Good day, and thank you for standing by. Welcome to the Second Quarter 2022 BlackLine Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to Matt Humphries, Vice President of Investor Relations. Please go ahead..

Good afternoon, and thank you for joining us today. With me on the call is Marc Huffman, 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, in particular, our guidance for Q3 and full year 2022 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 make are reasonable, actual results could differ materially because the 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 10-K and Form 10-Q.

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, 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 GAAP versus non-GAAP results is currently available in our earnings 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'll turn the call over to BlackLine's Chief Executive Officer, Marc Huffman.

Marc?.

customer engagement and success, platform innovation and expansion and growing our international presence. All 3 continue to play a critical role in driving long-term growth.

Taking a step back from our Q2 performance, we recognize that businesses around the world, again, are experiencing a challenging operating environment due to a variety of macroeconomic and geopolitical circumstances. These challenges manifest themselves acutely within the back office where manual legacy processes still dominate.

Over the past few quarters, we've seen an acceleration in digital transformation initiatives. There are still far too many businesses running manual processes, which create unnecessary friction, limits strategic decision-making and expose companies to unnecessary risk and missed opportunities.

Taking all of these together, the cost of doing nothing is rapidly rising. For BlackLine, specifically, the demand environment for back-office automation software remains resilient, albeit with pockets of noise.

Through ongoing customer interactions, prospect conversations and partner insights, we received real-time insight into where the market is, where it's going and the challenges our customers are facing.

As a result of these conversations, we expect that near-term growth may be influenced by broader market conditions including the possibility of lengthened sales cycles. Despite these potential conditions, our confidence in the longer-term opportunity remains strong.

Our go-to-market and customer success teams are fully engaged with our customers, prospects and partners, focusing on the value that our solutions provide and how they can be leveraged quickly during volatile periods like today.

In 1 such case this quarter, a middle-market North American reinsurance customer was having serious challenges with their financial close, audit and statutory reporting processes. These challenges were exacerbated by staffing shortfall and a heavy reliance on manual work.

We were able to demonstrate the value of our core financial close products and how they could leverage these quickly through our MAP program, improving close efficiency and accuracy while enhancing their control environment through automation, saving countless person hours and freeing up staff to focus on strategic work.

Our expansive customer footprint across industries and geographies provides a level of natural resiliency and diversity to our business, which is especially important when faced with a more uncertain operating environment.

This, in turn, gives us confidence in our pipeline as we consider a range of macro environment that could occur in the second half of this year. Though we haven't seen any material changes to our business or the demand environment thus far, we are taking a pragmatic approach to how we are positioning the business for late 2022.

Our updated guidance is an output of our approach, and Mark will walk through this with you shortly. To that end, we are placing additional rigor on the scope of investments we are making.

We do not plan to slow down or reduce investments into our strategic initiatives, particularly those that drive long-term growth and extend our competitive positioning like our GCP migration, which remains very much on track and the ongoing innovation of our platform.

We are, however, enhancing the rigor and discipline around other planned investments. Our ability to toggle these investment choices without impacting our long-term strategy is vital to our success and gives us a level of financial flexibility that many others may not have.

Our proven ability to invest through various market cycles and delivered continued innovation in the market is a key differentiator and further strengthens the trust customers and partners have in BlackLine. Looking ahead, we remain focused on hiring talented individuals that can accelerate our growth globally.

We've seen time and time again companies that lack discipline and reduce investment and capacity during periods of uncertainty only to come out on the other side, unprepared to capture growth in an economic recovery.

Our goal is to balance this approach with targeted hiring across the business and in geographies that we feel will accelerate our long-term growth profile. To sum it up, we expect to maintain a responsible level of investment into our business and our people.

We expect to generate further operational efficiencies from these investments as we move through the back half of this year and into next. And we will position ourselves such that when the global macroeconomic environment becomes a bit clear, we will be executing from a position of strength.

With these considerations in mind, let's review our Q2 highlights and dive deeper into our results. Total revenue in the second quarter was $129 million, up 26% versus the prior year, with net revenue retention at 110%, up 4 points versus last year and steady versus Q1 of 2022.

