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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________
FORM 10-Q
______________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from     to     
Commission File Number: 001-37924
______________________________________________________________
BlackLine, Inc.
(Exact name of Registrant as specified in its charter)
______________________________________________________________
Delaware46-3354276
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
21300 Victory Boulevard, 12th Floor
Woodland Hills, CA 91367
(Address of principal executive offices, including zip code) 
(818) 223-9008
(Registrant’s telephone number, including area code)
______________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.01 per shareBLNASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
   Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒
The number of shares of the registrant’s common stock outstanding at May 2, 2024 was 61,817,410.




BlackLine, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended March 31, 2024

TABLE OF CONTENTS


2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risk and uncertainties. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “would,” “continue,” “ongoing” or the negative of these terms or other comparable terminology. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, but not limited to, statements regarding future financial and operational performance; statements concerning growth strategies including acquisitions, extension of distribution channels and strategic relationships, product innovation, international expansion, customer growth and expansion, customer service initiatives, expectations regarding our acquisitions, expectations regarding contract size and increased focus on strategic products, expectations for hiring new talent; our ability to accurately forecast revenue and appropriately plan expenses and investments; the demand for and benefits from the use of our current and future solutions; market acceptance of our solutions; the impact of the macroeconomic environment on our business; and changes in the competitive environment in our industry and the markets in which we operate and our liquidity and capital resources. These statements are based upon our historical performance and our current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith beliefs and assumptions as of that time with respect to future events and are subject to risks and uncertainty. If any of these risks or uncertainties materialize or if any assumptions prove incorrect, actual performance or results may differ materially from those expressed in or suggested by the forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainty, and assumptions that are difficult to predict, including those identified below, under “Part II-Other Information, Item 1A. Risk Factors” and elsewhere herein. Forward-looking statements should not be read as a guarantee of future performance or results, and you should not place undue reliance on such statements. Furthermore, we undertake no obligation to revise or update any forward-looking statements for any reason, except as required by applicable law.
Unless the context otherwise requires, the terms “BlackLine, Inc.,” “BlackLine,” “the Company,” “we,” “us,” and “our” in this Quarterly Report on Form 10-Q refer to the consolidated operations of BlackLine, Inc. and its consolidated subsidiaries as a whole.
3


Part I. Financial Information
Item 1.    Financial Statements
BLACKLINE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except shares and par values) 
March 31,
2024
December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents$331,401 $271,117 
Marketable securities (amortized cost of $913,653 and $932,850 at March 31, 2024 and December 31, 2023, respectively)
913,453 933,355 
Accounts receivable, net of allowances of $4,308 and $5,064 at March 31, 2024 and December 31, 2023, respectively
125,613 171,608 
Prepaid expenses and other current assets33,189 31,244 
Total current assets1,403,656 1,407,324 
Capitalized software development costs, net38,982 37,828 
Property and equipment, net13,065 14,867 
Intangible assets, net73,860 79,056 
Goodwill448,965 448,965 
Operating lease right-of-use assets19,196 19,173 
Other assets91,161 93,552 
Total assets$2,088,885 $2,100,765 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$1,556 $8,623 
Accrued expenses and other current liabilities47,133 59,690 
Deferred revenue, current306,855 320,133 
Finance lease liabilities, current525 778 
Operating lease liabilities, current4,233 4,108 
Convertible senior notes, net, current249,560 249,233 
Total current liabilities609,862 642,565 
Finance lease liabilities, noncurrent 4 
Operating lease liabilities, noncurrent15,360 15,738 
Convertible senior notes, net, noncurrent1,141,666 1,140,608 
Deferred tax liabilities, net5,251 6,394 
Deferred revenue, noncurrent2,352 904 
Other long-term liabilities660 3,608 
Total liabilities1,775,151 1,809,821 
Commitments and contingencies (Note 12)
Redeemable non-controlling interest (Note 3)33,900 30,063 
Stockholders' equity:
Common stock, $0.01 par value, 500,000,000 shares authorized, 61,802,503 and 61,515,105 issued and outstanding at March 31, 2024 and December 31, 2023, respectively
618 615 
Additional paid-in capital480,175 474,863 
Accumulated other comprehensive income (loss)(489)205 
Accumulated deficit(200,470)(214,802)
Total stockholders' equity279,834 260,881 
Total liabilities, redeemable non-controlling interest, and stockholders' equity$2,088,885 $2,100,765 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4


BLACKLINE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data) 
Quarter Ended March 31,
20242023
Revenues
Subscription and support$149,501 $130,426 
Professional services7,960 8,558 
Total revenues157,461 138,984 
Cost of revenues
Subscription and support32,052 28,512 
Professional services7,045 6,759 
Total cost of revenues39,097 35,271 
Gross profit118,364 103,713 
Operating expenses
Sales and marketing61,111 61,931 
Research and development25,015 27,105 
General and administrative30,046 28,976 
Restructuring costs444 1,014 
Total operating expenses116,616 119,026 
Income (loss) from operations1,748 (15,313)
Other income (expense)
Interest income15,360 10,665 
Interest expense(1,469)(1,455)
Other income, net13,891 9,210 
Income (loss) before income taxes15,639 (6,103)
Provision for income taxes869 628 
Net income (loss)14,770 (6,731)
Net income attributable to redeemable non-controlling interest438 85 
Adjustment attributable to redeemable non-controlling interest 3,503 5,192 
Net income (loss) attributable to BlackLine, Inc.$10,829 $(12,008)
Basic net income (loss) per share attributable to BlackLine, Inc.$0.18 $(0.20)
Shares used to calculate basic net income (loss) per share61,643 60,187 
Diluted net income (loss) per share attributable to BlackLine, Inc.$0.17 $(0.20)
Shares used to calculate diluted net income (loss) per share72,893 60,187 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5


BLACKLINE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(in thousands)
Quarter Ended March 31,
20242023
Net income (loss)$14,770 $(6,731)
Other comprehensive income (loss):
Net change in unrealized gains (losses) on marketable securities, net of tax benefit of $(123) and $0, for the quarters ended March 31, 2024 and 2023, respectively.
(582)1,266 
Foreign currency translation(216)(45)
Other comprehensive income (loss)(798)1,221 
Comprehensive income (loss)13,972 (5,510)
Less comprehensive income attributable to redeemable non-controlling interest:
Net income attributable to redeemable non-controlling interest 438 85 
Foreign currency translation attributable to redeemable non-controlling interest(104)(20)
Comprehensive income attributable to redeemable non-controlling interest334 65 
Comprehensive income (loss) attributable to BlackLine, Inc.$13,638 $(5,575)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6



BLACKLINE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(in thousands)
Quarter Ended March 31, 2024
Common StockAdditional
Paid-in
Accumulated
Other
Comprehensive
Accumulated
SharesAmountCapitalIncome (Loss)DeficitTotal
Balance at December 31, 202361,515 $615 $474,863 $205 $(214,802)$260,881 
Stock option exercises28311311
Vesting of restricted stock units26033
Acquisition of common stock for tax withholding obligations(10,981)(10,981)
Stock-based compensation19,48519,485
Other comprehensive loss(694)(694)
Net income attributable to BlackLine, Inc., including adjustment to redeemable non-controlling interest(3,503)14,33210,829
Balance at March 31, 202461,803$618 $480,175 $(489)$(200,470)$279,834 
    
Quarter Ended March 31, 2023
Common StockAdditional
Paid-in
Accumulated
Other
Comprehensive
Accumulated
SharesAmountCapitalIncome (Loss)DeficitTotal
Balance at December 31, 202260,017$600 $385,709 $(1,472)$(272,969)$111,868 
Stock option exercises20927,2207,222
Vesting of restricted stock units25233
Acquisition of common stock for tax withholding obligations(12,403)(12,403)
Stock-based compensation21,06921,069
Other comprehensive income1,2411,241
Net loss attributable to BlackLine, Inc., including adjustment to redeemable non-controlling interest(5,192)(6,816)(12,008)
Balance at March 31, 202360,478$605 $396,403 $(231)$(279,785)$116,992 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


