Earnings call transcript: ON24 Q1 2025 shows mixed results with EPS miss

ON24 Inc. (TICKER:ONTF) reported its first-quarter 2025 financial results, revealing a mixed performance with a notable earnings per share (EPS) miss. The company’s actual EPS came in at -$0.01, falling short of the forecasted $0.02. Despite this shortfall, ON24’s stock saw a slight uptick of 0.85% in aftermarket trading, closing at $4.72. The revenue for the quarter was $34.7 million, slightly above the forecast of $34.28 million. According to InvestingPro data, the company maintains a strong gross profit margin of 74.6% and is currently trading at a low revenue valuation multiple. InvestingPro has identified 10 additional key investment tips for ON24, available to subscribers.

Key Takeaways

• ON24 missed EPS expectations by $0.03, reporting a negative EPS.
• Revenue slightly exceeded forecasts, totaling $34.7 million.
• The stock price increased modestly by 0.85% in aftermarket trading.
• Positive free cash flow was maintained for the fifth consecutive quarter.
• The company is expanding its AI capabilities and customer base.

Company Performance

ON24’s performance in Q1 2025 reflects ongoing challenges in meeting earnings expectations, despite achieving positive free cash flow for the fifth consecutive quarter. The company’s revenue of $34.7 million marks a slight increase over forecasts, though core platform revenue fell by 7% year-over-year. With a current ratio of 2.59 and more cash than debt on its balance sheet, ON24 maintains strong financial flexibility as it navigates macroeconomic uncertainties while focusing on diversifying its customer base beyond traditional technology and manufacturing verticals. InvestingPro’s Fair Value analysis suggests the stock may be undervalued at current levels.

Financial Highlights

• Total revenue: $34.7 million, slightly above forecast
• Core platform revenue: $34.2 million, a 7% year-over-year decrease
• EPS: -$0.01, missing the forecast of $0.02
• Positive free cash flow: $1.9 million
• Cash provided by operations: $3.4 million

Earnings vs. Forecast

ON24’s EPS of -$0.01 was a significant miss compared to the forecast of $0.02. This shortfall represents a $0.03 deviation from expectations, underscoring the company’s ongoing difficulty in achieving profitability. However, the revenue of $34.7 million slightly exceeded the expected $34.28 million, offering a positive note amidst the earnings miss.

Market Reaction

Following the earnings announcement, ON24’s stock experienced a modest increase, closing at $4.72 in aftermarket trading, up 0.85% from the previous close. This slight uptick suggests a neutral to slightly positive investor sentiment, likely influenced by the company’s operational improvements and continued positive cash flow. InvestingPro data shows the stock has declined significantly over the past six months, down 27.5%, potentially presenting an opportunity for value investors. A comprehensive analysis of ON24’s investment potential is available in the Pro Research Report, which provides detailed insights into the company’s fundamentals and growth prospects.

Outlook & Guidance

ON24 has set a conservative outlook for the upcoming quarters, citing macroeconomic uncertainties. The company projects Q2 2025 core platform revenue in the range of $33.8 million to $34.4 million and anticipates positive adjusted EBITDA for the quarter and the full year. The focus remains on maintaining positive free cash flow throughout 2025.

Executive Commentary

CEO Shiraz Shiran remarked, "We are very close to turning this number positive," reflecting optimism about future profitability. He also noted, "We can’t control the macro. But in the immediate term, like most businesses, we’ve had to add another layer of risk to our projections for 2025." CFO Steve Vattoni emphasized the company’s commitment to long-term goals, stating, "We remain strongly committed to our long-term goal of generating double-digit top-line revenue growth and double-digit EBITDA margins."

Risks and Challenges

• Macroeconomic uncertainty continues to pose a risk to financial projections.
• The decline in core platform revenue highlights potential challenges in maintaining growth.
• The company’s reliance on expanding AI capabilities could face competitive pressures.
• Diversification efforts beyond traditional verticals may encounter market resistance.
• Maintaining positive free cash flow amidst economic headwinds remains a priority.

Q&A

During the earnings call, analysts inquired about the potential trough in ARR for the $100K customer cohort and the company’s conservative guidance approach. Executives also elaborated on ON24’s AI strategy and its plans for product innovation, as well as efforts to diversify its vertical market presence.