Customer expansion growth and further upsell of our strategic products drove higher average deal sizes. For reference, our average deal size increased to $125,000 this quarter, up from $112,000 in Q2 of 2021. Additionally, we now have 43 customers that generate $1 million or more in ARR, up 48% year-over-year.

Revenue performance from our enterprise business was in line with our expectations and delivered solid year-over-year growth across geographies. However, bookings were slightly lower than expected as a few larger deals that we expected to close at the end of the quarter were delayed.

We are actively pursuing these deals and remain engaged with the customers and partners involved to close them in a timely manner. Our middle market business showed strength once again, reflecting the key investments that we've made across our go-to-market teams and into our strategic partner network, especially in EMEA and Asia Pacific.

New logo growth in the middle market was healthy, bringing our middle market customer count to over 2,000. We're seeing a higher average deal sizes and very healthy competitive win rates globally. Strategic products had another strong quarter, led by the demand for innovative solutions, solving some of the most complex customer problems.

We saw some great wins this quarter in intercompany including a large global consumer company who chose to deepen their relationship with BlackLine.

As part of their multiyear financial transformation project, this customer realized that there were significant risks with -- in their existing intercompany processes and had no clear solution or road map to resolve these.

Leaning on our go-to-market and solutions team while leveraging our existing partner network, we were able to deliver an accretive solution that adds strategic value to the company while minimizing the risk that they face every day.

This ability to expand within our existing customer base and cross-sell with market-leading strategic products is a key tenet of our long-term growth agenda and is evident in our recent NRR results. You should expect us to focus resources here to drive customer penetration higher.

We also saw some notable wins and competitive takeaways in AR automation. And 1 example, a new customer who is a leading logistics and transportation operator focused on global supply chain was looking to replace their existing AR solution.

Over the past few years, they had recurring challenges across basic collection tasks delaying internal processing time lines which lead to missed deadlines and as a result, poor customer experiences.

Our go-to-market teams were able to drive home the value that BlackLine's modern AR solution provides while offering additional solutions that the customer could leverage as they grow and expand their own business. Being a strategic partner to customers is critical, especially in today's environment.

Also important are the partners we leverage globally to help us expand our reach and win new business. And this quarter, we saw some great wins where we leveraged our extensive partner network to solve complex requirement for customers around the world.

In 1 such instance, we leveraged our SAP SolEx partnership to land one of Europe's largest telecommunication providers that was running multiple legacy systems as a part of their reconciliation processes. They wanted to simplify their existing technology footprint while improving efficiency, visibility, automation and control across the business.

They also wanted to operate more strategically, proactively managing their business and enhancing their control environment.

With our partners, we were able to provide a comprehensive set of solutions that aligns with their objectives and their technology road map while delivering an attractive ROI and much lower TCO than their previous experience, all in a great example of how we leverage our partners to expand our reach into new customers and markets.

And another example of working with our partners again, we were able to land one of Europe's largest automobile manufacturers. The customer was embarking on a multiyear digital transformation process and had a very clear strategy for their back office of the future.

Not only were they looking for more advanced reconciliation capabilities, but were intent on driving further efficiency through process automation. Through a very consultative RFP, we were able to build trust in our relationship and exceed their complex requirements.

We also offered additional solutions to outdated and poorly designed processes that were above and beyond the current scope paving the way for a much deeper relationship over time. To close, I'm proud of what our team accomplished this quarter in the face of elevated market uncertainty.

Our results were solid, and we believe the investments we are making will continue to drive favorable results in the business. The near term may be punctuated by further uncertainty across our customers and markets.

We recognize this and are taking a pragmatic approach to position our business appropriately while laying the foundation for our long-term growth. We expect to update you on our long-term growth views at our planned Investor Day in November, which will run concurrently with our BeyondTheBlack customer conference.

As part of this, we'll provide an update on our product and solutions positioning and how that positioning drives our long-term growth. We also plan to discuss our go-to-market strategy and take a deeper dive into our strategic product portfolio, especially intercompany.

With that, I'll turn it over to Mark Partin to discuss the details of our financial performance and our outlook..

Thank you, Marc, and good afternoon, everyone. Our second quarter financial results were solid, led by the continued execution in our growth initiatives. Further customer expansion and upsell of strategic products continues to reinforce the long-term opportunity that we see.

