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ON24 Inc. (ONTF) reported its fourth-quarter 2024 earnings, surpassing expectations with an EPS of $0.06 compared to the forecasted $0.01. Revenue also exceeded projections, coming in at $36.7 million against a forecast of $35.87 million. The company, currently valued at $252.4 million, maintains a strong balance sheet with more cash than debt. Following the announcement, ON24’s stock rose 0.83% in after-hours trading, reflecting investor optimism about the company’s performance and future prospects. InvestingPro analysis reveals 9 additional key insights about ON24’s financial position and growth prospects.
Key Takeaways
- ON24’s Q4 EPS of $0.06 beat the forecast by $0.05.
- Revenue reached $36.7 million, surpassing expectations.
- Stock increased by 0.83% in after-hours trading post-earnings.
- Positive free cash flow of $2.6 million in 2024.
- Launch of AI-powered ACE platform contributed significantly to growth.
Company Performance
ON24 reported a solid performance in Q4 2024, with total revenue at $36.7 million, despite a 6% year-over-year decrease in core platform revenue. The company showed resilience in a challenging marketing environment, bolstered by innovations such as the AI-powered ACE platform, which has driven significant growth in ARR bookings. The company’s annual ARR stood at $127.3 million, reflecting a 6% decline year-over-year, but initiatives to boost efficiency and innovation are expected to reverse this trend in 2025.
Financial Highlights
- Total (EPA:TTEF) Q4 Revenue: $36.7 million
- Q4 EPS: $0.06
- Annual ARR: $127.3 million
- Gross Margin: 77%
- Positive Free Cash Flow: $2.6 million
Earnings vs. Forecast
ON24’s earnings per share of $0.06 significantly outperformed the forecast of $0.01, marking a surprise increase of 500%. Revenue also exceeded expectations, coming in at $36.7 million compared to the projected $35.87 million. This performance indicates a positive shift in the company’s financial health and operational efficiency.
Market Reaction
Following the earnings announcement, ON24’s stock rose 0.83% in after-hours trading, closing at $6.09. The stock has been trading within a 52-week range of $5.37 to $7.48. Based on InvestingPro’s Fair Value analysis, ON24 appears undervalued at current levels. The positive market reaction reflects investor confidence in ON24’s strategic direction and future growth potential, despite the stock’s 13.09% decline over the past week. A detailed valuation analysis is available in ON24’s Pro Research Report, part of InvestingPro’s coverage of 1,400+ US stocks.
Outlook & Guidance
ON24 is optimistic about returning to ARR growth in 2025, projecting a 1-2% increase. The company has set a full-year 2025 revenue guidance between $136.3 million and $139.3 million, with expectations to achieve EBITDA positivity from Q2 to Q4 2025. Long-term, ON24 targets double-digit top-line revenue growth and improved EBITDA margins.
Executive Commentary
- Steve Bataloni, CFO, expressed confidence in the company’s ability to return to ARR growth in 2025.
- CEO Shiraz Sharan highlighted the significant contribution of the AI-powered ACE platform to growth.
- Sharan also emphasized the company’s focus on achieving positive ARR.
Risks and Challenges
- Continued challenges in the marketing budget environment could impact growth.
- Competition in AI-powered solutions may intensify.
- Economic uncertainties could affect customer spending.
Q&A
During the earnings call, analysts inquired about ON24’s strategy in the current marketing environment and its plans for balancing growth with profitability. Executives reiterated their focus on AI investments and go-to-market strategies as key drivers for future success.
Full transcript - ON24 Inc (ONTF) Q4 2024:
Conference Operator: Greetings. Welcome to ON24 Fourth Quarter twenty twenty four Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.
It is now my pleasure to introduce Shayo D’Aula, Investor Relations. Thank you. Please go ahead.