Full transcript - ON24 Inc (ONTF) Q1 2025:

Conference Operator: Good day, everyone, and welcome to the ON24 Q1 twenty twenty five Conference Call. At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the question and answer session. Please note this call may be recorded and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Emily Greenstein, Investor Relations.

Please go ahead.

Emily Greenstein, Investor Relations, ON24: Thank you. Hello, and good afternoon, everyone. Welcome to ON24’s first quarter twenty twenty five earnings conference call. On the call with me today are Shiraz Shiran, Co Founder and CEO of ON24 and Steve Vattoni, Chief Financial Officer of ON24. Before we begin, I would like to remind everyone that some information provided during this call will include forward looking statements regarding future events and financial performance, including guidance for the second quarter and full fiscal year 2025 as well as certain second quarter and full year non GAAP projections.

These forward looking statements are subject to known and unknown risks and uncertainties that can adversely affect ON24’s future results and cause these forward looking statements to be inaccurate, including our ability to grow our revenue, attract new customers and expand sales to existing customers the success of our new products and capabilities, other statements regarding our ability to achieve our business strategies, growth or other future events or conditions, such as the impact of adverse economic conditions and macroeconomic deterioration. ON24 cautions that these statements are not guarantees of future performance. All forward looking statements made today reflect our current expectations only, and we undertake no obligation to update any statement to reflect the events that occur after this call. Please refer to the company’s periodic SEC filings and today’s financial press release for factors that could cause our actual results to differ materially from any forward looking statements. We’d also like to point out that on today’s call, we will report both GAAP and non GAAP results.

We use these non GAAP financial measures to evaluate our ongoing operations and for internal planning and forecasting purposes. Non GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP. To see the reconciliations of these non GAAP financial measures, please refer to today’s financial press release. I will now turn the call over to Shirat.

Shiraz Shiran, Co-Founder and CEO, ON24: Thank you, and welcome, everyone, to the ON24 first quarter twenty twenty five earnings call. I appreciate you joining us today. With me is Steve Vatuani, our Chief Financial Officer, who will be sharing details on our Q1 performance shortly. Before we dive into the numbers, I’d like to take a moment to highlight a few key driving forces to be mindful of as we move through 2025. Constant innovation is mission critical at ON twenty four.

In this quarter, we’ll continue to roll out exciting AI innovation behind our intelligent engagement platform roadmap. You’ll see exciting product advancements around AI powered content nurture, hyper personalization, multi language capability, efficiency driven AI agents, and AI enabled performance insights. At the same time, we recognize we are operating in a time of macro uncertainty where customer buying decisions and outcomes are more measured. We have navigated through this type of environment before, and we know that in times of uncertainty, it is even more critical to focus on the customer. So we’ve doubled down on our commitment to customer satisfaction, engagement, and retention, ensuring we’re delivering measurable value for our clients at every stage of the journey with ON twenty four.

As we look to help our customers do more with less, we will sharpen our focus on ongoing product innovation and platform extensibility, particularly through AI powered features and enterprise grade capabilities. These enhancements deepen the impact of our platform while also enabling us to better execute on our value added sales strategy, expanding within our existing customer base by aligning with their evolving needs and long term customer engagement goals. From the rollout of AI powered analytics and content engine, ACE, to new product innovations, enterprise expansion wins, and improving customer retention trends, we are reinforcing ON24’s position as the intelligent engagement platform of choice for global enterprises and laying the foundation for sustainable, profitable growth. Our results for Q1 demonstrate our improving gross retention profile, operating expense discipline, and cash flow improvement. Revenue from our core platform including services was 34,200,000.0 and total revenue including virtual conference was $34,700,000.

In terms of ARR, we ended the quarter with hundred and 25,900,000.0 of core platform ARR and total ARR was hundred and $28,200,000. From a cash flow perspective, we drove positive free cash flow for the fifth consecutive quarter, and we remain committed to a long term profitability target of generating double digit EBITDA margins. I’d like to highlight some areas where we have been affecting change and improved our business. First, we made meaningful progress in accelerating our enterprise focused go to market initiatives. Under new North America sales leadership, we delivered the best enterprise new logo performance in the last five quarters.