Additionally, we saw incremental improvements in operating efficiency across key parts of the business and remain disciplined on managing costs in the quarter. As Marc mentioned, we did see a few slip deals in very late Q2.

While the number was small, the deal sizes were larger given the nature and scope of these deals, we expect them to close in the near future. Now let's review some key results and highlights for Q2.

Total revenue grew to $129 million, representing 26% growth compared to the second quarter of 2021, with subscription revenue growing to $121 million, up 27% compared to last year. Notably, we ended Q2 with $500 million in annual recurring revenue. In the quarter, non-GAAP overall gross margin was 79% and non-GAAP subscription gross margin was 82%.

We added 106 net new customers in the quarter, bringing our total customer count to 4,003. We have 43 customers that generate $1 million or more in ARR, up 48% year-over-year. Strategic product performance was strong, especially in intercompany and transaction matching and came in above our expected range of 26% of sales.

Performance here was driven by further upselling activity and execution from our go-to-market teams, combined with solid market demand. Partners were involved in 65% of large deals, up slightly versus last year and consistent with the first quarter.

Our partner ecosystem continues to be a powerful growth lever, providing opportunities to win new logos and expand further into our customer base. Revenue from our SAP partnership remains steady, representing 24% of revenue in Q2.

Non-GAAP operating expenses increased by 37% versus the prior year as we continued to invest in strategic initiatives and product innovation that fuels our long-term growth combined with continued hiring within our go-to-market and customer success teams.

Our hiring plan coming into the year was designed to be front-end loaded with lower levels of hiring activity in the second half. Given that we've achieved our hiring targets and have an appropriate level of capacity to sustain our growth, we expect to see a lower velocity of hiring in the back half of the year.

Further, we've been able to leverage our cost base to drive sustainable efficiencies that improve our margin profile. In services, for example, we're leveraging our partner network to take on more onboarding and implementation opportunities. Despite lower services revenue contributions in the near term, we see multiple benefits from this.

First, we're able to push out lower-margin services work, driving higher margins for the company overall. And second, these opportunities provide incentives for our partners to expand and grow their BlackLine practices, giving us further opportunities to capture. Additionally, we're seeing incremental improvements in our sales efficiency metrics.

We've focused much of our recent hiring these past 3 to 4 quarters in our sales teams. And as they ramp and mature within the organization, we're able to drive leverage off this cost base. We expect to see continued improvements in these going forward and to the consideration in our updated financial guidance.

Given the operational improvement mentioned, along with cost discipline, we delivered non-GAAP net income attributable to BlackLine of $5 million, above our prior guidance range. We generated $5.9 million in operating cash flow and a minus $5.1 million in free cash flow.

Free cash flow in the period was influenced by higher CapEx related to infrastructure build-out as well as product and technology spend. We expect that going forward, this outlay will normalize lower in line with the historical trends and drive continued improvement in our free cash flow profile.

We finished the quarter with approximately $1 billion in cash equivalents and marketable securities, giving us the financial flexibility to continue to invest through the cycle and with the long term in mind.

Now before we walk through our updated financial guidance, I'd like to provide some thoughts on how we are approaching the back half of the year and the considerations we've incorporated.

As you know, we have a highly predictable subscription model with very strong renewal rates, which gives us great visibility and high confidence into how our revenue growth trends over time.

However, broader market conditions such as today's macro environment requires us to consider additional factors that could influence our full year revenue expectations. Specifically, the rapid appreciation of the U.S. dollar is expected to be a 1 point headwind to revenue growth for the full year.

Also, we see it prudent to assume that we will see some elongated sales cycles in the back half of this year and as such, are underwriting another point headwind to full year revenue growth. Finally, we discussed earlier the continued shift of certain services-related work to our partners, leading to higher margins for the business.

The impact to full year revenue growth due to this continued shift is also expected to be 1 point. We expect that the operational efficiencies we're generating will continue to drive further margin improvement in the back half of the year and are reflected in our updated full year non-GAAP net income guidance.

Putting these all together, for the third quarter of 2022, total GAAP revenue is expected to be in the range of $133 million to $135 million, representing approximately 22% to 23% growth compared to the third quarter of 2021.

