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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 September 30, 2022
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 Number)
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 October 28, 2022 was 59,776,873.




BlackLine, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended September 30, 2022

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 and expanding our sales organization; 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 COVID-19 pandemic and the related responses by governments and private industry on our business and financial condition, as well as that of our customers and partners; 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.,” “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 1 – Financial Information
Item 1.    Financial Statements
BLACKLINE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands) 
September 30,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$190,514 $539,739 
Marketable securities (amortized cost of $858,271 and $658,886 at September 30, 2022 and December 31, 2021, respectively)
855,406 658,964 
Accounts receivable, net of allowances for credit losses of $2,284 and $2,923 at September 30, 2022 and December 31, 2021, respectively
108,792 125,130 
Prepaid expenses and other current assets22,363 23,855 
Total current assets1,177,075 1,347,688 
Capitalized software development costs, net30,452 23,547 
Property and equipment, net 20,636 16,321 
Intangible assets, net96,045 36,195 
Goodwill443,861 289,710 
Operating lease right-of-use assets15,265 16,264 
Other assets94,324 87,853 
Total assets$1,877,658 $1,817,578 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$5,534 $7,471 
Accrued expenses and other current liabilities51,144 50,930 
Deferred revenue, current245,155 242,429 
Finance lease liabilities, current981 373 
Operating lease liabilities, current5,253 4,936 
Contingent consideration, current6,514 16,438 
Total current liabilities314,581 322,577 
Finance lease liabilities, noncurrent1,050 824 
Operating lease liabilities, noncurrent9,953 13,248 
Convertible senior notes, net1,382,914 1,114,239 
Contingent consideration, noncurrent56,052 4,294 
Deferred tax liabilities, net5,274 8,175 
Deferred revenue, noncurrent415 362 
Other long-term liabilities4,893 124 
Total liabilities1,775,132 1,463,843 
Commitments and contingencies (Note 12)
Redeemable non-controlling interest (Note 3)24,595 28,699 
Stockholders' equity:
Common stock598 590 
Additional paid-in capital363,782 625,883 
Accumulated other comprehensive income (loss)(3,080)298 
Accumulated deficit(283,369)(301,735)
Total stockholders' equity77,931 325,036 
Total liabilities, redeemable non-controlling interest, and stockholders' equity$1,877,658 $1,817,578 
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 September 30,Nine Months Ended September 30,
2022202120222021
Revenues
Subscription and support$126,081 $102,924 $360,289 $289,749 
Professional services8,187 6,478 22,692 20,631 
Total revenues134,268 109,402 382,981 310,380 
Cost of revenues
Subscription and support25,544 17,948 75,495 50,540 
Professional services6,882 6,489 20,527 19,359 
Total cost of revenues32,426 24,437 96,022 69,899 
Gross profit101,842 84,965 286,959 240,481 
Operating expenses
Sales and marketing64,540 48,799 190,567 146,410 
Research and development27,721 18,843 80,871 56,611 
General and administrative31,000 11,372 74,997 59,886 
Total operating expenses123,261 79,014 346,435 262,907 
Income (loss) from operations(21,419)5,951 (59,476)(22,426)
Other income (expense)
Interest income4,387 231 6,620 412 
Interest expense(1,482)(16,110)(4,386)(46,582)
Other income (expense), net2,905 (15,879)2,234 (46,170)
Loss before income taxes(18,514)(9,928)(57,242)(68,596)
Provision for (benefit from) income taxes474 (210)(12,852)(78)
Net loss(18,988)(9,718)(44,390)(68,518)
Net loss attributable to redeemable non-controlling interest(344)(252)(468)(733)
Adjustment attributable to non-controlling interest 1,375 4,275 (3,227)10,366 
Net loss attributable to BlackLine, Inc.$(20,019)$(13,741)$(40,695)$(78,151)
Basic net loss per share attributable to BlackLine, Inc.$(0.34)$(0.23)$(0.68)$(1.34)
Shares used to calculate basic net loss per share59,69558,508 59,422 58,196 
Diluted net loss per share attributable to BlackLine, Inc.$(0.34)$(0.23)$(0.68)$(1.34)
Shares used to calculate diluted net loss per share59,695 58,508 59,422 58,196 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5