Shayo D’Aula, Investor Relations, ON24: Thank you. Hello and good afternoon everyone. Welcome to ON24’s fourth quarter and full year twenty twenty four earnings conference call. On the call with me today are Shiraz Sharan, Co Founder and CEO of ON24 and Steve Bataloni, 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 first quarter and full fiscal year 2025, as well as certain first quarter and full year non GAAP projections.
These forward looking statements are subject to known and unknown risks and uncertainties that could 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. ON-twenty four 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 also like to point out that on today’s call, we’ll 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 Sharan, Co-Founder and CEO, ON24: Thank you, and welcome, everyone, to ON24’s fourth quarter and full year twenty twenty four financial results conference call. I appreciate you joining us today. With me is Steve Batuoni, our Chief Financial Officer. Before we turn to Q4 results, I want to take a moment to look back at 2024, a year in which we laid the foundation for return to growth by diligently focusing on improving our gross retention rates, executing on our product innovation roadmap and delivering margin, profitability and cash flow improvements. We launched AI powered ACE, the next generation ON24 intelligent engagement platform in January 2024 and within a year, ACE accounted for over 20% of our growth ARR bookings.
In Q4, the percentage of customers with two or more products reached an all time high at close to 40%. We saw the ARR from multi year deals increase to 51%. Gross retention for 2024 improved to its highest level in the last three years. Net retention for our enterprise business was 91%, a mid single digit improvement over 2023. As a whole, new and expansion business reached their highest levels of the year in Q4.
We had the best win rates of the year and we continue to see win back momentum with Boomerang customers in Q4, which was a continuation from the prior quarter. We consistently met and exceeded our margin and profitability targets. Our non GAAP gross margin improved from 75% in 2023 fiscal year to 77% in 2024. Adjusted EBITDA margin improved by almost 200 basis points in the 2024 fiscal year compared to 2023. And finally, our free cash flow for 2024 was positive $2,600,000 compared to negative $14,400,000 in 2023, an improvement of $17,000,000 Turning to Q4 results.
Q4 revenue from our core platform including services was $36,000,000 and total revenue including virtual conference was $36,700,000 Of total revenue for the quarter, subscription and other platform revenue was $33,600,000 and professional services revenue was $3,100,000 In terms of ARR, we ended the quarter with $127,300,000 of core platform ARR, a decrease of $2,300,000 from Q3 in line with our guidance. Total ARR at the end of Q4, including ARR from our virtual conference product was $129,700,000 Steve will elaborate more on the results including ARR, but I’d like to highlight that even though Q4 is the largest renewable base in the year, our impaired gross retention in Q4 was consistent with the highest levels we have seen in 2024 and was up by mid single digits compared to the gross retention we saw for the 2023 fiscal year. As a whole, new and expansion business reached the highest levels of the year in Q4. We had our best win rates of the year and we continue to see win back momentum with Boomerang customers in Q4, which was a continuation from the prior quarter. And finally, AI powered ACE was a key contributor.
The number of customers using and paying for AI powered ACE grew each quarter of 2024 and now crossed double digits as a percentage of our customer base and was over 20% of our growth ARR bookings in Q4. We will continue to build on this in 2025. We recognize that there is more work to do, but we are excited by the progress we’ve made, especially as we start to see green shoots in the spending environment relative to the start of last year. Our results in Q4 in 2024 as a whole reinforce the positive steps you’ve taken in transforming ON24 into a profitable, cash generating business that is ready to return to growth in 2025. We remain committed to our long term goal of generating double digit top line revenue growth and double digit EBITDA margins.
Let me elaborate on the progress we made on executing our strategic priorities and how we are thinking about 2025. Starting with our focus on platform innovation. In 2024, our core focus on platform innovation was launching our next generation platform and putting AI at the center of our strategy to provide enterprises with a differentiated and intelligent platform for digital engagement. Our AI strategy is built on the two pillars of our core strengths, content and first party data. Specifically, our customers deliver hundreds of thousands of prospect and customer facing webinar experiences on our platform.