We expect to report non-GAAP net income attributable to BlackLine in the range of $6 million to $7 million or $0.08 to $0.10 on a per share basis. Our share count will be approximately 73.2 million diluted weighted average shares.

And for the full year 2022, we continue to expect total GAAP revenue in the range of $524 million to $528 million, representing 23% to 24% growth compared to the full year 2021. On the bottom line, we expect to report non-GAAP net income attributable to BlackLine in the range of $18 million to $20 million or $0.25 to $0.27 on a per share basis.

Our share count will be approximately 73 million diluted weighted average shares. To close, I want to emphasize that we remain focused on our long-term growth ambition.

Market demand for back-office automation software remains resilient and our market leadership, diverse customer base and financial position will serve us well as we navigate this volatile period.

And of course, the disciplined efforts and execution from our employees globally underpin our success and is a key asset that we will continue to leverage as we grow. Now I ask the operator to open the discussion to take your questions..

[Operator Instructions]. Our first question comes from Brent Bracelin with Piper Sandler..

While I totally understand large deals are now taking longer to close, we're seeing that largely across most of the software space. You did see a pretty healthy uptick in $1 million deals, up 48% year-over-year relative to the number of customers now are crossing that threshold.

So maybe could you just take a step back and maybe walk us through what's driving larger deal sizes? It looks like user expands were also very strong in the quarter.

Is the bundle kind of customers taking larger bundles? Is it larger initial lands that expands larger? Just walk us through the momentum you're seeing in those million-dollar ARR customers given they are growing about 2x faster than overall revenue?.

Yes. Thanks, Brent. If you look back in time, when we IPO-ed the company had 1 $1 million client. In 2018, when I joined, we had 7. And since then, we've had this as part of our growth initiatives. The theory being what we do is so mission-critical for these customers who have so much complexity that we should be investing in how we grow this space.

And so this has been part of our growth initiatives all the way back to 2018, causing us to invest in things like proper account management, customer success investments that we reference consistently as our top growth initiatives. The process expertise that we have focused on how we create a journey.

Equally as impressive, in my mind, is the growth in the $250,000 or greater a year spend that we have from our customer portfolio. And the way I think about it is we land them and our average sales price upon landing has increased over the last several years.

That $250,000 or greater population are those that are beginning a journey with us and going through a journey and at $1 million, you're thinking big transformation. And customers who are really strategic for us, so it's been purposeful, speaks to the nature of the criticality of what we do for customers and our extreme focus on it..

Helpful. And then, I guess, just one quick follow-up for Mark. P. As you think about the current environment, clearly, still facing kind of labor shortages out there. It's still a tight labor market.

Is the narrative of automation resonating with some of these customers? Are they leading in on either automation, accounting automation as a means to address some of the shortage they're having? Is cost one of the narratives -- cost savings a narrative that is resonating? Any sort of shift maybe you've seen there in the last couple of quarters would be helpful to hear..

Yes. Thanks, Brent. Look, I would turn to my CFO peers and to a number of our customers, some of -- many of which we have been talking to recently, about high ROI products in the CFO's office continuing to get priority. And I think we see that in a couple of ways. One is we had a couple record strategic product quarters.

And strategic products are the real ROI payback, high automation, things like intercompany and AR and Smart Close and transaction matching. These are ways that companies can really drive greater capability out of reduced capacity.

Talent management, retention of accountants continues to be one of the largest problems in the accountings office, and that's not going to go away anytime soon. So they have to make a fundamental shift.

Over the last 24 months, it went from hybrid working environment to talent management as part of being able to automate within the accountant's office.

And I think we're better positioned today with our overall product portfolio and the team that can help lead accountants through the decisions on how to implement automation is, I think it's as good as it's ever been..

Our next question comes from Matthew VanVliet with BTIG..

I guess, first on sort of the broader partner community and then maybe more specifically on SAP SolEx as well.

Anything that you're seeing there that's gaining more traction? Is the strategic product section really bringing a lot more of those partners in and having them invest in the practice knowing that not only are you bringing more of the services work to them, but these projects can be very substantial and the ability to push into $1 million-plus deals is very tangible now.

So maybe just talk about kind of which of the strategic products maybe are attracting the most attention from those partners..