BLACKLINE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
(in thousands)
Quarter Ended September 30,Nine Months Ended September 30,
2022202120222021
Net loss$(18,988)$(9,718)$(44,390)$(68,518)
Other comprehensive income (loss):
Net change in unrealized gains (losses) on marketable securities, net of tax of $0 for the quarters and nine months ended September 30, 2022 and 2021
(2,052)(81)(2,942)(111)
Foreign currency translation(147)5 (845)(199)
Other comprehensive loss(2,199)(76)(3,787)(310)
Comprehensive loss(21,187)(9,794)(48,177)(68,828)
Less comprehensive loss attributable to redeemable non-controlling interest:
Net loss attributable to redeemable non-controlling interest (344)(252)(468)(733)
Foreign currency translation attributable to redeemable non-controlling interest(71)11 (409)(91)
Comprehensive loss attributable to redeemable non-controlling interest(415)(241)(877)(824)
Comprehensive loss attributable to BlackLine, Inc.$(20,772)$(9,553)$(47,300)$(68,004)
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 except share data)
Quarter Ended September 30, 2022
Common StockAdditional
Paid-in
Accumulated
Other
Comprehensive
Accumulated
SharesAmountCapitalLossDeficitTotal
Balance at June 30, 202259,573 $596 $344,264 $(952)$(264,725)$79,183 
Stock option exercises8511,2471,248
Vesting of restricted stock units11811
Acquisition of common stock for tax withholding obligations(1,864)(1,864)
Stock-based compensation21,51021,510
Other comprehensive income(2,128)(2,128)
Net loss attributable to BlackLine, Inc., including adjustment to redeemable non-controlling interest(1,375)(18,644)(20,019)
Balance at September 30, 202259,776$598 $363,782 $(3,080)$(283,369)$77,931 

Nine Months Ended September 30, 2022
Common StockAdditional
Paid-in
Accumulated
Other
Comprehensive
Accumulated
SharesAmountCapitalIncome (Loss)DeficitTotal
Balance at December 31, 202158,984 $590 $625,883 $298 $(301,735)$325,036 
Cumulative-effect adjustment related to adoption of ASU 2020-06, net of tax— — (324,418)— 62,288 (262,130)
Balance at January 1, 202258,984590 301,465 298 (239,447)62,906 
Stock option exercises2022 3,662 — — 3,664 
Vesting of restricted stock units4925  — — 5 
Issuance of common stock through employee stock purchase plan98 1 4,465 — — 4,466 
Acquisition of common stock for tax withholding obligations— — (7,866)—  (7,866)
Stock-based compensation— — 58,829 —  58,829 
Other comprehensive loss— — — (3,378)— (3,378)
Net loss attributable to BlackLine, Inc., including adjustment to redeemable non-controlling interest— — 3,227 — (43,922)(40,695)
Balance at September 30, 202259,776 $598 $363,782 $(3,080)$(283,369)$77,931 
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Quarter Ended September 30, 2021
Common StockAdditional
Paid-in
Accumulated
Other
Comprehensive
Accumulated
SharesAmountCapitalIncome (Loss)DeficitTotal
Balance at June 30, 202158,402$584 $596,183 $244 $(259,970)$337,041 
Stock option exercises9612,6272,628
Vesting of restricted stock units14411
Acquisition of common stock for tax withholding obligations(2,713)(2,713)
Stock-based compensation17,37217,372
Equity component of the 2026 convertible senior notes, net of issuance costs and tax239 239 
Other comprehensive income(87)(87)
Net loss attributable to BlackLine, Inc., including adjustment to redeemable non-controlling interest(4,275)(9,466)(13,741)
Balance at September 30, 202158,642$586 $609,433 $157 $(269,436)$340,740 