Specifically in q one, we saw continued win back momentum with boomerang customers the largest number of customers and largest dollar value of ARR in the last five quarters. We continue to drive our AI powered innovation product roadmap, which I will discuss in more detail shortly. At the end of q one, low teens percentage of our customers are paying for AI powered ACE products. Customer retention measured by in period gross retention improved sequentially from last quarter and was at the highest level we’ve seen in the last four years. As we move ahead in 2025, we are focused on three core areas, AI innovation, improved enterprise go to market execution, and a commitment to positive cash flow.

Starting with product innovation, you continue to see a steady and exciting stream of AI advancements. AI is fundamentally changing sales and marketing, and our customers trust us to help bring their engagement strategies into the AI era. Our product development focus is based upon ON twenty four’s five core pillars, all of which are directed towards enabling our customers to power positive business outcomes, achieve greater cost efficiency, and deliver massive enterprise grade scalability. Let’s briefly touch on these five pillars. The first is our AI powered content and nurture, which allows customers to leverage the on 24 platform with AI powered analytics and content engine, ACE, to engage their audience in an entirely new way with experiences that are intelligent and personalized and content that is always on.

This not only accelerates content creation and execution, but also scales reach, ultimately propelling consistent pipeline growth for our customers. Second, we are introducing Entrepreneur IQ, intelligent agents to expand the capability of our existing On 24 AI powered ACE so participants can minimize manual repetitive tasks like event QA handling and others. We believe every event can become a data driven, highly unique experience that keeps audiences engaged. Third, our platform’s personalization capabilities allow customers to dynamically customize even experiences based on audience behaviors and to deliver personalized certifications and continued education programs that align with audience needs and regulatory requirements. Our fourth pillar leverages the platform’s AI capabilities to provide deep performance insights that allow our customers go to market teams to capitalize on On twenty four’s first party engagement data to make data driven decisions that drive growth.

And lastly, our new multilingual capability unlocks global engagement. Now customers can automatically localize event registration and activation pages, translate post event recording, and generate derivative content including ebooks, social posts, blogs, key takeaways, transcripts, and more. This enables global enterprises to scale their efforts and drive faster results globally. The second core area is our enterprise focused go to market strategy. As part of our strategic evolution, ON twenty four has made meaningful progress in accelerating our enterprise focused go to market initiatives.

We are aligning our sales, marketing, and customer success model to drive deeper value and long term growth in the global enterprise segment. First, we’ve shifted to a solutions based go to market approach, tailored to the complex needs of enterprise buyers. This strategy enables us to align more directly with our customers’ strategic objectives, whether that’s accelerating pipeline, improving buyer or client engagement, or delivering more personalized experiences at scale. Second, we are excited to announce the launch of a new global integrated marketing campaign called Propel Forward, focused on our solutions based go to market approach. Our Propel Forward campaign highlights the deep ROI we provide by segment as well as our ability to enable customers to maximize the first party engagement experience and capitalize on the power of personalization and AI to accelerate the customer journey and propel positive business outcomes.

On 24 can propel pipeline for technology providers, accelerate client relationships for financial services, and deliver engagement and certification for health care professionals. This integrated campaign should increase demand and brand awareness, thereby driving new acquisition accounts and facilitating customer expansion. Third, we are pleased to announce David Lee as our new chief marketing officer. David comes to us with extensive b to b experience previously serving as chief marketing officer for Envestnet, Yodlee, and vice president of marketing for SonicWall. With the hiring of David and the previous changes that we made in our North America sales leadership, we are focused on driving improved sales velocity and customer expansion.

In fact, we’ve already seen meaningful progress in accelerating our enterprise focused go to market initiatives, having delivered the best new business performance in the core. To highlight some of the new logos that we closed in q one, we acquired a new customer, one of the leading AI companies in the world, building a foundational AI system. With a clear focus on expanding their b to b and enterprise footprint, the customer turned to ON twenty four to shift their go to market strategy from traditional marketing to a scalable, data driven digital funnel. In the pharmaceutical space, a commercial stage biopharma company turned to ON twenty four to build a more mature omnichannel strategy. With compliance top of mind and a need to strong partner integration reflected on twenty four to deliver interactive experiences that could be reviewed before launch by compliance and access on demand by health care professionals.

Another major new logo is a leading provider of legal, tax, and business services providing multistate certifications. With the ON twenty four platform and AI powered ace, they’ve been able to automate the certification process by creating personalized on demand experiences leveraging real time analytics. Fourth, in q one, we experienced the highest number of win backs from boomerang customers in the last five quarters. In the technology vertical, we reengaged a Fortune 500 IT technology solutions provider. Their goals were ambitious, elevate their event strategy, increase engagement and conversions, and scale their content strategy.