7


BLACKLINE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Quarter Ended March 31,
20242023
Cash flows from operating activities
Net income (loss) attributable to BlackLine, Inc.$10,829 $(12,008)
Net income and adjustment attributable to redeemable non-controlling interest (Note 3)3,941 5,277 
Net income (loss)14,770 (6,731)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization12,648 12,004 
Change in fair value of contingent consideration 3,106 
Amortization of debt issuance costs1,385 1,362 
Stock-based compensation18,562 20,438 
Noncash lease expense1,558 1,498 
Accretion of purchase discounts on marketable securities, net(8,542)(7,519)
Net foreign currency losses38 473 
Deferred income taxes(1,041)(187)
Provision for credit losses 5 
Changes in operating assets and liabilities:
Accounts receivable45,696 30,166 
Prepaid expenses and other current assets(1,964)(5,268)
Other assets2,406 467 
Accounts payable (6,792)(9,518)
Accrued expenses and other current liabilities(14,774)(10,653)
Deferred revenue(11,830)(1,820)
Operating lease liabilities(1,710)(1,654)
Other long-term liabilities15 (3,302)
Net cash provided by operating activities50,425 22,867 
Cash flows from investing activities
Purchases of marketable securities(294,961)(311,246)
Proceeds from maturities of marketable securities322,700 328,800 
Capitalized software development costs(6,450)(6,879)
Purchases of property and equipment(299)(1,676)
Net cash provided by investing activities20,990 8,999 
Cash flows from financing activities
Principal payments under finance lease obligations(258)(241)
Proceeds from exercises of stock options314 2,411 
Acquisition of common stock for tax withholding obligations(10,981)(12,403)
Net cash used in financing activities(10,925)(10,233)
Effect of foreign currency exchange rate changes on cash, cash equivalents, and restricted cash(212)(41)
Net increase in cash, cash equivalents, and restricted cash60,278 21,592 
Cash, cash equivalents, and restricted cash, beginning of period271,363 201,207 
Cash, cash equivalents, and restricted cash, end of period$331,641 $222,799 
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets
Cash and cash equivalents at end of period$331,401 $222,557 
Restricted cash included within other assets at end of period240 242 
Total cash, cash equivalents, and restricted cash at end of period shown in the consolidated statements of cash flows$331,641 $222,799 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8


BLACKLINE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SUPPLEMENTAL CASH FLOWS DISCLOSURE
(in thousands)
Quarter Ended March 31,
20242023
Non-cash financing and investing activities
Stock-based compensation capitalized for software development$923 $832 
Capitalized software development costs included in accounts payable and accrued expenses and other current liabilities at end of period$613 $710 
Purchases of property and equipment included in accounts payable and accrued expenses and other current liabilities at end of period$89 $934 
Receivables from exercises of stock options, including tax withholdings$ $5,933 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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BLACKLINE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – The Company
BlackLine, Inc. and its subsidiaries (the “Company” or “BlackLine”) provide financial accounting close solutions delivered primarily as Software as a Service (“SaaS”). The Company’s solutions enable its customers to address various aspects of their critical processes, including financial close, intercompany, invoice-to-cash, and consolidation.
The Company is a holding company and conducts its operations through its wholly-owned subsidiary, BlackLine Systems, Inc. (“BlackLine Systems”). BlackLine Systems funded its business with investments from its founder and cash flows from operations until September 3, 2013, when the Company acquired BlackLine Systems, and Silver Lake Sumeru and Iconiq acquired a controlling interest in the Company, which is referred to as the “2013 Acquisition.”
The Company is headquartered in Woodland Hills, California. The Company has other local offices in Pleasanton, California; New York, New York; and Westport, Connecticut. We also have international office locations in Australia, Canada, France, Germany, India, Japan, the Netherlands, Poland, Romania, Singapore, and the United Kingdom.
Note 2 – Basis of Presentation, Significant Accounting Policies and Recently-Issued Accounting Pronouncements
The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the Securities and Exchange Commission (“SEC”) on February 23, 2024. The unaudited condensed consolidated financial statements are unaudited and have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair statement of the condensed consolidated financial statements. The unaudited condensed consolidated balance sheet at December 31, 2023 was derived from audited financial statements, but does not include all disclosures required by GAAP. The operating results for the quarter ended March 31, 2024 are not necessarily indicative of the results expected for the full year ending December 31, 2024.
Use of estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.
On an ongoing basis, management evaluates its estimates, primarily those related to determining the stand-alone selling price for separate deliverables in the Company’s subscription revenue arrangements, allowance for doubtful accounts, cancellations and credits, fair value of assets and liabilities assumed in a business combination, recoverability of goodwill and long-lived assets, useful lives associated with long-lived assets and right-of-use assets, income taxes, contingencies, fair value of contingent consideration, fair value of the 0.125% Convertible Senior Notes due in 2024 and 0.00% Convertible Senior Notes due in 2026, redemption value of redeemable non-controlling interest, and the valuation and assumptions underlying stock-based compensation. These estimates are based on historical data and experience, as well as various other factors that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.
The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company at March 31, 2024 and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s valuation of contingent consideration, the allowance for credit losses, and the carrying value of goodwill and other long-lived assets. While there was not a material impact to the Company’s condensed consolidated financial statements for
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the quarter ended March 31, 2024, the Company’s future assessment of these accounting matters and other factors could result in material impacts to the Company’s consolidated financial statements in future reporting periods.
Significant accounting policies
The Company’s significant accounting policies are detailed in “Note 2 - Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to the Company’s significant accounting policies.
Recently-adopted accounting pronouncements
There have been no recently adopted accounting pronouncements since the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
Recently-issued accounting pronouncements
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. This standard expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. For public business entities, it is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact that the updated standard will have on our disclosures within our consolidated financial statements. The Company does not intend to early adopt.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The amendment in the ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. For public business entities, it is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact that the updated standard will have on our disclosures within our consolidated financial statements. The Company does not intend to early adopt.
Note 3 – Redeemable Non-Controlling Interest
In September 2018, the Company entered into an agreement with Japanese Cloud Computing and M30 LLC (the “Investors”) to engage in the investment, organization, management, and operation of BlackLine K.K. that is focused on the sale of the Company's products in Japan. The Company initially contributed approximately $4.5 million in cash in exchange for 51% of the outstanding common stock of BlackLine K.K. and subsequently invested a further $2.3 million, maintaining the Company's majority ownership of 51%. As the Company continues to control a majority stake in BlackLine K.K., the entity has been consolidated.
All of the common stock held by the Investors is callable by the Company or puttable by the Investors upon certain contingent events. Should the call or put option be exercised, the redemption value will be determined based upon a prescribed formula derived from the discrete revenues of BlackLine K.K. and the Company, and may be settled, at the Company’s discretion, with Company stock or cash. As a result of the put right available to the Investors in the future, the redeemable non-controlling interest in BlackLine K.K. is classified outside of permanent equity in the Company’s consolidated balance sheets, and the balance is reported at the greater of the initial carrying amount adjusted for the redeemable non-controlling interest's share of earnings, or its estimated redemption value. The resulting changes in the estimated redemption amount are recorded within retained earnings or, in the absence of retained earnings, additional paid-in capital.
Activity in the redeemable non-controlling interest was as follows (in thousands):
Quarter Ended March 31,
20242023
Balance at beginning of period$30,063 $23,895 
Net income attributable to redeemable non-controlling interest (excluding adjustment to non-controlling interest)438 85 
Foreign currency translation(104)(20)
Adjustment to redeemable non-controlling interest3,503 5,192 
Balance at end of period$33,900 $29,152 
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Note 4 – Intangible Assets and Goodwill
The carrying value of intangible assets was as follows (in thousands):
March 31, 2024
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Trade name$15,977 $(15,977)$ 
Developed technology137,368 (70,284)67,084 
Customer relationships26,779 (21,075)5,704 
Defensive patent2,333 (1,261)1,072 
$182,457 $(108,597)$73,860 
December 31, 2023
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Trade name$15,977 $(15,977)$ 
Developed technology137,368 (66,900)70,468 
Customer relationships26,779 (19,342)7,437 
Defensive patent2,333 (1,182)1,151 
$182,457 $(103,401)$79,056 
The following table represents the changes in goodwill (in thousands):
Balance at December 31, 2023$448,965 
Additions from acquisitions 
Balance at March 31, 2024
$448,965 
Note 5 – Balance Sheet Components
Investments in Marketable Securities
Investments in marketable securities presented within current assets on the condensed consolidated balance sheets consisted of the following (in thousands):
March 31, 2024
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Marketable securities
U.S. treasury securities$512,472 $110 $(165)$512,417 
Commercial paper291,389   291,389 
U.S. government agencies109,792 1 (146)109,647 
$913,653 $111 $(311)$913,453 