Nine Months Ended September 30, 2021
Common StockAdditional
Paid-in
Accumulated
Other
Comprehensive
Accumulated
SharesAmountCapitalIncome (Loss)DeficitTotal
Balance at December 31, 202057,682 $577 $622,768 $376 $(201,651)$422,070 
Stock option exercises291 3 7,671 7,674 
Vesting of restricted stock units60555
Issuance of common stock through employee stock purchase plan6415,1965,197
Acquisition of common stock for tax withholding obligations(12,649)(12,649)
Stock-based compensation50,12350,123
Equity component of partial repurchase of 2024 convertible senior notes(219,284)(219,284)
Equity component of 2026 convertible senior notes, net of issuance costs and tax268,324268,324
Purchase of capped calls(102,350)(102,350)
Other comprehensive income(219)(219)
Net loss attributable to BlackLine, Inc., including adjustment to redeemable non-controlling interest(10,366)(67,785)(78,151)
Balance at September 30, 202158,642$586 $609,433 $157 $(269,436)$340,740 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8


BLACKLINE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Nine Months Ended September 30,
20222021
Cash flows from operating activities
Net loss attributable to BlackLine, Inc.$(40,695)$(78,151)
Net loss and adjustment attributable to redeemable non-controlling interest (Note 3)(3,695)9,633 
Net loss(44,390)(68,518)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization30,986 20,175 
Change in fair value of contingent consideration(14,113)(3,426)
Amortization of debt discount and issuance costs4,119 39,272 
Stock-based compensation57,410 48,789 
Loss on extinguishment of convertible senior notes 7,012 
Noncash lease expense4,186 3,387 
Accretion of purchase discounts on marketable securities, net(3,326)(158)
Net foreign currency (gains) losses(1,463)478 
Deferred income taxes(14,695)40 
Provision for (benefit from) credit losses85 (55)
Changes in operating assets and liabilities:
Accounts receivable18,321 5,436 
Prepaid expenses and other current assets2,239 1,646 
Other assets(6,355)(13,609)
Accounts payable (4,571)(985)
Accrued expenses and other current liabilities(612)3,665 
Deferred revenue2,548 18,672 
Operating lease liabilities(5,329)(3,854)
Lease incentive receipts653  
Other long-term liabilities4,566  
Net cash provided by operating activities30,259 57,967 
Cash flows from investing activities
Purchases of marketable securities(1,171,808)(1,107,908)
Proceeds from maturities of marketable securities975,750 484,209 
Capitalized software development costs(14,952)(11,240)
Purchases of property and equipment(9,742)(5,197)
Acquisition, net of cash acquired(157,738) 
Net cash used in investing activities(378,490)(640,136)
Cash flows from financing activities
Proceeds from issuance of convertible senior notes, net of issuance costs 1,128,794 
Partial repurchase of convertible senior notes (432,230)
Purchase of capped calls related to convertible senior notes (102,350)
Principal payments under finance lease obligations(380) 
Proceeds from exercises of stock options3,669 7,679 
Proceeds from employee stock purchase plan4,466 5,197 
Acquisition of common stock for tax withholding obligations(7,866)(12,649)
Financed purchases of property and equipment(84)(549)
Net cash provided by (used in) financing activities(195)593,892 
Effect of foreign currency exchange rate changes on cash, cash equivalents, and restricted cash(833)(201)
Net increase (decrease) in cash, cash equivalents, and restricted cash(349,259)11,522 
Cash, cash equivalents, and restricted cash, beginning of period539,991 367,913 
Cash, cash equivalents, and restricted cash, end of period$190,732 $379,435 
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets
Cash and cash equivalents at end of period$190,514 $378,977 
Restricted cash included within prepaid expenses and other current assets at end of period 203 
Restricted cash included within other assets at end of period218 255 
Total cash, cash equivalents, and restricted cash at end of period shown in the consolidated statements of cash flows$190,732 $379,435 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9


BLACKLINE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SUPPLEMENTAL CASH FLOWS DISCLOSURE
(in thousands)
Nine Months Ended September 30,
20222021
Non-cash financing and investing activities
Adjustment for adoption of ASU 2020-06$262,130 $ 
Estimated fair value of contingent consideration$55,947 $ 
Stock-based compensation capitalized for software development$1,675 $1,409 
Capitalized software development costs included in accounts payable and accrued expenses and other current liabilities at end of period$1,150 $890 
Purchases of property and equipment included in accounts payable and accrued expenses and other current liabilities at end of period$263 $211 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10


BLACKLINE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Company Overview
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 financial close process including account reconciliations, variance analysis of account balances, journal entry capabilities, and certain types of data matching capabilities.