By leveraging the ON twenty four platform, the team is now able to drive tangible growth by personalizing digital experiences based on their target audience. Specifically, they can scale channel effectiveness through a multimedia engagement hub that allows users to register once and consume all content while tracking interactivity and attributing it back to revenue. Additionally, they’re accelerating content creation through ON twenty four’s AI powered ace to rapidly produce derivative assets and streamline operations. Lastly, we remain focused on regulated industry verticals including financial services and life sciences. Our robust and secure offering is well suited to the high demand of these enterprise grade customers that require automated workflows, reliability, security, and compliance.

I want to highlight our work with one of the largest international financial services companies in the world providing global investment management, investment services, and wealth management. We are working with this global financial institution to consolidate their desperate demand generation, education, and leadership training programs and systems under a single intelligent engagement solution to bring together institutional investors, financial advisers, wealth managers, and more. We have been able to consolidate multiple use cases on the Onge 24 platform while exiting some of the other point solutions that they were using. In summary, with continued improvement in our gross retention rate and positive free cash flow generation, we believe we have stabilized our business. As we focus on returning to growth, we have made significant strides in our go to market execution, including enhancements to our leadership team.

Early results are good with encouraging signs across multiple dimensions, including new business acquisition, win backs from Boomerang customers, and increased penetration with regulated industry verticals which are now over a third for business. In addition, our AI driven innovation which has seen our AI is become an important growth vector, sets us up for continued innovation and momentum. While we’ve laid the foundation for a return to growth, our stock price has experienced new lows. Given this dynamic, we believe our current market valuation does not reflect our long term growth potential and strategy, presenting a compelling opportunity for us to repurchase our undervalued shares. Specifically, we are announcing a new $50,000,000 share repurchase program that Steve will discuss.

And with that, I will turn it to Steve.

Steve Vattoni, Chief Financial Officer, ON24: Thank you, Sharath, and good afternoon, everyone. I’m going to start with our first quarter twenty twenty five results and we’ll then discuss our outlook for the second quarter of twenty twenty five and full year 2025. Revenue from our core platform, including services in Q1 of twenty twenty five, was $34,200,000 representing a decrease of 7% year over year. Total revenue for the first quarter, which includes revenue from our virtual conference product was $34,700,000 Total subscription and other platform revenue was $32,300,000 Overages represented a little over 1% of total revenue in Q1. Total professional services revenue was $2,400,000 representing approximately 7% of total revenue.

Moving on to ARR. ARR represents the annualized value of all subscription contracts at the end of the period and excludes professional services and overages. In Q1 twenty twenty five, ending ARR related to our core platform totaled $125,900,000 a decrease of approximately $1,400,000 compared to Q4 of twenty twenty four. Total ARR at the end of Q1 was 128,200,000 During Q1, we experienced further stability within our installed base driven by our improved go to market strategy. Our in period gross retention in Q1 was the highest in the past four years and showed a sequential increase from Q4 of twenty twenty four.

In addition, we saw our largest quarter in the past five quarters of customer win backs. These boomerang customers, which had previously left us for other tools, returned to us in Q1 after missing the benefits of our solution. We did see some softness towards the end of Q1, primarily in our international and commercial business segments as uncertainty increased in the broader macro environment. Turning to customer metrics. As we look at our business moving forward, we are focused on our enterprise customers and are seeing positive growth across those metrics.

The percentage of our ARR in multiyear contracts increased in Q1 to reach new highs, was over 50% of our ARR at the end of Q1. The multi product adoption of our solution also continues reaching an all time high at the end of Q1. In Q1, the average core ARR per customer was approximately $78,000 up slightly from twenty twenty four year end levels. The ARR contribution from the $100,000 plus customer cohort continues to represent approximately two thirds of our total ARR, which is consistent with the prior quarter and we ended Q1 with $2.99 customers contributing more than $100,000 in total ARR. While we saw impressive new logo wins in Q1, we also did see some customers renew in Q1 under the $100,000 threshold.