December 31, 2023
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Marketable securities
U.S. treasury securities$523,344 $737 $(107)$523,974 
Commercial paper241,428 1  241,429 
U.S. government agencies168,078 2 (128)167,952 
$932,850 $740 $(235)$933,355 
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The Company’s marketable securities as of March 31, 2024 have a contractual maturity of less than two years. All of our available-for-sale securities are available for use in our current operations and are categorized as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date.
The fair values of available-for-sale securities, by remaining contractual maturity, were as follows (in thousands):
March 31, 2024
Amortized CostFair Value
Maturing within 1 year$881,656 $881,559 
Maturing between 1 and 2 years31,997 31,894 
$913,653 $913,453 
Refer to “Note 6 - Fair Value Measurements” for additional information.
Net gains and losses related to maturities of marketable securities that were reclassified from accumulated other comprehensive loss to earnings and included in interest income in the accompanying condensed consolidated statements of operations, were $8.5 million and $7.5 million for the quarters ended March 31, 2024 and 2023, respectively.
Net gains and losses are determined using the specific identification method. During the quarters ended March 31, 2024 and 2023, there were no realized gains or losses related to sales of marketable securities recognized in the Company's accompanying condensed consolidated statements of operations.
Marketable securities in a continuous loss position for less than 12 months had an estimated fair value of $365.0 million and $286.6 million, and unrealized losses of $0.3 million and $0.2 million, at March 31, 2024 and December 31, 2023, respectively. There were no marketable securities in a continuous loss position for greater than 12 months at March 31, 2024 and December 31, 2023, respectively.
The Company's marketable securities are considered to be of high credit quality and accordingly, there was no allowance for credit losses related to marketable securities as of March 31, 2024 or December 31, 2023.
Other Assets
Deferred customer contract acquisition costs are included in other assets in the accompanying condensed consolidated balance sheets and totaled $87.0 million and $89.9 million at March 31, 2024 and December 31, 2023, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities were comprised of the following (in thousands):
March 31,
2024
December 31,
2023
Accrued salaries and employee benefits$24,610 $33,344 
Accrued income and other taxes payable6,723 9,408 
Accrued restructuring costs627 1,569 
Other accrued expenses and current liabilities15,173 15,369 
$47,133 $59,690 
Note 6 – Fair Value Measurements
The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis by level, within the fair value hierarchy. Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):
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March 31, 2024
Level 1Level 2Level 3Total
Cash equivalents
U.S. treasury securities$9,955 $ $ $9,955 
Money market funds237,047237,047 
Commercial paper19,988 19,988 
Marketable securities
U.S. treasury securities512,417 512,417 
Commercial paper291,389291,389 
U.S. government agencies109,647109,647 
Total assets$759,419 $421,024 $ $1,180,443 
Liabilities
Contingent consideration$ $ $ $ 
Total liabilities$ $ $ $ 