Sure. At onset, when you land a new customer, and we continue to observe people who are living in a very manual world. And so that initial land and then set up of the base use case in itself is really critical for us, but it's not as unique and exciting for a partner who basically monetizes a consulting practice.

And so as we get into that journey in the higher automation, higher value, more strategic products, it clearly is a motivator for partner organizations to build on their practices.

The matching volume and engine that we have, the Journal Entry, engine, intercompany are 3 great examples where we see a lot of traction within the partner communities, which we have spent a great deal of time training up and educating on the value of those products over the course of the last year or so.

So that's the, I think, the more strategic products which have the most traction.

And the last one I would really highlight intercompany is an area that the most significant, the most complex organizations in the world who already have these really big embedded relationships with these large consulting organizations, there's a lot of momentum around intercompany and the marketplace from an interest standpoint that we expect or we believe will transfer to demand in the future..

And then when you look at a few of the large deals that you talked about slipping out of the quarter here, is there anything that you can point to that's maybe a correlation across those? And maybe digging in 1 layer deeper, do you feel like you've already been selected potentially as a vendor, and it's more a matter of timing, getting sort of the everything lined up on the signatures and budget? Or is there a risk that some of those deals maybe end up going to a competitor given that the sales cycle is elongated?.

Yes. And I'll remind -- it's a great question. I'll remind people that the largest statistical competitor is the status quo. And so in most every case on the top of our list of -- watch list of opportunities that have elongated, if you will, from a decision process that we've already been selected.

And it's an elongation of approval process and the complexity around that which tends to change. They happen to be a handful of the larger. I think Mark referenced that in his script. A couple of those were tied up in SolEx. That SolEx relationship is productive.

It's seasonal in nature, it's got some variability to it, and we just experienced a little of that..

Our next question is from Rob Oliver with RW Baird..

So a lot of focus here so far on the call on strategic products. And I think rightfully so, it seems like a really big success story for you guys. And with nice attach rates, which you called out in both Rimilia and FourQ.

And actually, you called out ICH, not FourQ, and that was my question was particularly with that large global consumer company where you guys already were embedded and where the decision Marc Huffman was to go with you guys for ICH, is FourQ already impacting those decisions? And if so, how is it relative to your expectations for the year? And then I had a follow-up for Mark Partin..

Sure. So with regard to that, I'd start to refer to this now as just our intercompany. We'll start talking about it in our user conference in Investor Day as IFM, Intercompany Financial Management, and it's the combined organizations, which we're looking at as a business unit.

Just as a data point for you, we had more bookings through the halfway point of the year of 2022 thus far than all of 2021. And both of the assets that were in there, the capabilities have been contributing to that success. So very pleased with it.

Very pleased with where we are on progress, on integration, the product road map and planning, the distribution strategy thus far with our intercompany business..

Great. Okay. And then Mark Partin for you. Obviously, you talked about some of the levers that you can pull on the cost side, they've got different scenarios and certainly, profitability outlook is markedly higher. But can you just -- you guys thought laid out some of the untouchables such as the Google Cloud transition and others.

What -- can you just remind us what are some of the things? What are some of the things you can't touch where you do have control over, which are more variable costs that you can play with, depending upon which of the outcome scenarios that we see in the economy?.

Yes. Yes. Great. Rob, thanks for the question. We did expect to be more profitable this year if we could execute and we are. And so our revenue will drop to the bottom line, and that helps us on the profitability. With respect to our levers of growth, there's a few that really make a difference.

I called out one of them earlier in the sales and marketing, where over the last 3 or 4 quarters, we have been hiring and investing in our sales capacity. And that's been one of our stated goals.

And then we ramp up typically at the beginning of the year, and then we have, today, one of the greatest sort of investments and unramped potential that we've had in our business in many years. And so that production will come online over the next several quarters, and we'll start to see the sales efficiency coming from that.

So that's a large one in the second half. Another one is around this gross margin impact that we mentioned from services, where we're able to drive in Q2, we had a 20% gross margin, and we're seeing high efficiency, good pricing power and also an effective and efficient use of the partner ecosystem.