Total customer count at the end of Q1 was sixteen oh four. In Q1, we had our largest renewal cohort of the year of smaller customers, which contributed to the reduction in our customer count during the quarter. Before turning to expense items and profitability, I would like to point out that I will be discussing non GAAP results going forward. Our non GAAP results exclude stock based compensation, restructuring charges, impairment charges for real estate, amortization of acquired intangibles, shareholder activism related costs, certain legal costs related to litigation regarding our 2021 IPO as

Shiraz Shiran, Co-Founder and CEO, ON24: well as

Steve Vattoni, Chief Financial Officer, ON24: certain other items. Our GAAP financial results along with a reconciliation between GAAP and non GAAP results can be found within our earnings release. Our gross margin in Q1 was 77% consistent with the past several quarters and with Q4 of last year. Now moving to operating expenses. Sales and marketing expense in Q1 was $15,600,000 compared to $16,300,000 in Q1 last year.

This represents 45% of total revenue compared to 43% in the same period last year and 44% last quarter. As Schrotte mentioned earlier, we have better aligned our go to market organization and our sales and marketing expenses have decreased in absolute dollars both year over year and from last quarter, largely due to the cost savings measures we have implemented to improve efficiency in that organization. R

Shiraz Shiran, Co-Founder and CEO, ON24: and

Steve Vattoni, Chief Financial Officer, ON24: D expense in Q1 was $6,800,000 compared to $6,700,000 in Q1 last year. This represents 20% of total revenue compared to 18% in the same period last year and last quarter. Our R and D expenses have remained relatively flat over the past year in absolute dollars as we have continued to invest in product innovation for our platform, including AI enabled features such as AI powered ACE on 24iQ and enhanced personalization. G and A expense in Q1 was $6,300,000 compared to $6,700,000 in Q1 last year. This represents 18% of total revenue compared to 18% in the same period last year and 16% last quarter.

We continue to take actions to reduce our G and A spending and streamline our G and A functions. And as a result, our G and A expenses in absolute dollars have decreased as compared to the same period last year. Moving on to our bottom line performance and cash flow metrics. Operating loss for Q1 was $2,100,000 or a negative 6% operating margin compared to an operating loss of $800,000 and a negative 2% operating margin in the same period last year. Net loss in Q1 was $400,000 or $01 per share based on approximately 42,100,000.0 basic and diluted shares outstanding.

This compares to net income of $1,000,000 or $02 per share in Q1 last year using approximately 45,600,000.0 diluted shares outstanding. Our Q1 bottom line results reflect Q1 being a seasonally softer quarter for revenue and I do expect our bottom line results to improve this year from Q1 levels, which I will discuss when I cover our financial guidance. Now turning to our cash flow metrics. Our free cash flow in Q1 was positive $2,800,000 when we exclude cash outflows related to our restructuring efforts, shareholder activism fees and certain other legal costs, which collectively totaled $900,000 in Q1 twenty twenty five. Our free cash flow in Q1, including all of these items, was positive $1,900,000 compared to positive $1,100,000 in Q1 last year.

This is our fifth consecutive quarter of positive free cash flow. Cash provided by operations in Q1 was $3,400,000 compared to cash provided by operations of $2,100,000 in Q1 of last year. I would like to provide an update on our previously announced capital return program. In March 2025, we completed the $25,000,000 share repurchase program we announced in March 2024. We utilized the full $25,000,000 allocated under that program with $4,500,000 utilized in Q1 twenty twenty five.

This share repurchase program followed the completion of two earlier capital return programs, which collectively returned 166,000,000 to shareholders. We have now returned a total of $191,000,000 to shareholders. In light of our strong balance sheet, positive free cash flow and undervalued stock, the Board of Directors has authorized a new $50,000,000 share repurchase program to drive shareholder value. Our balance sheet continues to remain strong with almost $181,000,000 of cash and investments at the end of Q1 twenty twenty five. Now I want to provide some context for how we are thinking about 2025.

As Chirat and I have discussed, we are seeing many positive signs of improvement in our business, and we are fundamentally pleased with our progress in a choppy market. We are focused on several key tenets to drive our business forward and create shareholder value, including delivery of a steady stream of market leading AI innovation, improved sales and marketing execution under new leadership and generating positive cash flow and positive adjusted EBITDA in 2025. That being said, the economic uncertainty has increased significantly over the last month. And like many businesses, we do have another layer of risk to factor in due to a lack of clarity and visibility into the potential health of the economy. Given the wider range of potential macro and policy driven outcomes, we have decided to take a more conservative approach to our near term top line guidance.