December 31, 2023
Level 1Level 2Level 3Total
Cash equivalents
Money market funds$148,298 $ $ $148,298 
Commercial paper 38,926  38,926 
U.S. government agencies 19,987  19,987 
Marketable securities
U.S. treasury securities523,974   523,974 
Commercial paper 241,429  241,429 
U.S. government agencies 167,952  167,952 
Total assets$672,272 $468,294 $ $1,140,566 
Liabilities
Contingent consideration$ $ $ $ 
Total liabilities$ $ $ $ 
The following table summarizes the changes in the contingent consideration liability (in thousands):
Quarter Ended March 31,
20242023
Beginning fair value$ $41,549 
Additions in the period  
Change in fair value 3,106 
Ending fair value$ $44,655 
The Company classified the marketable debt securities as available-for-sale debt securities at the time of purchase and reevaluated such classification as of each balance sheet date. The valuation techniques used to measure the fair values of our instruments that were classified as Level 1 were derived from quoted market prices for identical instruments in active markets. The valuation techniques used to measure the fair values of Level 2 instruments were derived from broker reports that utilized quoted market prices for similar instruments.
As a condition of the acquisition of FourQ Systems, Inc. (“FourQ”) that occurred on January 26, 2022, the Company agreed to pay additional cash consideration if FourQ realized certain firm-specific targets, including the amount and timing of new and incremental combined bookings from FourQ and BlackLine, and revenues from a specified FourQ customer over a three-year period subsequent to the acquisition date. The maximum cash consideration to be distributed is $73.2 million. Changes in the significant inputs used in the fair value measurement, specifically a change in new and incremental actual and forecasted combined bookings from FourQ and the Company, can significantly impact the fair value of the contingent consideration liability. At March 31, 2024, the related liability for the FourQ Acquisition was zero.
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Increases and decreases in the fair value of contingent consideration are recorded as expense or reversals of expense, respectively, within general and administrative expenses in the unaudited condensed consolidated statements of operations.
Note 7 – Convertible Senior Notes
2024 Notes
As of March 31, 2024, we had $250.0 million aggregate principal amount of our 0.125% Convertible Senior Notes due in 2024 (the “2024 Notes”) outstanding. The 2024 Notes consisted of the following (in thousands):
March 31,
2024
December 31,
2023
Liability:
Principal$250,000 $250,000 
Unamortized debt issuance costs(440)(767)
Net carrying amount(1)
$249,560 $249,233 
(1) Net carrying amount as of March 31, 2024 presented within total current liabilities on the condensed consolidated balance sheet.
The Company carries the 2024 Notes at face value less unamortized debt issuance costs on the accompanying condensed consolidated balance sheets and presents the fair value for disclosure purposes only. The estimated fair value was determined based on the actual bids and offers of the 2024 Notes in an over-the-counter market on the last trading day of the period. The estimated fair value of the 2024 Notes, based on a market approach at March 31, 2024, was approximately $256.6 million, which represents a Level 2 valuation.
During the quarter ended March 31, 2024, the Company recognized $0.3 million of interest expense related to the amortization of debt issuance costs and $0.1 million of coupon interest expense. During the quarter ended March 31, 2023, the Company recognized $0.3 million of interest expense related to the amortization of debt issuance costs and $0.1 million of coupon interest expense. 
The 2024 Notes were not convertible at March 31, 2024. It is the Company’s current intent to settle conversions of the 2024 Notes through “combination settlement”, which involves repayment of the principal portion in cash and any excess of the conversion value over the principal amount in shares of its common stock.
In connection with the offering of the 2024 Notes, the Company entered into privately negotiated capped call transactions (the “2024 Capped Calls”). There have been no changes to the condition of the 2024 Capped Calls since December 31, 2023, and the 2024 Capped Calls are still outstanding as of March 31, 2024.
2026 Notes
As of March 31, 2024, we had $1.150 billion aggregate principal amount of our 0.00% Convertible Senior Notes due in 2026 (the “2026 Notes”) outstanding. The 2026 Notes consisted of the following (in thousands):
March 31,
2024
December 31,
2023
Liability:
Principal$1,150,000 $1,150,000 
Unamortized debt issuance costs(8,334)(9,392)
Net carrying amount$1,141,666 $1,140,608 
The Company carries the 2026 Notes at face value less unamortized debt issuance costs on the accompanying condensed consolidated balance sheets and presents the fair value for disclosure purposes only. The estimated fair value was determined based on the actual bids and offers of the 2026 Notes in an over-the-counter market on the last trading day of the period. The estimated fair value of the 2026 Notes, based on a market approach at March 31, 2024, was approximately $1.0 billion, which represents a Level 2 valuation.
During the quarters ended March 31, 2024 and 2023, the Company recognized interest expense related to the amortization of debt issuance costs of $1.1 million and $1.0 million, respectively.
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The 2026 Notes were not convertible at March 31, 2024. It is the Company’s current intent to settle conversions of the 2026 Notes through “combination settlement”, which involves repayment of the principal portion in cash and any excess of the conversion value over the principal amount in shares of its common stock.
In connection with the offering of the 2026 Notes, the Company entered into privately negotiated capped call transactions (the “2026 Capped Calls” and together with the 2024 Capped Calls, the “Capped Calls”). There have been no changes to the condition of the 2026 Notes since December 31, 2023, and the 2026 Capped Calls are still outstanding as of March 31, 2024.
Note 8 – Restructuring Costs
The liability for the fiscal 2023 and 2022 restructuring programs was included in accrued expenses and other current liabilities in the condensed consolidated balance sheet, and the following tables summarize the related activity for the respective plans for the quarter ended March 31, 2024 (in thousands):
Quarter Ended March 31, 2024
Restructuring Program
Fiscal 2023Fiscal 2022Total
Accrual balance as of December 31, 2023$1,562 $7 $1,569 
Restructuring charges444  444 
Cash payments and adjustments(1,382)(4)(1,386)
Accrual balance as of March 31, 2024$624 $3 $627 
All plan adjustments were changes in estimates whereby increases and decreases in charges were generally recorded to operating expenses in the periods of adjustments.
As of March 31, 2024, the Company incurred cumulative costs of $10.3 million and $5.0 million related to the fiscal 2023 restructuring program and fiscal 2022 restructuring program, respectively. The Company does not anticipate incurring material additional expenses.
Note 9 – Equity Awards
Stock-based compensation expense
Stock-based compensation expense was as follows (in thousands):
Quarter Ended March 31,
20242023
Cost of revenues$1,962 $2,352 
Sales and marketing5,794 6,483 
Research and development2,851 3,824 
General and administrative7,955 7,779 
$18,562 $20,438 
For the quarters ended March 31, 2024 and 2023, stock-based compensation capitalized as an asset was $0.9 million and $0.8 million, respectively.
Stock options - service-only vesting conditions
The following table summarizes activity for awards that contain service-only vesting conditions (in thousands):
Outstanding at December 31, 20231,693 
Granted 
Exercised(36)
Forfeited/canceled(6)
Outstanding at March 31, 2024
1,651 
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Restricted stock units - service-only vesting conditions
The following table summarizes activity for restricted stock units that contain service-only vesting conditions (in thousands):
Nonvested at December 31, 20232,208 
Granted1,289 
Vested(394)
Forfeited/canceled(79)
Nonvested at March 31, 2024
3,024 
Restricted stock units - performance and service conditions
The following table summarizes activity for restricted stock units with performance and service vesting conditions with grant dates established (in thousands):
Nonvested at December 31, 2023113
Granted183
Performance adjustment(62)
Vested(51)
Forfeited/canceled(8)
Nonvested at March 31, 2024175
The following table summarizes activity for restricted stock units with performance and service vesting conditions with no grant dates established (in thousands):
Nonvested at December 31, 2023235 
Granted100 
Accounting grant dates established(133)
Vested 
Forfeited/canceled(5)
Nonvested at March 31, 2024197 
Restricted stock units - market and service conditions
The following table summarizes activity for restricted stock units with market and service-based conditions (in thousands):
Nonvested at December 31, 2023
Granted150
Vested
Forfeited/canceled
Nonvested at March 31, 2024150
Note 10 – Income Taxes
In determining quarterly provisions for income taxes, the Company uses the annual estimated effective tax rate applied to the actual year-to-date income (loss), adjusted for discrete items arising in that quarter. The Company’s annual estimated effective tax rate differs from the U.S. federal statutory rate of 21% primarily as a result of state taxes, foreign taxes, and changes in the Company’s valuation allowance for income taxes. For the quarters ended March 31, 2024 and 2023, the Company recorded $0.9 million and $0.6 million in income tax expense, respectively. The increase in income tax expense for the quarter ended March 31, 2024 compared to March 31, 2023, resulted primarily from an increase in U.S. profitability, along with changes in the mix of profitable foreign jurisdictions.
For purposes of calculating its income tax attributed to continuing operations, the Company continued to maintain a full valuation allowance on its U.S. federal and state net deferred tax assets as it was more likely than not that those deferred tax assets will not be realized.
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Note 11 – Net Income (Loss) per Share
The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share amounts):
Quarter Ended March 31,
20242023
Basic net income (loss) per share
Numerator:
Net income (loss) attributable to BlackLine, Inc.$10,829 $(12,008)
Denominator:
Weighted average shares61,643 60,187 
Basic net income (loss) per share attributable to BlackLine, Inc.$0.18 $(0.20)
Diluted net income (loss) per share
Numerator:
Net income (loss) attributable to BlackLine, Inc.$10,829 $(12,008)
Interest expense1,463 
Tax effect of interest expense(69) 
Net income (loss) attributable to BlackLine, Inc. for diluted calculation$12,223 $(12,008)
Denominator:
Weighted average shares61,643 60,187 
Dilutive effect of securities926  
Dilutive effect of convertible senior notes10,324  
Shares used to calculate diluted net income (loss) per share72,893 60,187 
Diluted net income (loss) per share attributable to BlackLine, Inc.$0.17 $(0.20)
The weighted average impact of potentially dilutive securities that were excluded from the diluted per share calculations because they were anti-dilutive were as follows (in thousands):
Quarter Ended March 31,
20242023
Stock options - service-only vesting conditions189 2,202 
Restricted stock units - service-only vesting conditions1,373 2,869 
Restricted stock units - performance and service conditions9 370 
Restricted stock units - performance, market, and service conditions 63 
Restricted stock units - market and service conditions26  
Total shares excluded from net loss per share1,597 5,504 
Additionally, approximately 3.4 million and 6.9 million weighted average shares underlying the conversion option in the 2024 Notes and the 2026 Notes, respectively, are excluded from the calculation of diluted net loss per share attributable to common stockholders for the quarter ended March 31, 2023 as the effect would be anti-dilutive. The shares are subject to adjustment, up to approximately 4.7 million shares and 9.9 million shares for the 2024 Notes and the 2026 Notes, respectively, if certain corporate events occur prior to the maturity dates or if the Company issues a notice of redemption.
Note 12 – Commitments and Contingencies
Litigation—From time to time, the Company may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. The Company is not currently a party to any legal proceedings, nor is it aware of any pending or threatened litigation that would have a material adverse effect on the Company’s business, operating results, cash flows, or financial condition should such litigation be resolved unfavorably.
Indemnification—In the ordinary course of business, the Company may provide indemnification of varying scope and terms to customers, vendors, investors, directors, and officers with respect to certain matters, including, but not limited to, losses arising out of its breach of such agreements, services to be provided by the Company, or
18


