Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ON24 Inc (ONTF, Financial) reported revenue, gross margins, adjusted EBITDA, and EPS all above guidance for Q3 2024.
- The company achieved its sixth consecutive quarter of adjusted EBITDA profitability and third consecutive quarter of positive free cash flow.
- AI-powered solutions are gaining traction, with AI-powered ARR reaching a new high as a percentage of growth ARR.
- ON24 Inc (ONTF) has seen significant improvement in gross retention and net retention rates, with churn and downsells improving year over year.
- The company is experiencing customer win-backs, particularly from those who previously left for less effective solutions, indicating strong platform differentiation.
Negative Points
- Total ARR decreased by approximately 1% from Q2 2024, indicating ongoing challenges in stabilizing the business.
- Revenue from the core platform decreased by 7% year over year, reflecting pressure on marketing budgets.
- Despite improvements, ON24 Inc (ONTF) still faces macroeconomic challenges and softness in marketing budgets.
- The company expects a sequential reduction of core ARR by 1% to 2% in Q4 2024, showing continued pressure on growth.
- ON24 Inc (ONTF) has not yet returned to ARR growth, with further work needed to improve new business execution.
Q & A Highlights
Q: Can you provide more details on the customer win backs and the impact of AI on your platform?
A: Sharat Sharan, CEO: We are seeing encouraging signs with customer win backs, particularly from those who left for collaboration tools and realized their mistake. For example, a large cybersecurity company returned to us after realizing the negative impact on their pipeline. Our AI-powered solutions are a significant draw, offering personalized experiences and actionable insights that competitors lack.
Q: What does the win back pool look like, and what percentage do you expect to win back?
A: Steve Vattuone, CFO: As the market stabilizes, we expect more companies to return to ON24, focusing on revenue generation. While it's hard to quantify, we anticipate continued momentum in win backs, especially from the technology sector, as we move into 2025.
Q: How are you addressing changes in the go-to-market strategy with new leadership?
A: Sharat Sharan, CEO: We've hired a new sales leader for North America to improve our business outcome-oriented execution. Our focus is on aligning solutions with business challenges and creating measurable outcomes, particularly in verticals like life sciences and financial services.
Q: Can you elaborate on the improvements in gross retention and down sells?
A: Steve Vattuone, CFO: Gross retention improved by high single digits year-over-year, and down sells showed the best performance in three years. We have more multi-year contracts than ever, indicating stabilization and setting the stage for improved retention in 2025.
Q: What are your expectations for 2025, particularly regarding seasonality and growth?
A: Steve Vattuone, CFO: We expect Q1 to be seasonally soft, but anticipate revenue growth throughout 2025. Our goal is to maintain profitability while returning to ARR growth, supported by disciplined cost management and strategic investments in AI and regulated industries.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
