that we're not going to signal when that's going to be in the market, but it's definitely part of our longer term road map.

An example of where a partner might utilize these types of APIs would be, let's say that there's some very specific analytics or reports that, that partner has developed as part of their BlackLine offering, then those could really be put into a particular partners implementation plan to give value. And I'll just -- I'll even be more precise on that.

Let's say it's a particular sector, all right, that is looking at particular things in particular ways, then there are specializations within our partners that can address those things. Reporting is the easy one, but there are other processes as well..

Got it. And then I wanted to ask, Mark, on the services revenue. I know you've kind of talked to that last quarter that 6% range.

But could you just provide some more context on how long of an opportunity you see around strategic products kind of enablement that might require additional services on your part or if you ultimately see this being able to transition this towards partners further down the road? Thanks..

Sure. Yes, thanks. We are already working on partners. Partners are spending quite a bit of time in the field with us on some of our large digital transformation projects. Look, I think this 6% that we had services as a percentage of total revenue in Q3 continues a little bit in the near-term, it's a good healthy balance for us.

Our strategic product uptake is helping us to drive that. We've invested pretty heavily in the customer success and implementation teams to make that time to value and customer experience, really strong. And we want, at least here in the near-term to be really the quarterback on that and really controlling that experience.

And so that's our primary focus, it's the customer, and we think that's a good healthy balance where we are right now..

All right. Great. Thank you..

Thank you. Our next question comes from the line of Terry Kiwala of First Analysis. Your line is open..

Hey good evening and congratulations. I have a question on the -- on your -- your international performance, which seemed to tick up slightly I'm wondering if you could elaborate a little bit on -- you alluded to some of the SOLEX performance internationally.

If you could just describe the non-SOLEX international portfolio and how your new sales and renewals are going?.

Yes, I can take that. We have -- last year, we really started accelerating some of our team development in Asia-Pac with new leadership, and we're very excited about that team as they expand beyond Australia, and we've been seeing very nice momentum in those markets.

Similarly, in Europe in the major markets that -- where we are today, we do partner with SAP and SOLEX. But I think we've been in that market for a number of years, and that's allowed us to get some good traction with that team.

And so we've seen, really strong over the last now a year or more, some good acceleration in both markets that's helping that tick up. It is 22%, it's growing faster, and we saw good results typical European seasonality in Q3 and it still met our expectations and was strong. .

Thank you. Our next question comes from Chris Merwin of Goldman Sachs. Your line is open..

Okay. Thanks very much. I just wanted to dig into net expansion, if I could; it looks like you had a really nice step up in the quarter. And I think part of that you called out was strategic products. And I think Intercompany Hub; in particular, there was a big deal you signed in the quarter.

Just curious, like any other drivers you could talk about there? And also, if we should think about this kind of continuing going forward at a higher run rate? Thanks..

Yes, great. Thank you. So, we were pleased to see that, but we're also expecting it. It's at the high end of the range. We have been performing on our installed base expansion strategy, what we call, the strategic partner to finance, and that is putting a lot of really high-quality, dedicated resources towards our existing customers.

Teams like our accounting innovation team, our customer success team, our strategic account managers, all because we believe that, that installed base has real opportunity over the long term, to turn over for digital transformation.

They're -- even at our conference, Therese and many of us had a lot of meetings where customers that have been with us for a long time were just now coming to the table and saying, we want to work with you and your partners for more of the products. So, I think we've seen this developing and the numbers start to show the results in Q3.

So, a couple though really great drivers that we see is that it's not just strategic products, which has operated at the high end of our range. But it's user expansion, too, and we've seen some really strong user expansion over the last couple quarters as our customer success teams and our sales teams really drive penetration into our account..

Okay, great. Thanks. And then just one more on deferred revenue. Obviously, it was a really big quarter for that in Q2 and dipped slightly in Q3. Just -- maybe can you just talk about any lumpiness in there? And how we should think about deferred in Q4 as well? Thanks..

Yes, sure. Deferred revenue, there's a couple things about it. It is timing sensitive. So if we have multiple years of very strong Q2s, which we have had in Q2 of last year and Q2 of this year, you sort of get a buildup and deferred. I think, also timing of when deals close within the quarter affect your deferred revenue balance.

I think most importantly, what we saw in the quarter was good, strong, broad performance across the sales team. And that really delivered the revenue growth and the uptick in guidance that we've shared..

Great. Thank you..

Okay..

Thank you. Our next question comes from Bhavan Suri of William Blair. Your question please..

Hey, this is Matt Stotler on for Bhavan. Great quarter, guys. Thank you for taking the questions. So, one more on the strategic products front, InTheBlack, we got a lot of positive commentary for both customers and partners on Transaction Matching, Intercompany Hub and Smart Close.