Allowing them to leverage what they’ve already created and deploy global integrated campaigns based on that content and other derivative content generates massive ROI. On top of that, our AI innovations are built on ON24’s first party data foundation to provide our customers deep insights on their prospects engagement and propensity to purchase. After launching our intelligent engagement platform and introducing our new AI Power Days offering at the beginning of twenty twenty four, we were laser focused on driving adoption across our installed base and further enhancing our competitive position. These breakthrough advancements introduced the ability for customers to easily segment their audiences and offer segment specific hyper personalized engagement experiences tailored to demographics, audience behavior and more. Additionally, these platform innovations offer the speed and simplicity of AI generated content personalized for different audience segments, enabling rapid multi touch nurture and accelerated engagement.
In Q4, our AI powered analytics and content engine or ACE had its best quarter yet with the highest level of new bookings. Our AI innovations are delivering value by driving an immediate ROI for our customers. Take for example, a leading global accounting network of public accounting tax, consulting and business professionals. They selected ON24 specifically for ACES ability to create personalized and highly curated digital content experiences for their priority audiences to better move them throughout their buying journey. This platform innovation not only helps improve the customer’s ability to deliver personalized experience at scale, it also allows them to automate content creation, generate more qualified leads and drive measurable revenue results.
Another example, which highlights our competitive differentiation and was a customer win back is a global leader in testing and certification. This boomerang customer returned to ON24 and a purpose built intelligent engagement platform including ACE after poor global customer service and a weak data integrations with their previous solutions provider. Committing to a new three year agreement, they are expecting to see an immediate increase in pipeline by using ON24’s latest AI enhancement to create personalized immersive customer experiences to generate an increase in first party intent data and insights from their prospects and customers. The 2024 adoption and revenue numbers for ACE show the impact that ACE has had in our customer base. Looking ahead, 2025 greater opportunities of platform innovation.
We plan to expand our roadmap with our latest innovations to be announced at ON24 NEXT, our product innovation event scheduled for next month, highlighting a focus on enhanced first party data, new performance insight capabilities and an increased focus on AI innovation, which will continue to be at the center of our 2025 strategy. Our second strategic pillar in 2024 was advancing our enterprise go to market strategy with a strong emphasis on regular industries and digital transformation use cases. Our enterprise focused efforts reinforce the industry leading advancements of our intelligent engagement platform, our AI powered analytics and content engine, hyper personalization capability and enterprise readiness to work in some of the most highly regulated sectors. In Q4, we saw continued strength in regulated verticals including life sciences and financial services. This momentum reflects the value of our enterprise grade platform for supporting mission critical revenue generating go to market use cases in these industries.
To illustrate the strength of our life sciences vertical, I would like to highlight one of our customers, a multi billion dollar revenue global pharmaceutical company that expanded its partnership with ON24. Now a trusted partner, our platform, including ACE has been elevated as a foundational technology within their tech infrastructure, helping them advance the healthcare professional or HCP digital engagement strategy. Through our platform, they are transforming their ability to engage and interact with hard to reach HCPs and integrating on twenty four first party data with their systems of record to support both medical and commercial teams across global markets in gaining invaluable HCP insights. As another example, and continuing our spotlight on highly regulated industries, an enterprise global asset management group returned to ON24 in Q4. After switching to a point solution, we recognize that without a purpose built platform for engaging experiences and first party actionable data and insights that their program could not be successful.
Committing to a new four year agreement, they returned to leverage the breadth and depth of our capabilities. Given their institutional focus, our first party data was important in providing insights that they could use to deliver a high touch personalized customer experience at scale. As we enter 2025, we are strengthening our focus and operating model around our enterprise go to market. To enhance our go to market leadership, we’ve added three new senior sales leaders to our North America enterprise sales execution team, including the new head of North America sales who joined in the latter half of twenty twenty four. These changes have brought renewed focus and alignment to our sales teams contributing to a stronger foundation for new and expansion enterprise business.