from intellectual property infringement claims made by third parties. These indemnification provisions may survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is indeterminable. The Company has never paid a material claim, nor has it been sued in connection with these indemnification arrangements. At March 31, 2024 and December 31, 2023, the Company has not accrued a liability for these indemnification arrangements because the likelihood of incurring a payment obligation, if any, in connection with these indemnification arrangements was not probable or reasonably estimable.
Note 13 – Unearned Revenue and Performance Obligations
Revenue totaling $129.6 million and $112.5 million was recognized during the quarter ended March 31, 2024 and 2023, respectively, that was previously included in the deferred revenue balance at December 31, 2023 and 2022, respectively.
Contracted but unrecognized revenue was $825.6 million at March 31, 2024, of which the Company expects to recognize approximately 58% over the next 12 months and the remainder thereafter.
Note 14 – Geographic Information
The Company disaggregates its revenue from contracts with customers by geographic location, as it believes it best depicts how the nature, amount, timing, and uncertainty of its revenues and cash flows are affected by economic factors.
The following table sets forth the Company’s revenues by geographic region (in thousands):
Quarter Ended March 31,
20242023
United States$111,407 $100,012 
International46,054 38,972 
$157,461 $138,984 
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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with the financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 23, 2024 (“Annual Report on Form 10-K”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those discussed in the section entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.
Overview
We have created comprehensive cloud-based solutions designed to transform and modernize accounting and finance operations for midsize and enterprise organizations in all industries globally. Our secure, scalable solutions transform critical processes, including financial close, intercompany, invoice-to-cash, and consolidation. By introducing software that unifies critical data and enables process orchestration and automation, we empower accounting and finance professionals to improve the integrity of their financial reporting, reduce time spent on manual work, accelerate cash flows, and redeploy resources to focus on analysis and business partnership.
At March 31, 2024, we had 387,050 individual users across 4,411 customers. Additionally, we continue to build strategic relationships with technology vendors, professional services firms, business process outsourcers, and resellers.
We are a holding company and conduct our operations through our wholly-owned subsidiary, BlackLine Systems, Inc. (“BlackLine Systems”). On September 3, 2013, we acquired BlackLine Systems, and outside investors acquired a controlling interest in us, which we refer to as the “2013 Acquisition.” The 2013 Acquisition was accounted for as a business combination under GAAP and resulted in a change in accounting basis as of the date of the 2013 Acquisition.
Our cloud-based solutions include Account Reconciliations, Transaction Matching, Task Management, Financial Reporting Analytics, Journal Entry, Variance Analysis, Compliance, Smart Close for SAP, BlackLine Cash Application, Credit & Risk Management, Collections Management, Disputes & Deductions Management, Team & Task Management, AR Intelligence, Electronic Invoicing & Payments, Intercompany Create, Intercompany Balance and Resolve, and Intercompany Net and Settle. These solutions are offered to customers as scalable solutions that support critical record-to-report and invoice-to-cash processes.
We derived approximately 95% of our revenue from subscriptions to our cloud-based software platform and approximately 5% from professional services for the quarter ended March 31, 2024. Our subscription contracts have initial non-cancellable terms of one year to three years with renewal options. The majority of new contracts in 2023 and during the quarter ended March 31, 2024 had an initial term of three years. We price our subscriptions based on a number of factors, primarily the number of users having access to the products and the number of products purchased by the customer. We typically invoice customers annually in advance for subscriptions, which is initially recorded as deferred revenue and recognized ratably over the term of the customer contract. The first year of subscription fees are typically payable within 30 days after execution of a contract, and thereafter upon renewal.
Professional services consist primarily of implementation and consulting services. With the exception of our intercompany accounting solutions acquired from FourQ, our product offerings are available for immediate use on our platform after granting access to a new customer. We typically help customers implement our solutions, and we also provide consulting services to help customers optimize the use of our products. We invoice customers for our consulting services on a time-and-materials basis and recognize that revenue as services are performed. A limited number of our customers are provided professional services for a fixed fee which we invoice in advance and is initially recorded as deferred revenue and recognized on a proportional-performance basis as the services are rendered.
We sell our solutions primarily through our direct sales force, which leverages our relationships with technology vendors, professional services firms and business process outsourcers. In particular, our solution integrates with SAP’s enterprise resource planning (“ERP”) solutions, and SAP is part of the reseller channel that we use in the ordinary course of business. SAP has the ability to resell our solutions as SAP solution-extensions (“SolEx”), for which we receive a percentage of the revenues. We also have an agreement with Google Cloud in which we collaborate with them on joint selling and go-to-market activities and bring enhanced automation solutions for finance and accounting to new and existing customers.
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Our ability to maximize the lifetime value of our customer relationships will depend, in part, on the willingness of customers to purchase additional user licenses and products from us. We rely on our sales and customer success teams to support and grow our existing customers by maintaining high customer satisfaction and educating customers on the value all our products provide.
The length of our sales cycle depends on the size of a potential customer and contract, as well as the type of solution or product being purchased. The sales cycle for our global enterprise customers is generally longer than that of our midsize customers. In addition, the length of the sales cycle tends to increase for larger contracts and for more complex, strategic products like Intercompany Financial Management. As we continue to focus on increasing our average contract size and selling more strategic products, we expect our sales cycle to lengthen and become less predictable, which could cause variability in our results for any particular period.
We have historically signed a high percentage of agreements with new customers, as well as renewal agreements with existing customers, in the fourth quarter of each year and usually during the last month of the quarter. This can be attributed to buying patterns typical in the software industry. As the terms of most of our customer agreements are measured in full year increments, agreements initially entered into during the fourth quarter or last month of any quarter will generally come up for renewal at that same time in subsequent years. This seasonality is reflected in our revenues, though the impact to overall annual or quarterly revenues is minimal due to the fact that we recognize subscription revenue ratably over the term of the customer contract.
For the quarters ended March 31, 2024 and 2023, we had revenues totaling $157.5 million and $139.0 million, respectively. We generated net income attributable to BlackLine, Inc. of $10.8 million and incurred a net loss attributable to BlackLine, Inc. of $12.0 million for the quarters ended March 31, 2024 and 2023, respectively.
Global Macroeconomic Factors
Our operating results may vary based on the impact of changes in our industry or the global economy on us or our customers. General macroeconomic conditions, such as a recession or rising inflation rates, an economic downturn in the United States (“U.S.”) or internationally, adverse business conditions and liquidity concerns, or bank failures or instability in the financial services sector, has and could continue to adversely affect demand for our products and make it difficult to accurately forecast and plan our future business activities. In recent quarters, as a result of economic uncertainty, we have seen customers delay and defer purchasing decisions, which has adversely impacted our near-term demand.
Key Metrics
We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections, and make strategic decisions.
Mar. 31, 2023Jun. 30, 2023Sep. 30, 2023Dec 31, 2023Mar. 31, 2024
Dollar-based net revenue retention rate106 %106 %105 %106 %105 %
Number of customers4,2364,2794,3684,3984,411
Number of users369,493377,585381,892386,814387,050
Dollar-based net revenue retention rate. We believe that dollar-based net revenue retention rate is an important metric to measure the long-term value of customer agreements and our ability to retain and grow our relationships with existing customers over time. We calculate dollar-based net revenue retention rate as the implied monthly subscription and support revenue at the end of a period for the base set of customers from which we generated subscription revenue in the year prior to the calculation, divided by the implied monthly subscription and support revenue one year prior to the date of calculation for that same customer base. This calculation does not reflect implied monthly subscription and support revenue for new customers added during the one-year period but does include the effect of customers who terminated during the period. We define implied monthly subscription and support revenue as the total amount of minimum subscription and support revenue contractually committed to, under each of our customer agreements over the entire term of the agreement, divided by the number of months in the term of the agreement. At March 31, 2024, our dollar-based net revenue retention rate marginally declined from the year ended December 31, 2023. Our ability to maximize the lifetime value of our customer relationships will depend, in part, on the willingness of the customer to purchase additional user licenses and products from us. We rely on our customer success and sales teams to support and grow our existing customers by maintaining high customer satisfaction and educating the customer on the value all our products provide.
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Number of customers. We believe that our ability to expand our customer base is an indicator of our market penetration and the growth of our business. We define a customer as a company that contributes to our subscription and support revenue as of the measurement date. In situations where an organization has multiple subsidiaries or divisions, each entity that is invoiced as a separate entity is treated as a separate customer. However, where an existing customer requests its invoice be divided for the sole purpose of restructuring its internal billing arrangement without any incremental increase in revenue, such customer continues to be treated as a single customer. For the quarters ended March 31, 2024 and 2023, no single customer accounted for more than 10% of our total revenues.
Number of users. Since our customers generally pay fees based on the number of users of our platform within their organization, we believe the total number of users is an indicator of the growth of our business. While the fees for the majority of the products we sell are user-based, we are seeing an increasing volume of transactions for our non-user based strategic products, such as eInvoicing & Payments, Transaction Matching, Intercompany, and BlackLine Cash Application.
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the non-GAAP measures below are useful to us and our investors in evaluating our business. These non-GAAP financial measures are useful because they provide consistency and comparability with our past performance, facilitate period-to-period comparisons of operations and facilitate comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.
Quarter Ended March 31,
20242023
(in thousands, except percentages)
GAAP gross profit$118,364 $103,713 
GAAP gross margin75.2 %74.6 %
GAAP operating income (loss)$1,748 $(15,313)
GAAP operating margin1.1 %(11.0 %)
GAAP net income (loss) attributable to BlackLine, Inc.$10,829 $(12,008)
Diluted net income (loss) per share attributable to BlackLine, Inc.$0.17 $(0.20)