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."

On October 2, 2020, the Company acquired Rimilia Holdings Ltd. (“Rimilia”), which is referred to as the “Rimilia Acquisition.”

On January 26, 2022, the Company acquired FourQ Systems, Inc. (“FourQ”), hereinafter referred to as the “FourQ Acquisition.” The primary purpose of the FourQ Acquisition was to enhance our existing intercompany accounting automation capabilities by driving end-to-end automation of traditionally manual intercompany accounting processes.
The Company is headquartered in Woodland Hills, California and has offices in Pleasanton, California, as well as 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, 2021, which was filed with the Securities and Exchange Commission (“SEC”) on February 25, 2022 and as amended in the Annual Report on Form 10-K/A filed on March 24, 2022. 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, 2021 was derived from audited financial statements, but does not include all disclosures required by GAAP. The operating results for the quarter and nine months ended September 30, 2022 are not necessarily indicative of the results expected for the full year ending December 31, 2022.
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.
The extent to which COVID-19 impacts the Company’s business and financial results will depend on numerous continuously evolving factors including, but not limited to, the magnitude and duration of COVID-19, including resurgences; the impact on the Company’s employees; the extent to which it will impact worldwide macroeconomic conditions, as well as variability in such recovery across different geographies, industries, and markets; and governmental and business reactions to the pandemic. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information
11


reasonably available to the Company and the unknown future impacts of COVID-19 and macroeconomic conditions at September 30, 2022 and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s allowance for credit losses and doubtful accounts, 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 at and for the quarter and nine months ended September 30, 2022, the Company’s future assessment of the magnitude and duration of COVID-19 and other factors could result in material impacts to the Company’s condensed 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, 2021. There have been no material changes to the Company’s significant accounting policies except for the adoption of ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, as discussed below and the accounting for acquired deferred tax liabilities in a business combination as discussed in "Note 10 - Income Taxes".
Recently-adopted accounting pronouncements
In August 2020, the FASB issued ASU No. 2020-06. This standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. For public business entities, it is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years using the fully retrospective or modified retrospective method. The Company adopted the provisions of the new standard effective January 1, 2022 using the modified retrospective method, which resulted in an adjustment of $324.4 million, net of tax of $2.4 million to reclassify the remaining balance of the conversion feature recorded in additional paid in capital to convertible debt for $262.1 million and retained earnings for $62.3 million. Accordingly, the Company no longer carries an equity component of the convertible notes.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This standard addresses diversity in practice and inconsistency related to recognition of an acquired contract liability, and payment terms and their effect on subsequent revenue recognized by the acquirer. For public business entities, it is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Entities should apply the provisions of the new standard prospectively to business combinations occurring on or after the effective date of the standard. Early adoption is permitted, including adoption in an interim period. The Company adopted the provisions of the new standard effective January 1, 2022. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.
Recently-issued accounting pronouncements not yet adopted
In January 2022, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2022-01, Derivatives and Hedging, which expands the scope of the portfolio layer method to include non-prepayable financial assets, and provides additional guidance on the accounting for and disclosure of hedge basis adjustments that are applicable to the portfolio layer method. For public business entities, it is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company has not used derivative instruments to mitigate the impact of our market risk exposures. The Company has not adopted, nor does it intend to early adopt, the provisions of the new standard and does not expect it to have a material impact on the Company’s consolidated financial statements.
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 a Japanese subsidiary (“BlackLine K.K.”) of the Company that is focused on the sale of the Company's products in Japan. In October 2018, the Company initially contributed approximately $4.5 million in cash in exchange for 51% of the outstanding common stock of BlackLine K.K. As the Company controls a majority stake in BlackLine K.K., the entity has been consolidated.
12