We will continue to focus on mission critical use cases in regulated industries. In addition, we will be extending into some other use cases and pursuing the green shoots we are seeing in the technology vertical. We’ve also made targeted adjustments within our customer success organization to better support retention and expansion efforts for our growing customer base in these key industries. These changes are helping us provide a more seamless customer experience, especially for enterprise customers with complex needs in highly regulated industries. Finally, we continue to be focused on building a profitable cost structure, while positioning ourselves for long term growth.
In 2024, our total non GAAP expenses were almost $20,000,000 lower than 2023, which underscores our disciplined cost management and operational efficiency. As I mentioned earlier, we delivered positive adjusted EBITDA and positive non GAAP EPS in Q4 for the seventh consecutive quarter, while driving margin improvements. Furthermore, we were free cash flow positive for the fourth consecutive quarter. The steps we have taken to align our cost structure over the past few years have set up the business for profitable growth. We will continue to be laser focused on maintaining our efficient approach to expense control while prioritizing strategic investments in our key areas of focus.
We remain committed to our long term profitability target of generating double digit EBITDA margins. As we look ahead to 2025, there are several factors that will be key in continuing the progress we made this last year. First, we expect the stabilization of the installed base to continue and anticipate more improvement in gross retention in 2025 as churn and down sell trend positive. Secondly, we are seeing customers return to spending initiatives, which we believe will in turn drive increased adoption, both in regulated use cases and in the technology burden, where we are seeing green shoots. Lastly, we are excited to see the adoption of our AI tools expand in 2025 as AI powered ACE continues to be a key driver for growth.
I’m happy with the steps we took in 2024 to position the business for a return to growth in 2025. As I look into 2025, I’m confident in our ability to achieve key goals. I expect we will continue to innovate with major new product introductions, many of them in the first half of the year. We will continue to grow AI Power Days as a percentage of revenues. We will return to customer growth in a 100 ks customer cohort.
We will continue to reduce churn and improve gross retention. We expect our NRR to steadily improve. And most importantly, I expect we will return to positive ARR. I enter twenty twenty five with renewed confidence in our solutions and business and look forward to achieving our goals. With that, I would like to hand it over to Steve Batuany, our CFO, to share the financial details of Q4 and full year 2024.
Steve Bataloni, Chief Financial Officer, ON24: Thank you, Sharath, and good afternoon, everyone. I’m going to start with our fourth quarter twenty twenty four results and will then discuss our outlook for the first quarter of twenty twenty five and full year 2025. Before I get into the numbers, I want to remind everyone that our focus, as it was in the prior quarters, will be on the core platform business as we have deemphasized the virtual conference product. We view the metrics from our core platforms such as revenue and ARR as the best KPIs to measure our performance. Before I get into the details, I wanted to quickly outline at a high level what we have delivered in 2024 and the progress we have made.
On the top line, we have stabilized the business with improved ARR performance relative to 2023 with improvements in both gross and net dollar retention. On profitability, we have improved both our gross and operating margins in 2024, delivering adjusted EBITDA profitability for every quarter in 2024. On cash flow, we delivered four consecutive quarters of positive free cash flow with a $17,000,000 improvement in free cash flow in 2024 as compared to 2023. And on the innovation front, we launched our AI powered ACE product with new bookings for that product increasing every quarter since we launched it in Q1 of twenty twenty four. Now, let me provide the details starting with revenue.