Now turning to our guidance. Regarding Q2 guidance, we expect Q2 core platform revenue, including services, in the range of $33,800,000 to $34,400,000 and total revenue, which includes our Virtual Conference product, in the range of $34,500,000 to $35,100,000 Professional Services is expected to represent approximately 8% of total revenue. We expect our gross margin to be 76% in Q2. We expect a non GAAP operating loss in the range of $1,500,000 to $700,000 and non GAAP net income per share of $0.00 per share to $02 per share using approximately 45,600,000.0 diluted shares outstanding. In Q2, we also expect to be adjusted EBITDA positive.

We expect a restructuring charge of $500,000 to $800,000 in Q2 related to our ongoing cost reduction efforts, which is excluded from the non GAAP amounts provided above. Amortization of acquired intangibles, shareholder activism costs, certain other legal costs and certain other items are excluded from the Q2 non GAAP amounts provided above. On ARR, we assume core ARR will be down $500,000 to $1,500,000 compared to Q1 levels. For our Virtual Conference product, we expect Q2 ARR to decline approximately $200,000 in Q2, ending Q2 at $2,100,000 Now turning to our annual guidance for 2025, which assumes the macro conditions do not worsen. For the full year, we expect core platform revenue, including services, to be in the range of $133,700,000 to $136,700,000 We expect total revenue to be in the range of $136,000,000 to $139,000,000 Professional services is expected to represent approximately 7.5% of total revenue.

We expect a non GAAP operating loss in the range of $5,500,000 to $3,500,000 and non GAAP net income per share of $02 per share to $05 per share using approximately 45,000,000 diluted shares outstanding. We expect gross margins for the year to be approximately 76%. We expect to be adjusted EBITDA positive for 2025 and we expect to deliver positive adjusted EBITDA in each quarter of twenty twenty five starting in Q2. In addition to delivering positive adjusted EBITDA, we also expect to deliver positive free cash flow in 2025, excluding any incremental non GAAP expenses. Restructuring charges and amortization of acquired intangibles, shareholder activism costs, certain other legal costs and certain other items are excluded from the full year non GAAP amounts provided above.

Given the decreased visibility into the second half of the year, we are not providing an outlook for our 2025 ARR. However, we remain 100% focused on returning to ARR growth And it is worth noting that our annual revenue guidance does assume improved core ARR performance in the second half of this year. ARR from our Virtual Conference product is expected to decrease minimally during the second half of twenty twenty five. In summary, our goals for 2025 are to deliver another year of positive adjusted EBITDA and positive free cash flow, to continue investing in AI focused innovation and to continue improving our go to market motion. We are confident we are taking the right steps to improve our business and return to ARR growth.

We have announced a new $50,000,000 share repurchase program to enhance shareholder value and are excited to have the opportunity to acquire our undervalued stock. We remain strongly committed to our long term goal of generating double digit top line revenue growth and double digit EBITDA margins. With that, Trat and I will open the call up for questions.

Conference Operator: We’ll take our first question from Scott Berg with Needham and Company. Your line is open.

Rob Marilli, Analyst, Needham and Company: Yeah. Hi, everyone. This is Rob Marilli on for Scott Berg. Thanks for taking the question. Congrats on the quarter.

Just one for me. So it’s been a couple of quarters of declines in the 100 ks AR cohort. Now as you noted some customer retention improvement. Do you have any visibility or insight into where or when that metric troughs out? Thanks.

Shiraz Shiran, Co-Founder and CEO, ON24: Rob, let me take that.

Steve Vattoni, Chief Financial Officer, ON24: You know,

Shiraz Shiran, Co-Founder and CEO, ON24: we are very close to turning this this number positive. Rob, enterprise customers continue to be our focus with the hundred k plus customer cohort being a proxy for that, and that makes about two thirds of our ARR. And we have seen these customers continue to make longer term commitments to our platform. As you said, the number of customers contributing more than hundred k in total ARR in at the end of q one was two ninety nine, a very modest decline of mid single digits from q four. And a large portion of that were customers downgrading under the hundred k threshold, which was the largest contributor there.