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 unaudited condensed consolidated balance sheets, and the balance is reported at the greater of the initial carrying amount adjusted for the redeemable non-controlling interests 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.
The following table summarizes the activity in the redeemable non-controlling interest for the periods indicated below:
Quarter Ended September 30,Nine Months Ended September 30,
2022202120222021
Balance at beginning of period$23,635 $18,032 $28,699 $12,524 
Net loss attributable to redeemable non-controlling interest (excluding adjustment to non-controlling interest)(344)(252)(468)(733)
Foreign currency translation(71)(6)(409)(108)
Adjustment to redeemable non-controlling interest1,375 4,275 (3,227)10,366 
Balance at end of period$24,595 $22,049 $24,595 $22,049 

Note 4 — Business Combinations
Acquisition of FourQ
On January 26, 2022 the Company completed the FourQ Acquisition for cash consideration of $160.2 million payable at the closing of the acquisition with additional cash payments of up to $73.2 million payable upon certain earnout conditions being met. The FourQ Acquisition enhances the Company's existing intercompany accounting automation capabilities by driving end-to-end automation of traditionally manual intercompany accounting processes. The Company incurred transaction-related costs, which include, but are not limited to, fees for accounting, legal, and advisory services, of less than $0.1 million and $3.4 million during the quarter and nine months ended September 30, 2022, respectively. The transaction-related costs were expensed as incurred.
The contingent consideration was classified as a liability and included in contingent consideration on the accompanying condensed consolidated balance sheet. It will be remeasured on a recurring basis at fair value. To estimate the fair value of the contingent consideration liability, management utilized a Monte Carlo simulation model to value the earnout based on the likelihood of reaching firm-specific targets. Significant inputs used in the fair value measurement of contingent consideration are 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, as well as the discount rate. At January 26, 2022, the fair value of the contingent consideration liability was $55.9 million.
The Company accounted for the transaction as a business combination using the acquisition method of accounting. The total purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date. The purchase price allocation is preliminary.

The purchase consideration and major classes of assets and liabilities to which the Company allocated the total fair value of purchase consideration of $214.2 million were as follows (in thousands):
13



Cash consideration$160,224 
Post-acquisition working capital adjustment(635)
Contingent consideration55,947 
Less: One-time expense related to accelerated vesting(1,322)
Purchase consideration$214,214 
Cash and cash equivalents$1,164 
Accounts receivable, net1,853 
Prepaid expenses and other current assets410 
Other assets143 
Property and equipment659 
Intangible assets 74,400 
Goodwill154,151 
Accounts payable(1,537)
Accrued liabilities(2,585)
Deferred revenue(231)
Deferred tax liabilities, net(14,213)
Total consideration$214,214 
The Company believes the amount of goodwill resulting from the acquisition is primarily attributable to increased offerings to customers, and enhanced opportunities for growth and innovation. The goodwill resulting from the acquisition is not tax deductible.
To determine the estimated fair value of intangible assets acquired, the Company engaged a third-party valuation specialist to assist management. All estimates, key assumptions, and forecasts were either provided by, or reviewed by the Company. While the Company chose to utilize a third-party valuation specialist for assistance, the fair value analysis and related valuations reflect the conclusions of the Company and not those of any third party. The fair value measurements of the intangible assets were based primarily on significant unobservable inputs and thus represent a Level 3 measurement as defined in ASC 820. The acquired intangible asset categories, fair value, and amortization periods, were as follows:
Amortization
Period
Fair Value
(in thousands)
Developed technology7$64,900 
Customer relationships39,500 
$74,400 
The weighted average lives of intangible assets at the acquisition date was 6.5 years.
The identified intangible assets, developed technology and customer relationships, were valued as follows:
Developed technology – The Company valued the finite-lived developed technology using the multi-period excess earnings model ("MPEEM") under the income approach. This method estimates an intangible asset’s value based on the present value of the incremental after-tax cash flows attributable to the intangible asset. The Company applied judgment which involves the use of significant assumptions with respect to the discount rate, obsolescence rate, revenue forecasts, research and development for future technology, and EBITDA forecasts.
Customer relationships – The Company valued the finite-lived customer relationships using the differential cash flow (with-and-without) model. This method assumes that the value of the intangible asset is equal to the difference between the present value of the prospective cash flows with the intangible asset in place and the
14


present value of the prospective cash flows without the intangible asset. The Company applied judgment, which involved the use of significant assumptions with respect to the discount rate and the customer ramp-up rate.