Kind of looking through the numbers from the Analyst Day, it looks like the customer base that you have using Transaction Matching is in order of magnitude larger than those using ICH and Smart Close.

So, just wondering if you could maybe flesh out why there's such a disparity in the product adoption within the strategic products bucket? And then what is going to take to accelerate adoption of ICH and Smart Close?.

Yes. And the really simple answer is that Transaction Matching has been in the marketplace several years longer than either of the other products. So, that one has been around quite a bit. And so that -- it just takes time to get that kind of traction and track record and set of use cases that convinces a larger number of customers to come over..

Yes. And just to add to that, too, Transaction Matching actually is up and down the stack for both mid-market and enterprise. So the addressable sort of customer base is much broader. And ICH and smart Close are very high end, big ticket targeted deals that we're going after our strategic accounts.

And those, as Therese mentioned, have been in market for a little while, but the way we're trying to accelerate adoption, are all the things we talked about at Analyst Day, including a partner ecosystem that's healthy and can work through the digital transformation trend.

That's really where IT gets involved and the CFO and that's a driver for more of these larger ticket strategic products. Our own internal resources, we feel very good about. We've invested in teams and subject matter experts that can help a salesperson sell those products.

And I think probably the one that has been -- we've had the most success with is operationalizing the ones that we've already sold and getting those customers to be good referenceable companies..

Got you. That's helpful. Hope those ambulances aren't for any of you guys. But one more on the SOLEX partnership.

Just are you seeing the SAP sales force really hang the payment to push BlackLine, so to speak? And just any more color on early interest in the pipeline there? And anything top of mind as far as seasonality in that business kind of as we look further forward? Thank you..

Well, we're seeing a good increase in the pipeline. It is still a sales enablement effort that we have planned for taking several years to get there, simply because it's a very large population of people at SAP, and it does take time to get the word out..

Got you. Thank you very much..

Thank you. [Operator Instructions] Our next question comes from the line of Koji Ikeda of Oppenheimer. Your line is open..

Hey great quarter guys and thank you for taking my question. I have another question on the SOLEX partnership with SAP too. And congrats on your first win there in the U.K., that's great news.

I guess how would you categorize your SAP SOLEX visibility for the next 12 months now?.

Yes. Well, look, it's still early. And so the visibility, of course, I'm not yet -- I'd love it to be better. But it's getting increasingly stronger in the pipeline, in the number of touch points that we have, in the relationships that we're building with our direct sales reps.

I think our ability for visibility comes with more control of the deal flow, which we believe now we're in and more transparency to the pipeline, which we are getting. There's really opportunity for us as we move forward to keep partnering and keep enabling the sales team, which is where our focus is.

It really is in the markets and the local markets in the field..

But I would also say, Koji, that we're still learning, right? It is a new partnership; it is different when it's on SAP Paper. So, I would say we've had some great learnings. We're still learning and ramping..

Got it. Thank you for that. And Mark, just a follow-up for you. I know this comes out in the Q, but I'm going to ask it for it right now anyway.

The RPO number, is there any way we can get that today?.

Yes, yes, yes. Sure. It does come out in the Q. So contracted not recognized revenue is $312 million. The amount to be recognized in the next 12 months, the current, is at 64%, which is consistent. And that's a -- yes, 21% year-over-year growth for the contracted not recognized revenue..

Thanks Mark for that and congrats on great quarter. Thank you very much..

Thank you..

Thank you. Our next question comes from Eric Lemus of SunTrust Robinson. Your line is open..

Hey guys thanks for taking the question and nice on the quarter. I had a follow-up on one of the comments in the prepared remarks. Mark, you said something about expenses being shifted into 2020. Can you give a little bit of context on what those expenses are? And why they shift to 2020? Any other color would be great..

Yes, of course. It's not that big of a deal. We talked in the Analyst Day about our public cloud migration to Google. We've been very excited about that. We think it's really a long-term opportunity for us to expand our opportunities with customers and markets. And the timing of that is just more likely shifting into 2020 then into this year.

So, we don't see any of the costs yet associated with that. That's the majority of my comment..

Okay, great. And then just kind of following up on overall expenses.

How do should we think about expenses? Are they going to be more so geared towards potentially accelerating revenue in the future? Or based on the guidance and implied margin expansion was pretty nice in 2019, so how should we think about investments and how to think about the balance of growth and profitability?.

Sure. We'll give guidance for 2020 after Q4 in our Q4 call in February. So, there'll be a lot more to talk about at that point.

I think to this point, this business has really demonstrated great operating leverage over the last several years, we've been able to continue investing in growth, we're making investments in new leadership team in markets and partnerships like Japan and SAP, we have continued to accelerate the opportunity for direct salespeople for higher retention and productivity in that group.

So, our investments really are to grow responsibly to invest in growth and do that where we're seeing the demand. And we believe today that this balance that you see in our results is meeting that demand for growth..