Others are belt tightening in G&A, which we are doing. It also includes in our GCP migration, the cost optimization and work that, that team is doing to maintain a stable and consistent margin while maintaining that customer experience and migration is really great. We're on schedule, and we're finding ways to delever on the cost side there.

So those are the big contributors to the second half of the year..

It's from Pinjalim Bora with JPMorgan..

I wanted to ask you about the macro. It seems like you said you're not seeing material changes, but you -- seems like you do expect kind of a potential elongation of sales cycles.

What is the other conversations manifesting at this point in time in some of the discussions? And are you seeing any discussions where people are reassessing their 2023 budgets at this point? And thinking of cutting them that or maintaining it? How should people think about that?.

Yes. So I would agree with your assertion about our commentary on the impact thus far from the macro environment. I do believe that it's -- and so much of this comes through customer conversation. We reiterate and inquire with our prospects and customers as to their priorities.

And the recent interactions that I've had with customers, we remain a priority and a multiyear strategic priority and the rollout of BlackLine. Again, these are some of the largest, most complex organizations in the world going through global rollouts and modernizing their financial system. So their commitment stays high to that.

I do see that people are taking a moment to evaluate what the forward-looking priorities are and making sure that they're investing in allocating capital properly. I think that's an ordinary course that affects our sector as well as the broader economy in terms of what businesses are prioritizing their spend on..

Understood. The other question, I think you kind of answered it, but I will come on to ask you one more time. The inorganic contribution in the 10-Q seems like it was a little bit higher for Q1 than we had expected. And is that it's a single unit, maybe you don't want to break it out at this point. They are both doing well.

But I think investors are trying to understand kind of the organic growth of the business.

How should we go about thinking about the organic growth at this point?.

Yes, thanks. When we set out our annual guidance for the year with respect to 4Q, our guidance was that the impact of the inorganic for the full year would be 2% to 3% on revenue in our guide. And after Q2, we are executing to the high end of that range as of Q2 and sort of year-to-date.

So when you think about the numbers, that's probably the right way to disaggregate it..

Just to be sure, you said 2% to 3% was baked into the guide as in Q4?.

That's right. And we're executing to the high end of that range..

It comes from Alex Sklar with Raymond James..

Marc Huffman, after you bought Rimilia almost some 2 years now, but we saw you really expand from the functionality into a broader AR suite. It sounds like more of the same to come with intercompany now after FourQ.

Can you talk about if either of those kind of business units are becoming a tip of the spear offering for you? Or are those still more cross-sell?.

I think our experience to the latter question there, Alex, thank you. We've landed new customers through the AR suite and Cash App specifically. We've been pleased with the progress in our mid-market sector specifically on some of that new customer motion. We've got, I think, some momentum there.

In terms of our strategy with FourQ, intercompany and IFM, yes, we are helping bring those assets together for a complete set of functionality. We're executing well on our product road map such that we have complete trade, nontrade, netting and settlement, the real important portions of intercompany management.

We're starting to work on interoperability with the important systems in the world like materials management systems that, that trade business really depends upon, so we could fit into a really complex global architecture. And we remain on track for getting our products through the PQ process for SolEx, all of those to say that we continue to invest.

We're staying on track for the broadening of the intercompany capabilities, and that will be our strategy there..

Got it. Okay. That's real helpful. And I see more to come add in the black. But on SAP, they talked about a nice quarter, the RISE initiative. You talked about some traction this quarter, but you noted some seasonality. I'm curious kind of if you could just kind of parse out how that SAP SolEx partnership is going year-to-date versus plan..

Yes. I'd say that we're pleased with the partnership. That RISE initiative continues to be one of the elements that is driving progress both from an actual standpoint and an interest in demand gen conversation standpoint. So that, I would say, is a benefit.

The -- some of the slipped deals that I referred to were specifically larger in nature and things that were partnered with SAP through SolEx, that have yet to complete and become part of the Q2 actual such that, that put us, I would say, just slightly behind where I would want us to be at the halfway point in SolEx..

One moment for our next question, please. It comes from Matt Stotler with William Blair..

Maybe first one, just another one on strategic products, obviously, we talked about, especially with ICH for a while, right? That product has been around for many years. But clearly, this year, there's a lot of strong momentum behind ICH and kind of portfolio in general.