The revenue and earnings of the acquired business were included in the Company’s results since the acquisition date and are not material to the Company’s consolidated financial results for the quarter and nine months ended September 30, 2022. Pro forma revenues and results of operations for this acquisition have not been presented as the impact on the Company’s consolidated financial statements would be immaterial.
Note 5 – Intangible Assets and Goodwill
The carrying value of intangible assets was as follows (in thousands):
September 30, 2022
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Trade name$15,977 $(14,514)$1,463 
Developed technology129,258 (51,452)77,806 
Customer relationships26,089 (10,859)15,230 
Defensive patent2,333 (787)1,546 
$173,657 $(77,612)$96,045 
December 31, 2021
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Trade name$15,977 $(13,317)$2,660 
Developed technology64,358 (43,148)21,210 
Customer relationships16,589 (6,046)10,543 
Defensive patent2,333 (551)1,782 
$99,257 $(63,062)$36,195 
The following table represents the changes in goodwill (in thousands):
Balance at December 31, 2021$289,710 
Additions from acquisitions154,151 
Balance at September 30, 2022
$443,861 
Note 6 – 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):
September 30, 2022
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Marketable securities
U.S. treasury securities$386,580 $10 $(1,646)$384,944 
Corporate bonds73,569 603 (112)74,060 
Commercial paper259,954  (952)259,002 
U.S. government agencies138,168  (768)137,400 
$858,271 $613 $(3,478)$855,406 

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December 31, 2021
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Marketable securities
Corporate bonds$74,144 $346 $(10)$74,480 
Commercial paper584,742  (258)584,484 
$658,886 $346 $(268)$658,964 
Refer to "Note 7 - 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 $2.8 million and $3.3 million for the quarter and nine months ended September 30, 2022 and $0.1 million and $0.2 million for the quarter and nine months ended September 30, 2021, respectively.
Net gains and losses are determined using the specific identification method. During the quarters and nine months ended September 30, 2022 and 2021, 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 $725.6 million and $379.7 million, and $3.5 million and $0.3 million of unrealized losses, at September 30, 2022 and December 31, 2021, respectively. At September 30, 2022, there were no marketable securities in a continuous loss position for greater than 12 months.
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 September 30, 2022 or December 31, 2021.
The Company’s marketable securities as of September 30, 2022 have a contractual maturity of less than 1 year.
Other Assets
Deferred customer contract acquisition costs are included in other assets in the accompanying condensed consolidated balance sheets and totaled $84.9 million and $80.0 million at September 30, 2022 and December 31, 2021, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities were comprised of the following (in thousands):
September 30,
2022
December 31,
2021
Accrued salaries and employee benefits$32,646 $32,156 
Accrued income and other taxes payable6,885 9,770 
Other accrued expenses and current liabilities11,613 9,004 
$51,144 $50,930 

Note 7 – 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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September 30, 2022
Level 1Level 2Level 3Total
Cash equivalents
Money market funds$87,479 $ $ $87,479 
Commercial paper 68,600  68,600 
Marketable securities
U.S. treasury securities384,944 384,944 
Corporate bonds 74,06074,060 
    Commercial paper259,002259,002 
U.S. government agencies137,400137,400 
Total assets$472,423 $539,062 $ $1,011,485 
Liabilities
Contingent consideration$ $ $62,566 $62,566 
Total liabilities$ $ $62,566 $62,566 

December 31, 2021
Level 1Level 2Level 3Total
Cash equivalents
Money market funds$432,110 $ $ $432,110 
Marketable securities
Corporate bonds 74,480  74,480 
Commercial paper 584,484  584,484 
Total assets$432,110 $658,964 $ $1,091,074 
Liabilities
Contingent consideration$