Revenue from our core platform, including services in Q4 of twenty twenty four, was $36,000,000 representing a decrease of 6% year over year. Total revenue for the fourth quarter, which includes revenue from our virtual conference product, was $36,700,000 Total subscription and other platform revenue was $33,600,000 Overages represented approximately 1% of total revenue in Q4. Total professional services revenue was $3,100,000 a decrease of 13% year over year, representing approximately 8% of total revenue compared to 9% in the year ago period. 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 2024, ending ARR related to our core platform totaled $127,300,000 a decrease of approximately $2,300,000 compared to Q3 of twenty twenty four and in line with the guidance range we provided last quarter. Total ARR was $129,700,000 Looking at ARR performance on a year over year basis, while still negative for the year, ARR performance made an almost five point improvement from a year over year reduction of 11% in 2023 to a year over year reduction of 6% in 2024 in a tough macro environment for marketing budgets. I believe we have laid the groundwork to return to positive ARR growth in 2025. Specifically, it is important to note the fourth quarter would have shown even clearer evidence of our progress if we had not had two significant downsells. Both of these customers see the core value of our product and made 7 figure commitments, but did adjust the scope of their work with us for business reasons.
I see a lot less of these large renewals that concern me in 2025, and I’m confident that our underlying improvement will be much more evident in upcoming quarters. Let me break down what we saw in ARR a little more, starting with new business and expansion bookings in Q4. New business and expansion ARR were both the highest of the year in Q4. As Shrott mentioned, our AR Powered eight product continues to show positive momentum, contributing over 20% of our growth ARR bookings in Q4 and representing the highest dollar amount of bookings to date for this product. Moving on to retention.
Even with the two larger customer downsells, in period gross retention in Q4 was consistent with the highest levels we saw in 2024 and up by mid single digits from gross retention for the 2023 fiscal year. As a one time disclosure, in 2024, our gross retention was in the low 80s, which was up mid single digits from 2023. The dollar based net retention, or NRR, for our core platform enterprise customers was 91%, an improvement of mid single digits from 2023. These are customers with over 1,000 employees and make up close to 80% of our core ARR and the primary focus of our business. Core platform NRR for the whole business was a couple of points lower at 89% at the end of twenty twenty four.
Turning to customer metrics. Our enterprise customers continue to show a commitment to our platform as we continue to strengthen our focus around our enterprise go to market strategy. 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. In a year when marketing conditions were challenging and some customers lowered their spend with us due to budgetary constraints, we ended the year with three zero five customers contributing more than $100,000 in total ARR. The majority of our ARR is from enterprise customers, and we continue to see these customers commit to longer term contracts.
The percentage of our ARR in multiyear contracts at the end of twenty twenty four was 51%. This metric has improved over 20 points since the end of twenty nineteen when it was 29%. We’re also encouraged with the multi product adoption we are continuing to see in our customer base. The number of customers using two or more products increased to 39% at the end of twenty twenty four, an all time high. This metric has also steadily increased, increasing sequentially every year for the last five years from 17% at the end of twenty nineteen to 39% at the end of twenty twenty four.
In Q4, the average core ARR per customer was approximately $77,000 up slightly from 2020 ’3 year end levels. Total customer count at the end of Q4 was sixteen forty five. 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, as well as certain other items. Our GAAP results, along with a reconciliation between GAAP and non GAAP results, can be found within our earnings release.
In 2024, we focused on controlling our operating expenses and continuing to streamline our operations to improve our operational efficiency, which resulted in improvements to both our gross margins and our bottom line performance. Let me provide the details starting with our gross margin. Our gross margin in Q4 was 77%, consistent with the past several quarters and with Q4 of last year. For the 2024 year as a whole, our gross margin was 77%, up from 75% in 2023, reflecting the cost reduction actions we have taken to streamline our operations. Now moving on to operating expenses.
Sales and marketing expense in Q4 was $16,000,000 compared to $16,700,000 in Q4 last year. This represents 44% of total revenue compared to 42% in the same period last year and consistent with last quarter. Our sales and marketing expenses have decreased in absolute dollars year over year largely due to the cost savings measures we have implemented over past quarters to improve efficiency in our go to market organization. R and D expense in Q4 was $6,500,000 compared to $6,700,000 in Q4 last year. This represents 18% of total revenue compared to 17% in the same period last year and consistent with last quarter.