So as I said, we are very close to turning this number positive. I mean, that that is an important focus of ours. At the same time, our average score ARR per customer was the highest. So we are retaining the overall spend level with a larger enterprise customers even with some churn at at the lower end. Now on the lower end, we’ve talked about that, you know, in this market environment, some of you know, that does impact the lower end a little more.

But overall, our focus is in the core hundred k and above, and we we believe and we feel that we are very close.

Rob Marilli, Analyst, Needham and Company: Got it. That’s helpful. Thanks for taking the question.

Conference Operator: Our next question comes from DJ Hines with Canaccord. Your line is open.

Luke, Analyst, Canaccord: Hey, guys. This is Luke on for DJ. Thanks for taking the question. I was wondering if you could expand on, the comment you made about seeing soft softness towards the end of the quarter, and just how much of that contributed to the the new outlook versus how much is incremental conservatism just given the the macroeconomic environment? Thanks.

Steve Vattoni, Chief Financial Officer, ON24: Let me let me go ahead and take that. Let me start by saying that, we are seeing some good signs in the business, and we are making progress. Now that being said, there is now a lot more macro uncertainty than there was earlier in the year, and there’s now a wider range of outcomes because of that. Now we don’t have a crystal ball, and we’re not sure how this will play out. So we are being incrementally more conservative with our annual revenue guidance because of that, primarily in the back half of the year since that’s further out.

In terms of ARR, we’re not providing annual guidance at this time. But for q two, the midpoint of our ARR guidance is the decrease of a million dollars, from Q1, which is actually a modest improvement from our Q1 ARR performance. So we are expecting to make some progress there in Q2. And we were previously expecting sequential improvement in ARR performance through the year, and we’re still expecting that now with more progress in the second half of the year, but we are being more conservative in our outlook. Now for revenue, we are being incrementally more conservative with our annual revenue guidance to bake in another layer of conservatism primarily in the back half of the year, as I mentioned earlier.

Let me quickly also touch on profitability and cash flow. We do expect to be adjusted EBITDA and EPS positive in Q2 and for the rest of the quarters in 2025 and for 2025 as a whole. And we’re free cash flow positive in Q1 for the fifth consecutive quarter. And we expect to be cash flow positive for 2025, excluding any incremental non GAAP items like restructuring.

Shiraz Shiran, Co-Founder and CEO, ON24: Yes. Let let me add to what Steve just said. This is Shwab. Look, look, we can’t control the macro. But in the immediate term, like most businesses, we’ve had to add another layer of risk to our projections for 2025.

And as I hope my prepared remarks conveyed my enthusiasm around the changes that we are making in our business and why that gives me confidence. And again, just to reiterate the five core drivers, You know, q one was the best gross retention in the last four years, and we expect that to improve this year. For many of you who have practiced, you know how important that is for us. Two, we have significantly improved our go to market execution leadership team with the hiring of a new CMO and previously a new head head of North America sales. And again, q one was the best enterprise new business quarter over the last five quarters.

At PowerDays, we’ve got 30% of our customers using our AI capabilities and low teens percentage of our customers are paying for these solutions. We have a very aggressive AI product agenda, so we have a lot of room to run here. Winbacks, as Steve has talked about, the best winback quarter q one was in the last five quarters. And so we are expecting sequential ARR improvement during 2025. I think Steve also talked about our cash flow performance, our margin performance.

So overall, we believe our shares are undervalued. And so our confidence is underscored by the just announced $50,000,000 share repurchase program.

Luke, Analyst, Canaccord: That’s helpful. Thanks, guys. And then maybe just a quick follow-up. Wondering if you could just expand on on ’24 IQ, how that fits into the broader AI strategy, and then how you’re thinking about pricing those agents.

Shiraz Shiran, Co-Founder and CEO, ON24: Yeah. So, you know, I I look. Let me take that. I just talked about that 30% of our customers are using our AI capabilities, and a low teen percentage of our customers are paying for it. So we have room to run, and it’s an exciting growth vector for us.

But, you know, when when we think about our innovation agenda for AI, we really focus on how are we providing positive business outcomes, how are we helping customers achieve greater cost efficiency, and and delivering massive enterprise grade scalability. So now as we’ve evolved our AI strategy and, you know, our focus here is to be extremely aggressive and continuous on our innovation agenda. So there are five core pillars there. One, we have talked about this before, is our AI powered content and nurture engine, which allows customers to create more derivative content and do more with less. Second, you talked about ON24 IQ.