Great. Thanks. Nice job..

Thank you..

Thank you. Our next question comes from Mark Murphy of JPMorgan. Your question please..

Hey guys. It's Adam Bergere on for Mike Murphy. Congrats on another great quarter. So, you guys named off a number of great customer wins this quarter. And I was wondering if there are any nonstandard use cases you guys might be seeing that you can touch on.

And additionally, do you guys have any updated comments on how RPA sits within the competitive landscape? Thanks guys..

Well, part of what our accounting transformation team does is they go in at a pretty detailed level, and they work with the customers to map out different process improvements that can happen. Now, I think, Tammy -- you may have heard at our Analyst Day, Tammy speak to some of those.

But I would say because of the power and the flexibility of the BlackLine platform, there are quite a few different processes that have benefited from our software that I don't know if I would call them nonstandard, but I would call them some really great creative uses. So, I'm not going to give examples of those now.

I know I have in the past, but there is a couple that -- yes, that happens regularly..

We missed the second part of your question.

Could you say it again?.

Yes.

Any -- just any updated opinion on how RPA sits within the BlackLine competitive landscape?.

Yes. We've got great partnerships with the RPA vendors. And I know that some people kind of view them as competition, but it's a really different animal than what BlackLine does, okay? They're great at automating and making faster tasks that are at a fairly granular level in an organization.

What BlackLine does, especially when we're working with customers going through a digital transformation, is to really look at the overall processes that are happening and almost do a top-down reengineering of those that then allows for an incredible amount of automation. And so it's a really different approach.

I find that there is great value in some of the things that RPA vendors do. There is also a certain amount of maintenance that has to be done. And if you look at one of the examples that I talked about in our script earlier, it really is lots have to be maintained.

And so as long as nothing changes, that's good, but there are a lot of things that change, so that can be a downside of some of what happens there. So, our customers, what we do in terms of top-down automation resonates with them in a great way.

We also partner with the RPA vendors to identify very specific tasks that they can really help with our platform on..

Sounds great guys. Thank you..

Thank you..

Thank you..

Thank you. Our next question comes from Pat Walravens of JMP Securities. Your line is open. Mr. Walravens, please make sure your line is unmuted..

Sorry. I hope you guys can hear me.

Therese can you tell us what's going on in ServiceNow and how -- what they're trying to do is different than what you do?.

We don't have a lot of visibility into that, Pat, but it appears that they seem to be building something that's around improving accounting workflow, okay? And again, what we've built into our product over the last 15 years is really much more specific to the automation of a lot of processes that are happening in accounting and finance.

So we paid close attention. It seems like that they're using partners. We've got a great partner ecosystem from the beginning. And it's kind of similar, I think, to what they've done in both CRM and HR, right? It doesn't compete with the leader in the space because their focus is really digital workflows..

Great. Thank you. And I know you touched on this, but just came up a lot due to diligence.

Why is the matching engine so important? And what makes yours better than what other people seem to have?.

Well, I'm going to start with the first one because I love answering questions about product. Okay, our matching engine -- here's what's interesting about software, okay? You can build very, very powerful software, but if it's flexible, it's usually incredibly hard to use.

Transaction Matching is this really cool trifecta, okay? It's very, very flexible, it's very powerful, and it's actually really pretty streamlined for somebody who's good at excel to be able to configure a lot of different use cases.

The combination of all three of those qualities is what makes it so good for our customers, okay? So, that is why it's so good. Now, in terms of why it's so applicable is because data that's out there right now, there are so many different systems in one company, okay? You can have thousands of different systems.

The data between those systems in order to have accurate financials, accurate inventory, accuracy and a lot of different things, you have to reconcile data, typically at a transactional level between many different systems, all right. I'll give you a really simple one. Let's say, it's a retail customer that has a point-of-sale system.

That point-of-sale system also has to reconcile its transactions to one or more general ledgers; it also has to reconcile transactions to banks and to credit card processors, of which there might be five or six different ones.

So, in order to actually be assured that you've got all the right transactions in the right places, you've got to do 10 or 15 different types of system and system reconciliations.

Now, if all data was perfect at all times, and nobody ever keyed anything in, and it was absolutely the same data in every single system, then you would probably use a lot less of transaction matching.

But the truth is, sometimes the bank doesn't read your check right, right? I mean, sometimes, somebody transposes two numbers in a journal entry or forgets a letter in somebody's name. So, as long as humans continue to interact with systems and numbers, I think Transaction Matching is going to be very valuable to them..

That's very helpful. Thank you..

Thank you. Thank you for asking a product question..

Thank you. At this time, I'd like to return the call to Therese Tucker, Founder and CEO for closing remarks..

Thank you everyone for your ongoing support and evangelism of BlackLine. It continues to bring us new referrals and new customers and so please keep it up. Thank you so much for joining us today..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..