While our R and D expenses have decreased in absolute dollars over the past year, we have continued to invest in product innovation for our platform, including AI enabled features such as AI PowerDACE. G and A expense in Q4 was $5,900,000 compared to $6,600,000 in Q4 last year. This represents 16% of total revenue compared to 17% in the same period last year and last quarter. We have taken actions to reduce our G and A spending and streamline our G and A functions. And as a result, our G and A expenses and absolute dollars have decreased as compared to the prior quarter and prior year.
Moving on to our bottom line performance. We have seen an improvement of almost 200 basis points in our adjusted EBITDA for 2024 as compared to 2023, and I am pleased to report that we exceeded the profitability targets that we provided in the prior earnings call. The operational enhancements we made to reduce our cost structure have been effective. For 2024, our total expenses were almost $20,000,000 less than 2023, the result of our efforts to contain our costs and streamline our operations. In Q4, we achieved positive adjusted EBITDA and non GAAP EPS profitability for the seventh consecutive quarter.
Operating loss for Q4 was $400,000 or a negative 1% operating margin compared to operating income of $200,000 and a positive 1% operating margin in the same period last year. Net income in Q4 was $2,500,000 or $0.06 per share based on approximately 45,300,000.0 diluted shares outstanding. This compares to net income of 2,600,000 or $0.06 per share in Q4 last year using approximately 46,000,000 diluted shares outstanding. Turning to the balance sheet and cash flow. We ended the quarter with $182,700,000 in cash, cash equivalents and marketable securities.
In March of twenty twenty four, we announced a new $25,000,000 share repurchase program, which runs for one year until March 2025. This new share repurchase program follows the completion of two earlier capital return programs, which collectively returned $166,000,000 to shareholders. Under the new $25,000,000 share repurchase program, we have utilized $23,600,000 to date with approximately $20,500,000 utilized in 2024 and approximately $3,100,000 utilized thus far in Q1 twenty twenty five. Our balance sheet continues to remain strong with almost $183,000,000 of cash and investments at the end of twenty twenty four. Turning to our cash flow metrics for Q4 and for 2024 as a whole.
Cash provided by operations in Q4 was $1,000,000 compared to cash used in operations of $900,000 in Q4 of last year. Free cash flow was positive $400,000 in Q4 compared to negative $2,000,000 in Q4 last year. This is our fourth quarter in a row of positive free cash flow. Our cash flow in Q4 and for 2024 includes cash outflows related to our restructuring efforts, which totaled $400,000 in Q4 and $2,600,000 for 2024. Our free cash flow for all 2024 was positive $2,600,000 compared to negative $14,400,000 in 2023, an improvement of $17,000,000 in one year.
Before I talk about how we’re thinking about ARR in 2025, I wanted to expand on what Sharath said regarding how we believe our strategy heading into 2025 can help drive a return to ARR growth. Starting with product innovation, we have seen meaningful progress with our AI powered ACE product and we believe our AI enabled content generation and personalization capabilities will further differentiate us from the competition. We are not stopping there and will be launching more exciting product innovations to take advantage of our treasure trove of first party data to deliver increased ROI to our customers. Our focus on highly regulated customer use cases, particularly in the life sciences and financial verticals will continue with a solutions based approach tailored to these verticals. We expect these verticals will continue to be growth vectors for us.
We expect the meaningful changes we made to our go to market team, including bringing in new senior leaders, will enable us to better execute on our strategic goals and drive our return to ARR growth. Our execution strategy in 2025 is focused on driving ARR growth while maintaining EBITDA profitability. We believe this will position us for sustained growth in 2026 and beyond. Now, before I move on to guidance, I want to provide our outlook on 2025 ARR and our framework for top and bottom line guidance. In 2024, we made meaningful progress in stabilizing our business with our enterprise and total net dollar retention rate, as well as our gross retention, all improving by mid single digits in 2024.