Quarter Ended March 31,
20242023
(in thousands, except percentages)
Non-GAAP gross profit$124,396 $109,672 
Non-GAAP gross margin79.0 %78.9 %
Non-GAAP operating income$26,800 $15,565 
Non-GAAP operating margin17.0 %11.2 %
Non-GAAP net income attributable to BlackLine, Inc.$40,075 $25,100 
Diluted non-GAAP net income per share attributable to BlackLine, Inc.$0.54 $0.34 
Non-GAAP Gross Profit and Non-GAAP Gross Margin. Non-GAAP gross profit is defined as GAAP revenues less GAAP cost of revenue adjusted for amortization of acquired developed technology, stock-based compensation, transaction-related costs (including, but not limited to, accounting, legal, and advisory fees related to the transaction, as well as transaction-related retention bonuses). Non-GAAP gross margin is defined as non-GAAP gross profit divided by GAAP revenues. We believe that presenting non-GAAP gross profit and non-GAAP gross margin is useful to investors as it eliminates the impact of certain non-cash expenses and allows a direct comparison between periods.
Non-GAAP Income (Loss) from Operations and Non-GAAP Operating Margin. Non-GAAP income (loss) from operations is defined as GAAP income (loss) from operations adjusted for amortization of intangible assets, stock-based compensation, change in fair value of contingent consideration, transaction-related costs, legal settlement gains or costs, and restructuring costs. Non-GAAP operating margin is defined as non-GAAP income from operations divided by GAAP revenues. We believe that presenting non-GAAP income (loss) from operations and non-GAAP operating margin is useful to investors as it eliminates the impact of items that have been impacted by
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BlackLine’s acquisitions and other related costs in order to allow a direct comparison of income (loss) from operations between all periods presented.
Non-GAAP Net Income (Loss) Attributable to BlackLine and Diluted Non-GAAP Net Income (Loss) Per Share Attributable to BlackLine, Inc. Non-GAAP net income (loss) attributable to BlackLine is defined as GAAP net income (loss) attributable to BlackLine adjusted for the impact of the provision for (benefit from) income taxes related to acquisitions, amortization of intangible assets, stock-based compensation, amortization of debt issuance costs from our 0.125% Convertible Senior Notes due in 2024 (the “2024 Notes”) and 0.00% Convertible Senior Notes due in 2026 (the “2026 Notes” and, together with the 2024 Notes, the “Notes” or “convertible senior notes”), change in fair value of contingent consideration, transaction-related costs, legal settlement gains or costs, restructuring costs, and the adjustment to the redeemable non-controlling interest to the redemption amount. Diluted non-GAAP net income per share attributable to BlackLine, Inc. includes the adjustment for shares resulting from the elimination of stock-based compensation. We believe that presenting non-GAAP net income (loss) attributable to BlackLine is useful to investors as it eliminates the impact of items that have been impacted by our acquisitions and other related costs to allow a direct comparison of net income (loss) between all periods presented.
Reconciliation of Non-GAAP Financial Measures
The following table presents a reconciliation of gross profit, gross margin, operating income (loss), operating margin, and net income (loss), the most comparable GAAP measures, to non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, and non-GAAP net income:
Quarter Ended March 31,
20242023
(in thousands, except percentages)
Non-GAAP Gross Profit:
Gross profit$118,364 $103,713 
Amortization of acquired developed technology3,384 2,949 
Stock-based compensation2,596 2,797 
Transaction-related costs52 213 
Total non-GAAP gross profit$124,396 $109,672 
Gross margin75.2 %74.6 %
Non-GAAP gross margin79.0 %78.9 %
Non-GAAP Operating Income:
Operating income (loss)$1,748 $(15,313)
Amortization of intangible assets5,196 5,085 
Stock-based compensation
19,196 20,883 
Change in fair value of contingent consideration— 3,106 
Transaction-related costs216 790 
Restructuring costs444 1,014 
Total non-GAAP operating income$26,800 $15,565 
GAAP operating margin1.1 %(11.0 %)
Non-GAAP operating margin17.0 %11.2 %
Non-GAAP Net Income Attributable to BlackLine, Inc.:
Net income (loss) attributable to BlackLine, Inc.$10,829 $(12,008)
Benefit from income taxes(583)(181)
Amortization of intangible assets5,196 5,085 
Stock-based compensation19,085 20,740 
Amortization of debt issuance costs1,385 1,362 
Change in fair value of contingent consideration— 3,106 
Transaction-related costs216 790 
Restructuring costs444 1,014 
Adjustment to redeemable non-controlling interest3,503 5,192 
Total non-GAAP net income attributable to BlackLine, Inc.$40,075 $25,100 
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Results of Operations
The following table sets forth our statements of operations for each of the periods indicated:
Quarter Ended March 31,
20242023
(in thousands)
Revenues
Subscription and support$149,501 $130,426 
Professional services7,960 8,558 
Total revenues157,461 138,984 
Cost of revenues
Subscription and support32,052 28,512 
Professional services7,045 6,759 
Total cost of revenues39,097 35,271 
Gross profit118,364 103,713 
Operating expenses
Sales and marketing61,111 61,931 
Research and development25,015 27,105 
General and administrative30,046 28,976 
Restructuring costs444 1,014 
Total operating expenses116,616 119,026 
Income (loss) from operations1,748 (15,313)
Other income (expense)
Interest income15,360 10,665 
Interest expense(1,469)(1,455)
Other income, net13,891 9,210 
Income (loss) before income taxes15,639 (6,103)
Provision for income taxes869 628 
Net income (loss)14,770 (6,731)
Net income attributable to redeemable non-controlling interest438 85 
Adjustment attributable to redeemable non-controlling interest 3,503 5,192 
Net income (loss) attributable to BlackLine, Inc.$10,829 $(12,008)
Comparison of Quarters Ended March 31, 2024 and 2023
Revenues
Quarter Ended March 31,Change
20242023$%
(in thousands, except percentages)
Subscription and support$149,501 $130,426 $19,075 15 %
Professional services7,960 8,558 (598)(7 %)
Total revenues$157,461 $138,984 $18,477 13 %
March 31,
20242023
Dollar-based net revenue retention rate105 %106 %
Number of customers4,411 4,236 
Number of users387,050 369,493 