I would love to just kind of dig down into what's driving that, right? I mean, is it more customer readiness to adopt these types of solutions? Is it more, "Hey, we now have more of the pieces in place, right? We require FourQ on the intercompany side and are adding capability.

And so now that these products are more ready to really fit the breadth of customer needs." Who would adopt these, just more on the internal go-to-market front in terms of you guys kind of getting that motion really kind of banging anal cylinders this year.

Is this more partnered by in and kind of any elevation of a partner participation in the last several quarters? Or is it a combination of all those right? I mean, it seems like these are kind of converging on the strategic products we look to kind of get some bots there..

Yes. It's a great question. I think it's the latter. It's a maturity scenario where you've got market receptivity. There hasn't been a large focus. Oftentimes vendors bring education to potential solutions to these challenges. And then BlackLine was leading the way on that. FourQ was an emerging company focused on that.

And so I think there's a maturity model in the interest and demand and readiness. Clearly, there's a need for it out there. If we talk to any of these large companies, every single one of the meetings I'm in, we talk about their intercompany challenges and they're vast. It's a more completeness.

And our capabilities, upstream and planning and executing transactions, downstream and sort of more completeness around the trade and nontrade. So there's a maturity that's going on there. And then through the acquisition, we bring in roughly 100 heads, really capable people, a great team who are some of the best intercompany experts in the world.

So I think all of those things combined to one, get us where we are today and really the excitement that we have in the potential future..

Right. Right. That's helpful. And then maybe just one on kind of the international business, right? Obviously, SAP is doing well, but outside of kind of that portion of the international business would love to get any sort of updates or if you're seeing any different trends or behaviors internationally versus domestic markets.

Any color on the progress with your initiative there would be helpful..

Yes. If we look at the halfway point of the year, the international performance was good. We hadn't yet -- there's all of these, obviously, discussion and volatility in the market, and it wasn't apparent to us or material that it was going to be a drag on international.

That said, we have some of the slipped deals we referred to that, of course, are international in nature. But we had good performance internationally. We're happy with our progress and the investments that we've made internationally. We continue to grow our presence.

And we talked about taking the modern accounting playbook globally, and we continue to drive growth in mid-market. We continue to drive some growth through SolEx internationally as well as our own direct efforts into the non-SAP world..

One moment for our next question. It comes from Andrew DeGasperi with Berenberg..

Just one on the full year guide. Thanks for quantifying the impacts that you laid out. Just the one follow-up I have is on the 1 percentage point you laid out for deals getting pushed out. I was just wondering, clearly, you quantified it.

And I'm just trying to understand if this is due to the Q2 deals getting pushed out? Or are you assuming some other potential weakness in the back half as well? And then I have a follow-up..

Yes. Thank you. It's both. So it's Q2 and the timing delay that creates revenue recognition delay, and then it's an assumption around Q3 and Q4 as well that there will be some similar impact, albeit to a lesser extent..

That's helpful. And then in terms of the margin guide, and thanks for laying out the assumption there as well. I was just wondering when you mentioned the belt tightening on G&A, and did I misunderstand, but you didn't mention sales and marketing.

Is that continuing to be invested as originally planned earlier in the year?.

Yes. Thank you. So sales and marketing has been accelerating its hiring as well as customer's team for the last 3 to 4 quarters. We began in earnest of Q3 last year, we started to see the accelerating demand in the market.

We talked about the need to hire and build capacity to meet that demand in key areas of the business, including international, account management and mid-market. And so we did that over that 3 or 4 quarters. Salespeople in our business take a while to ramp to get to a full-time production.

And so the original plan was hire early and then taper in the second half of the year. That's sort of the rhythm of hiring that group. So we'll get the efficiency out of that in the second half..

Thank you. And I will turn the call back to Mr. Marc Huffman for final remarks..

I just want to thank everybody for tuning in today. And on behalf of the management to just thank our employees who are working very, very hard to serve our customers, serve each other. And our customers and our partners for their continued belief in safe and BlackLine's ability to modernize and change the work that accountants do.

We'll see you next time. Thank you very much, everyone..

Thank you. And with that, ladies and gentlemen, we conclude our conference call. Thank you for participating, and you may now disconnect..