And in 2025, we expect to make more progress on all of these metrics. We are encouraged by the positive signs in new expansion business heading into 2025 compared to last year, And we are confident that the momentum from AI powered ACE will continue to be a tailwind to ARR growth. For 2025, given the momentum I just referenced, we do expect to return ARR growth during the year with ending 2025 core ARR expecting to be higher than ending 2024 levels. Our revenue guidance assumes ending 2025 core ARR increases year over year by 1% to 2%. As 2025 progresses, we expect to improve our ARR performance.
For Q1, our revenue guidance assumes core ARR will be breakeven to down 1% compared to 2024 year end levels. For our virtual conference product, we expect Q1 ARR to decline approximately $100,000 in Q1 and in Q1 at $2,200,000 We expect ARR from that product to continue to decrease slowly during 2025 and in 2025 at approximately $1,900,000 Our revenue guidance takes into account Q1 being a seasonally softer quarter for new business, and we expect that Q1 will be the low point for revenue and revenue will improve over the course of 2025. Our bottom line guidance reflects the seasonality, and we do not expect to be adjusted EBITDA positive in Q1, but do expect to be EBITDA positive for the following three quarters. For the year, we are focused on getting back to ARR growth, making strategic investments, including in AI innovation and maintaining a consistent level of expense discipline. We are committed to our long term target of double digit operating margin.
Now turning to our annual guidance for 2025. For the full year, we expect core platform revenue, including services, to be in the range of 136,300,000 to $139,300,000 We expect total revenue to be in the range of $138,600,000 to $141,600,000 Professional services is expected to represent approximately 8% 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 $0.02 per share to $0.05 per share using approximately 47,500,000.0 diluted shares outstanding. We expect gross margins for the year to be approximately 76%. We expect to be adjusted EBITDA positive for 2025.
Given the seasonality of a soft Q1, we expect to deliver positive EBITDA in each quarter of twenty twenty five starting in Q2. Restructuring charges and amortization of acquired intangibles and certain other items are excluded from the full year non GAAP amounts provided above. Now turning to Q1 guidance. We expect Q1 core platform revenue, including services, in the range of $33,400,000 to $33,900,000 and total revenue, which includes our virtual conference product, in the range of $34,000,000 to $34,500,000 Professional services is expected to represent approximately 7% of total revenue. We expect our gross margin to be 76% in Q1.
We expect a non GAAP operating loss in the range of $3,300,000 to $2,300,000 and non GAAP loss per share of $0.03 per share to $0.01 per share using approximately 42,000,000 basic and diluted shares outstanding. We expect a restructuring charge of $800,000 to $1,000,000 in Q1 related to our ongoing cost reduction efforts, which is excluded from the non GAAP amounts provided above. I would like to remind everyone that Q1 is typically a seasonally softer quarter for us with fewer days in the quarter to deliver platform revenue and it is seasonally softer for services. As such, we would expect quarterly revenue and bottom line performance to increase in 2025 from seasonally soft Q1 levels. In summary, in 2024, we executed against our strategic growth pillars, made operational enhancements and demonstrated operational discipline by improving margins and retention rates.
We are confident in our ability to return AR growth in 2025 while maintaining adjusted EBITDA profitability and positive cash flow generation, and we remain committed to our long term goal of generating double digit top line revenue growth and double digit EBITDA margins. With that, Shrott and I will open the call up for questions.
Conference Operator: Thank Our first question is from Noah Herman with JPMorgan. Please proceed.
Noah Herman, Analyst, JPMorgan: Thanks for taking our questions. Can you maybe just provide a little bit of an overview of what you’re seeing in the marketing budget environment? You mentioned in your prepared remarks that you’re seeing some green shoots specifically in the technology vertical. So that would be really helpful and I
Steve Bataloni, Chief Financial Officer, ON24: have a follow-up as well.
