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ON24 (ONTF) 7 Nov 24 2024 Q3 Earnings call transcript

AInvestFriday, Nov 8, 2024 9:52 am ET
2min read

In a positive development for ON24, the company reported significant improvements in its financial performance during the third quarter of 2024. The quarter saw a marked improvement in key metrics such as revenue, gross margins, adjusted EBITDA, and EPS, all of which exceeded expectations. The company's core platform revenue was $35.6 million, reflecting a decrease of 7% year-over-year, while total revenue, including Virtual Conference, reached $36.3 million. Sharat Sharan, Co-Founder and CEO of ON24, and Steve Vattuone, Chief Financial Officer, highlighted the company's progress in stabilizing its business despite the challenges posed by ongoing macroeconomic uncertainty and declining marketing budgets.

Financial Highlights and Key Achievements

The third quarter of 2024 marked a significant milestone for ON24, with the company achieving its sixth consecutive quarter of adjusted EBITDA profitability and a third consecutive quarter of positive free cash flow generation. The company's core ARR performance has improved, with a decrease of 1% year-over-year, a notable improvement from the 12% year-over-year decrease in the same period in 2023. This improvement is attributed to the company's focus on mission-critical use cases in regulated industries, particularly in life sciences. ON24's revenue retention has also shown a high single-digit year-over-year increase, demonstrating the company's ability to retain customers and maintain a strong installed base.

Strategic Focus and Innovation

ON24's strategic focus on platform innovation, particularly in the area of AI-powered ACE, has yielded positive results. The company has seen a surge in the number of AI-powered ACE customers, reaching triple digits, with these customers showing higher investment levels and longer usage periods. The AI-powered ACE solution, which includes personalization at scale, AI-generated content, and automated campaigns, has been instrumental in helping ON24 recapture budget in the technology vertical, an industry segment that faced significant pressure due to budget concessions. The company's investment in AI innovation and the addition of new AI-driven capabilities, such as Smart Tips, have further strengthened ON24's competitive advantage and solidified its position in the market.

Go-to-Market Strategy and Win-Backs

ON24's enterprise go-to-market strategy has shown encouraging signs of stabilization and a return to growth. The company's focus on multiyear agreements and the expansion of its customer base has led to a record high of over 50% of ARR in multiyear agreements. Additionally, the company has seen a significant increase in win-backs from customers who left for cheaper but less effective options. These win-backs, particularly from the technology sector, are a positive indicator of ON24's ability to attract and retain customers, especially as the market begins to stabilize and companies start to invest in revenue-generating solutions.

Looking Ahead

Despite the challenges posed by macroeconomic conditions and declining marketing budgets, ON24 is optimistic about its future prospects. The company expects to return to ARR growth in 2025, with a goal of achieving positive ARR for the year. ON24's strategic focus on platform innovation, regulated industries, and improving new business execution, along with its disciplined approach to cost management and profitability, positions the company well for the future.

Conclusion

In conclusion, ON24's third quarter 2024 earnings call highlighted the company's resilience and adaptability in the face of challenging market conditions. The company's financial performance, strategic focus, and go-to-market execution have laid a strong foundation for future growth. As ON24 continues to innovate and execute on its strategic initiatives, it is well-positioned to capitalize on the opportunities in the market and drive long-term value for its shareholders.

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