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The increase in revenues for the quarter ended March 31, 2024, compared to the quarter ended March 31, 2023, was primarily due to a net increase in the number of customers and users. The total number of customers and users at March 31, 2024, increased by 4% and 5%, respectively, as compared to March 31, 2023.
Cost of revenues
Quarter Ended March 31,Change
20242023$%
(in thousands, except percentages)
Subscription and support$32,052 $28,512 $3,540 12 %
Professional services7,045 6,759 286 %
Total cost of revenues$39,097 $35,271 $3,826 11 %
Gross margin75.2 %74.6 %
The increase in total cost of revenues for the quarter ended March 31, 2024, compared to the quarter ended March 31, 2023, was primarily due to the following:
$2.9 million increase in computer software and data center expenses due to higher spend on cloud hosting services as customers continue to migrate to the Google Cloud Platform, as well as an increase in software purchases; and
$1.0 million increase in amortization of developed technology due to net additions to software placed into service; partially offset by
$0.5 million decrease in salaries, benefits, and stock-based compensation.
Sales and marketing
Quarter Ended March 31,Change
20242023$%
(in thousands, except percentages)
Sales and marketing$61,111 $61,931 $(820)(1 %)
Percentage of total revenues38.8 %44.6 %
The decrease in sales and marketing expenses for the quarter ended March 31, 2024, compared to the quarter ended March 31, 2023, was primarily due to the following:
$3.2 million decrease in salaries, benefits, and stock-based compensation driven primarily by a decrease in headcount; partially offset by
$1.0 million increase in professional fees;
$0.6 million increase in employee events; and
$0.6 million increase in travel and entertainment to support in-person events.
Research and development 
Quarter Ended March 31,Change
20242023$%
(in thousands, except percentages)
Research and development, gross$30,573 $32,879 $(2,306)(7 %)
Capitalized internally developed software costs(5,558)(5,774)216 (4 %)
Research and development, net$25,015 $27,105 $(2,090)(8 %)
Percentage of total revenues15.9 %19.5 %
The decrease in research and development expenses for the quarter ended March 31, 2024, compared to the quarter ended March 31, 2023, was primarily due to the following:
$2.1 million decrease in salaries, benefits, and stock-based compensation driven primarily by a decrease in average salaries, partially offset by an increase in headcount; and
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$0.3 million decrease in transaction costs; partially offset by
$0.3 million increase in computer software to support business growth.
We remain committed to innovation and investing in artificial intelligence to enhance our platform and business.
General and administrative
Quarter Ended March 31,Change
20242023$%
(in thousands, except percentages)
General and administrative$30,046 $28,976 $1,070 %
Percentage of total revenues19.1 %20.8 %
The increase in general and administrative expenses for the quarter ended March 31, 2024, compared to the quarter ended March 31, 2023, was primarily due to the following:
$1.8 million increase in salaries, benefits, and stock-based compensation primarily due to an increase in average headcount and average salaries;
$1.8 million increase due to net foreign currency losses due to the strengthening of the U.S. Dollar across multiple currencies; and
$0.6 million increase in professional fees; partially offset by
$3.1 million decrease in the fair value of FourQ contingent consideration that occurred in the quarter ended March 31, 2023 (refer to “Note 6 - Fair Value Measurements”); and
$0.4 million decrease in depreciation and amortization primarily due to certain intangible assets being fully amortized.
Restructuring costs
 Quarter Ended March 31,Change
 20242023$%
 (in thousands, except percentages)
Restructuring costs$444 $1,014 $(570)(56)%
The decrease in restructuring costs during the quarter ended March 31, 2024, compared to the quarter ended March 31, 2023, was due to lower additional one-time termination benefits for the fiscal 2023 restructuring program compared to higher additional one-time termination benefits for the fiscal 2022 restructuring program in the respective periods. Refer to “Note 8 - Restructuring Costs” for additional information.
Interest income
Quarter Ended March 31,Change
20242023$%
(in thousands, except percentages)
Interest income$15,360 $10,665 $4,695 44 %
The increase in interest income during the quarter ended March 31, 2024, compared to the quarter ended March 31, 2023, was due to increased average interest rates on our investments and cash balances and, to a lesser extent, an increase in average balances.
Interest expense
Quarter Ended March 31,Change
20242023$%
(in thousands, except percentages)
Interest expense$1,469 $1,455 $14 %
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Interest expense during the quarter ended March 31, 2024, compared to the quarter ended March 31, 2023, was essentially flat and consisted of interest expense on our convertible senior notes.
Provision for income taxes
Quarter Ended March 31,Change
20242023$%
(in thousands, except percentages)
Provision for income taxes$869 $628 $241 38 %
We are subject to federal and state income taxes in the U.S. and taxes in foreign jurisdictions. For the quarter ended March 31, 2024, our annual estimated effective tax rate differed from the U.S. federal statutory rate of 21% primarily as a result of state taxes, foreign taxes, and changes in our valuation allowance for income taxes.
For the quarters ended March 31, 2024 and 2023, we recorded $0.9 million and $0.6 million in income tax expense, respectively. The increase in income tax expense for the quarter ended March 31, 2024, compared to the income tax expense for the quarter ended March 31, 2023 resulted primarily from an increase in U.S. profitability, along with changes in the mix of profitable foreign jurisdictions.
Liquidity and Capital Resources
At March 31, 2024, our principal sources of liquidity were an aggregate of $1.2 billion of cash and cash equivalents and marketable securities, which primarily consist of short-term, money market mutual funds, commercial paper, U.S. treasury securities, corporate bonds, and U.S. government agencies. We had $1.4 billion aggregate principal amount of Notes outstanding at March 31, 2024, of which $250.0 million is due within the next 12 months. We plan to and believe we are able to make all expected principal and interest payments in the next 12 months.
We believe our existing cash and cash equivalents, investments in marketable securities and cash from operations will be sufficient to meet our working capital needs, capital expenditures, and financing obligations for at least the next 12 months.
Contractual Obligations and Commitments
Notes Payable
In connection with the offering of the 2024 Notes, we entered into the 2024 Capped Calls with certain counterparties covering, subject to anti-dilution adjustments, approximately 3.4 million shares of our common stock and are generally expected to offset the potential economic dilution of our common stock up to the initial cap price. The 2024 Capped Calls have an initial strike price of $73.40 per share - subject to certain adjustments, which corresponds to the initial conversion price of the 2024 Notes - and an initial cap price of $106.76 per share, subject to certain adjustments. As of March 31, 2024, all of the 2024 Capped Calls remained outstanding.
In connection with the offering of the 2026 Notes, we entered into the 2026 Capped Calls with certain counterparties covering, subject to anti-dilution adjustments, approximately 6.9 million shares of our common stock and are generally expected to offset the potential economic dilution of our common stock up to the initial cap price. The 2026 Capped Calls have an initial strike price of $166.23 per share - subject to certain adjustments, which corresponds to the initial conversion price of the 2026 Notes - and an initial cap price of $233.31 per share, subject to certain adjustments. As of March 31, 2024, all of the 2026 Capped Calls remained outstanding.
Lease Liabilities
As of March 31, 2024, we have obligations totaling $20.1 million related to existing property and equipment leases.
Purchase Obligations
Purchase obligations represent our most significant contractual obligations in the ordinary course of business for which we have not received the related goods or services, in whole or in part. At March 31, 2024, we have $36.2 million of contractual obligations related to eight commitments, with $17.1 million payable within 12 months, and have additional contractual obligations with other vendors that are individually immaterial and which we can readily settle given our liquidity position and capital resources.
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Contingent Consideration
We are potentially obligated to pay a maximum of $73.2 million of contingent consideration between January 2022 and January 2025 related to our FourQ Acquisition if certain financial performance milestones are met. At March 31, 2024, the related liability for the FourQ Acquisition was zero.
Unrecognized Tax Liabilities
As of March 31, 2024, while we have liabilities for unrecognized tax benefits of $7.6 million, due to their nature, there is a high degree of uncertainty regarding the timing of future cash outflows and other events that extinguish these liabilities.
Letters of Credit
Commitments under letters of credit at March 31, 2024 were scheduled to expire as follows (in thousands):
 TotalLess than 1 Year1-3 Years3-5 YearsThereafter
Letters of credit$619 $171 $33 $415 $— 
Letters of credit are maintained pursuant to certain of our lease arrangements. The letters of credit remain in effect at varying levels through the terms of the related agreements.
Future Capital Requirements
Our future capital requirements will depend on many factors, including our growth rate, strategic relationships and international operations, the timing and extent of spending to support research and development efforts, future merger and acquisition activities, repurchase or refinancing of our existing indebtedness, and the continuing market acceptance of our solutions. From time to time, we have required, and may in the future require or opportunistically raise, additional equity or debt financing. Sales of additional equity or equity-linked securities could result in dilution to our stockholders. If we raise funds by borrowing from third parties, the terms of those financing arrangements would require us to incur interest expense and may include negative covenants or other restrictions on our business that could impair our operating flexibility. We can provide no assurance that financing will be available at all or, if available, that we would be able to obtain financing on terms favorable to us. If we are unable to raise additional capital when needed, we would be required to curtail our operating activities and capital expenditures, and our business operating results and financial condition would be adversely affected.
Cash Flows
The following table sets forth a summary of our cash flows for the periods indicated:
Quarter Ended March 31,
20242023
(in thousands)
Net cash provided by operating activities$50,425 $22,867 
Net cash provided by investing activities$20,990 $8,999 
Net cash used in financing activities$(10,925)$(10,233)