These are intelligent agents that streamline and automate actions across our platform. So our customers can now let ON24 IQ take away a lot of the automation, take away a lot of the heavy and repetitive task work, and a lot and allows our customers to do a lot more with less. Third, our platform hyper personalization capabilities to dynamically customize event experiences based on audience profiles. We’ve talked about that before. Fourth, we are now leveraging our platform’s AI capabilities and our first party data.

We have over a billion engagement minutes per year. We are leveraging that to really provide much more performance insights, and that’s our fourth tier. And finally, for our enterprise customers, we are we are launching a lot more capability on multilingual capability that allows them a platform for global scale. You talked about how we are looking to you know, we currently have AI eight SKUs. I think I expect that in the next thirty to sixty days, we will launch many more SKUs, more packages related to AI for our customers, especially for our enterprise customers that allow them to do more with less and to scale massively globally and leveraging multiple languages across the world.

Luke, Analyst, Canaccord: That’s great. Thank you.

Conference Operator: Our last question will come from Alinda Lee with William Blair. Your line is open.

Alinda Lee, Analyst, William Blair: Perfect. Thanks for taking my question, guys. First one, with David on the team as CMO now, what are some action plans David has in mind from a marketing perspective and also plans together with the North American head of sales?

Shiraz Shiran, Co-Founder and CEO, ON24: Yeah. So, you know, we have this is Shweta. We are fundamentally transforming our go to market motion with extreme focus on outcome driven actions. So if you go to our website now, you’ll already see that we talk about how our solutions, whether you are in technology, whether you’re in financial services, whether you are in life sciences, how we help companies drive pipeline propel propel pipeline forward for technology, how we help companies propel customer relationships for financial services, how for life sciences we propel, health care professional engagement for those forward. And it’s now going to be supplemented by a lot of very strong ROI stories.

In this market environment, CFOs and CMOs and CEOs really want the impact. Is On twenty four one of the top three sources of pipeline for for for for what they are spending with with with On twenty four? How is On twenty four helping you in driving more client relationships and others? So David’s job, first, is to really drive extreme solutions more based approach and ROI based approach for our our customers. We all his other focus is also to work with sales and SDRs to continue to focus in improving pipeline.

And by the way, early indications on the pipeline front are improving, so I’m I’m excited about that. So those are really the two core things, the new solutions positioning and message out there with very strong focus on demand generation and and pipeline. And this completely ties with you asked about how this ties with the with the head of North America sales. Now the head of North America sales work with works with our chief revenue officer and, of course, with David now to make sure we have an end to end execution. So after the campaigns, they are very closely aligned with pipeline.

They’re very how we are selling in the marketplace is is also very dependent on that. And then, of course, from a customer success point that you how we are implementing our customers. So my hope is we have we have started the campaign, but very soon you’re gonna see a lot more end to end execution from ON 24, really helping our customers drive ROI based results at at a very cost effective and cost efficient price. So that’s that’s the focus for David and the and the and the sales team.

Alinda Lee, Analyst, William Blair: Awesome. Thank you. Another question to follow-up. Any verticals that are doing particularly better than others from a churn and down sell perspective?

Shiraz Shiran, Co-Founder and CEO, ON24: Yeah. Yeah. You know, I think we previously talked about that a lot of our focus is is to diversify from a concentration in technology in technology and manufacturing verticals that were about 50% of our ARR in 2019 to more verticals like life sciences and financial services that drive mission critical digital transformation use cases. And the the the good news is the share of life science and financial services is now a third of our business. It it’s an important part of our enterprise go to market market focus.

Just as an example in q one, we highlighted our work in the prepared remarks with one of the largest international financial services companies in the world. Now they’ve been able to consolidate multiple use cases on the on the platform. They exited few point solutions that they were using. And so and overall, you know, on the life sciences and financial services, we also see, generally higher gross retention, better better net retention. So overall, we feel that our business is a lot more diversified and well positioned to drive broad based growth as we, especially as we execute on the propel forward campaign in these various verticals.

Alinda Lee, Analyst, William Blair: Perfect. Thank you.

Conference Operator: It appears we have no further questions. I’ll turn the program back to the speakers for closing remarks.

Shiraz Shiran, Co-Founder and CEO, ON24: Well, thank you everyone for joining. Really appreciate it. Thank you.

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