Shiraz Sharan, Co-Founder and CEO, ON24: Yes, Noah, let me take that. As we look at, I think to provide the context on this, Noah, twenty twenty four was a very difficult year for marketing budgets. I mean, in the last six years,
Steve Bataloni, Chief Financial Officer, ON24: it was probably one of
Shiraz Sharan, Co-Founder and CEO, ON24: the toughest years. It was close to 8% compared to close to 11% in 2019 according to Gartner (NYSE:IT). That being said, as we look at 2025, while the market is still tight, but based on our customer conversations and win backs from boomerang customers that we’ve been seeing, there are some green shoots. We are also seeing customers reinvest in growth initiatives. Our business has stabilized now with gross retention being the best in the last three years and I expect this will continue to improve in 2025.
Customers are investing in AIAs as it is providing immediate ROI. So we expect NRR also to improve from 2024 levels. And we’re also focused on enhancing our new business execution, including enhancements that we made to our sales leadership and more vertical focus on regular industries. And you were talking about that you mentioned the technology vertical or what we are seeing there. If I look at them, some of the win backs and some and the investments in AI Power Days are really coming from the technology side.
So we are seeing some green shoots there. And finally, we are seeing stabilization, but we are not factoring any major improvement in the macro. If it does improve, it will only help us. Look, companies have been focused on reducing their martech stacks for the past two or three years. They’ve cut real deep.
These win backs are any guide. We expect them to start investing in revenue generating products in 2025. So we are cautiously optimistic.
Noah Herman, Analyst, JPMorgan: Got it. That’s really helpful. And then maybe just quickly on the guidance. It does imply operating margins on a non GAAP basis to contract a little bit, but I assume that’s given some of the positive signals you’re seeing in the demand environment. So would you be able to maybe provide a little bit more of an overview of the OpEx line items, how we should be thinking about sales and marketing, R and D?
Thank you.
Unidentified Speaker, ON24: Noah, let me go ahead and take that. So, first, we’re always prioritizing to return to growth and balancing profitability with that. The key is now a balanced approach for us with a focus on returning to top line growth in 2025. And given the strong progress we’ve made on profitability over the last couple of years, we’re focused on returning to growth. Now on the top line, we are seeing positive trends in the business and we do expect to return to ARR growth in 2025 as we discussed in the prepared remarks.
Now, in terms of the expense structure, we have gross margins in the mid to high 70s and are exiting 2024 with positive adjusted EBITDA for the fourth Q4 and for the year. And we expect to be continue to be adjusted EBITDA and EPS profitable for 2025 as a whole with Q1 being the trough for profitability and then positive EBITDA after that. Now, we will of course continue to monitor the cost structure based on what we’re seeing on the top line. And to transition back to top line growth this year, we are going to make some selected investments in things like product innovation, especially around AI enabled capabilities like AI powered ACE, which we launched early in 2024. And also, some selected go to market investments for regulated industries like financial services and life sciences as we’ve done this past year.
So, we believe we can make key investments in the business, get back to AR growth in 2025 and also maintain profitability without increasing
Steve Bataloni, Chief Financial Officer, ON24: the cost structure.
Unidentified Speaker, ON24: In terms of the macro, if that improves, as Sharath discussed, that will, of course, be a net positive
Shiraz Sharan, Co-Founder and CEO, ON24: for us
Unidentified Speaker, ON24: as well.
Conference Operator: Our next question is from Ian Black with Needham and Company. Please proceed.
Shayo D’Aula, Investor Relations, ON24: Hi, this is Ian Black on for Scott Berg. Should we expect free cash flow positive again in 2025?
Unidentified Speaker, ON24: Let me go ahead and take that. So we are guiding to EPS profitability in 2025. So, I would expect to be free cash flow positive as well in 2025, possibly excluding any one time or restructuring charges. Thank
Shiraz Sharan, Co-Founder and CEO, ON24: you.
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