Net Cash Provided By Operating Activities
Our cash flows provided by operating activities are primarily influenced by our net income, as applicable, and cash generated from collections in accordance with our subscription-based revenue model wherein billings occur in advance of revenue recognition, as well as the substantial amount of non-cash charges that we incur. Non-cash activities primarily include depreciation and amortization, stock-based compensation, changes in fair value of contingent consideration, non-cash lease expense, amortization of debt issuance costs, accretion of premiums on marketable securities, and deferred taxes.
For the quarter ended March 31, 2024, cash provided by operations was $50.4 million, resulting from net non-cash expenses of approximately $24.6 million, net income of $14.8 million, and net cash flows provided as a result of changes in operating assets and liabilities of $11.0 million. The $11.0 million of net cash flows provided as a result of changes in our operating assets and liabilities reflected primarily the following:
$45.7 million decrease in accounts receivable primarily due to increased collections; and
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$2.4 million decrease in other assets due to a net decrease in prepaid commissions, partially offset by an increase in cloud computing costs.
These changes in our operating assets and liabilities were partially offset by the following:
$14.8 million decrease in accrued expenses and other current liabilities primarily due to annual bonus payments;
$11.8 million decrease in deferred revenue due to a decrease in billings resulting from a decrease in bookings;
$6.8 million decrease in accounts payable due to timing of payments;
$2.0 million net increase in prepaid expenses and other current assets related to insurance and software subscriptions; and
$1.7 million decrease in operating lease liabilities.
For the quarter ended March 31, 2023, cash provided by operations was $22.9 million, resulting from net non-cash expenses of approximately $31.2 million, less net cash flows used as a result from changes in operating assets and liabilities of $1.6 million, partially offset by our net loss of $6.7 million. The $1.6 million of net cash flows used as a result of changes in our operating assets and liabilities reflected primarily the following:
$10.7 million decrease in accrued expenses and other current liabilities primarily due to annual bonus payments;
$9.5 million decrease in accounts payable due to timing of payments;
$5.3 million increase in prepaid expenses and other current assets;
$3.3 million decrease in other long-term liabilities primarily related to the acquisition of FourQ;
$1.8 million decrease in deferred revenue; and
$1.7 million decrease in operating lease liabilities.
These changes in our operating assets and liabilities were partially offset by the following:
$30.2 million decrease in accounts receivable due to increased collections.
Net Cash Provided By Investing Activities
Our investing activities consist primarily of investments in, and maturities and sales of, marketable securities, capitalized software development costs, and capital expenditures for property and equipment.
For the quarter ended March 31, 2024, cash provided by investing activities was $21.0 million primarily as a result of the following:
$27.7 million of proceeds from maturities, net of purchases of marketable securities; and
$6.5 million for capitalized software development costs.
For the quarter ended March 31, 2023, cash provided by investing activities was $9.0 million as a result of the following:
$17.6 million of proceeds from maturities of marketable securities, net of purchases; partially offset by
$6.9 million for capitalized software development costs; and
$1.7 million in purchases of property and equipment.
Net Cash Used In Financing Activities
For the quarter ended March 31, 2024, cash used in financing activities was $10.9 million primarily for acquisitions of common stock for tax withholding obligations.
For the quarter ended March 31, 2023, cash used in financing activities was $10.2 million primarily as a result of the following:
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$12.4 million for acquisitions of common stock for tax withholding obligations, partially offset by
$2.4 million of proceeds from exercises of stock options.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with GAAP, which require us to make estimates and assumptions about future events that affect the amounts reported in our unaudited condensed consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q. During the quarter ended March 31, 2024, there were no significant changes to our critical estimates as detailed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.
Recent Accounting Pronouncements
See Note 2 - “Basis of Presentation, Significant Accounting Policies and Recently-Issued Accounting Pronouncements” contained in the “Notes to Unaudited Condensed Consolidated Financial Statements” in Item 1 of Part I of this Quarterly Report on Form 10-Q for a full description of the recent accounting pronouncements and our expectation of their impact, if any, on our results of operations and financial condition.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
We have operations both within the U.S. and internationally, and we are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate, foreign exchange, and inflation risks, as well as risks relating to changes in the general economic conditions in the countries where we conduct business. To reduce these risks, we monitor the financial condition of our customers and limit credit exposure by collecting in advance and setting credit limits as we deem appropriate. In addition, our investment strategy has historically been to invest in financial instruments that are highly liquid and readily convertible into cash for use in our operations. To date, we have not used derivative instruments to mitigate the impact of our market risk exposures. We have also not used, nor do we intend to use, derivatives for trading or speculative purposes.
Interest Rate Risk
We are exposed to market risk related to changes in interest rates.
In August 2019, we issued $500.0 million aggregate principal amount of the 2024 Notes. The 2024 Notes have a fixed annual interest rate of 0.125%; therefore, we do not have economic interest rate exposure with respect to the 2024 Notes. In March 2021, we issued $1.150 billion aggregate principal amount of the 2026 Notes. The 2026 Notes have a fixed annual interest rate of 0.0%; therefore, we do not have economic interest rate exposure with respect to the 2026 Notes. However, the fair value of the Notes is exposed to interest rate risk. Generally, the fair market value of the Notes will increase as interest rates fall and decrease as interest rates rise. In addition, the fair value of the Notes is affected by our common stock price. The fair value of the Notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines. Additionally, we carry the Notes at face value less unamortized issuance costs on our consolidated balance sheet, and we present the fair value for required disclosure purposes only.
We had cash and cash equivalents and marketable securities of $1.2 billion at March 31, 2024. Our cash equivalents and marketable securities consist of highly liquid, money market mutual funds, commercial paper, U.S. treasury securities, corporate bonds, and U.S. government agencies.
The carrying amount of our cash equivalents and marketable securities reasonably approximates fair value due to the highly liquid nature of these instruments. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs and the fiduciary control of cash and investments. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to fluctuations in interest rates, which may affect our interest income and the fair market value of our investments. Due to the short-term nature of our investment portfolio, however, we do not believe an immediate 10% increase or decrease in interest rates would have a material effect on the fair market value of our portfolio. We therefore do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.
We do not believe our cash equivalents and marketable securities have significant risk of default or illiquidity. While we believe our cash equivalents and marketable securities do not contain excessive risk, we cannot provide absolute assurance that in the future, our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits. We cannot be assured that we will not experience losses on these deposits.
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Foreign Currency Risk
While we primarily transact with customers in the U.S. Dollar, we also transact in foreign currencies, including the Australian Dollar, British Pound, Canadian Dollar, Euro, Japanese Yen, Romanian Leu, and Singapore Dollar due to foreign operations and customer sales. We expect to continue to grow our foreign operations and customer sales. Our international subsidiaries maintain certain asset and liability balances that are denominated in currencies other than the functional currencies of these subsidiaries, which is the U.S. Dollar for all international subsidiaries, with the exception of our Japanese subsidiary, for which the Japanese Yen is the functional currency. Changes in the value of foreign currencies relative to the U.S. Dollar can result in fluctuations in our total assets, liabilities, revenue, operating expenses, and cash flows. The effect of a hypothetical 10% increase or decrease in foreign currency exchange rates applicable to our business would have reduced by $3.4 million or increased by $3.4 million, respectively, our cash balances at March 31, 2024.
As our international operations grow, our risks associated with fluctuation in currency rates will become greater, and we will continue to reassess our approach to managing this risk. In addition, currency fluctuations or a weakening U.S. Dollar can increase the costs of our international expansion. To date, we have not entered into any foreign currency hedging contracts, since exchange rate fluctuations have not had a material impact on our operating results and cash flows. Based on the current level of foreign operations and customer sales, we do not plan on engaging in hedging activities in the near future.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or “the Exchange Act” means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms; and that such information is accumulated and communicated to the company’s management, including its principal executive officers and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officers and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures at March 31, 2024, the last day of the period covered by this Quarterly Report. Based on this evaluation, our principal executive officers and principal financial officer have concluded that, at March 31, 2024, our disclosure controls and procedures were effective at a reasonable assurance level.
Limitations on the Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and our management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures and internal control over financial reporting also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be subject to legal proceedings, including claims, litigation, investigations, and inquiries arising in the ordinary course of business. In addition, from time to time, third parties may assert intellectual property infringement claims against