Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• ON24 Inc (NYSE:ONTF) launched AI Powered Ace, which accounted for over 20% of growth ARR bookings within a year.
• The percentage of customers using two or more products reached an all-time high of close to 40%.
• Gross retention for 2024 improved to its highest level in the last three years.
• ON24 Inc (NYSE:ONTF) achieved positive free cash flow of $2.6 million in 2024, compared to negative $14.4 million in 2023.
• The company consistently met and exceeded margin and profitability targets, with non-GAAP gross margin improving from 75% in 2023 to 77% in 2024.

Negative Points

• Q4 revenue from the core platform decreased by 6% year over year.
• Total ARR at the end of Q4 decreased by $2.3 million from Q3, in line with guidance.
• Professional services revenue decreased by 13% year over year.
• Operating loss for Q4 was $0.4 million, compared to operating income of $0.2 million in the same period last year.
• The company experienced two significant downsells in Q4, impacting ARR performance.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with ONTF.

Q: Can you provide an overview of what you're seeing in the marketing budget environment, particularly in the technology vertical? A: (CEO) 2024 was a challenging year for marketing budgets, with a significant decrease compared to previous years. However, as we look into 2025, we are seeing some positive signs, especially in the technology vertical. Customers are beginning to reinvest in growth initiatives, and our business has stabilized with improved gross retention. We are cautiously optimistic about 2025 as companies start investing in revenue-generating products again.

Q: The guidance implies a contraction in operating margins on a non-GAAP basis. Can you provide more details on how we should think about sales, marketing, and R&D expenses? A: (CFO) We are prioritizing a balanced approach to return to growth while maintaining profitability. We expect to make selected investments in product innovation, particularly around AI-enabled capabilities, and in go-to-market strategies for regulated industries. Despite these investments, we aim to maintain profitability without increasing the cost structure significantly.

Q: Should we expect ON24 to be free cash flow positive again in 2025? A: (CFO) Yes, we are guiding towards EPS profitability in 2025, and we expect to be free cash flow positive as well, excluding any one-time restructuring charges.

Q: What are the key factors that will drive a return to ARR growth in 2025? A: (CFO) We anticipate ARR growth driven by product innovation, particularly our AI-powered offerings, and a focus on highly regulated industries like life sciences and financial services. We have also made changes to our go-to-market team to better execute our strategic goals.

Q: Can you elaborate on the impact of AI-powered products on your growth strategy? A: (CEO) Our AI-powered products, such as the AI-powered Ace, have shown positive momentum and contributed significantly to our growth ARR bookings. These innovations provide immediate ROI for customers and are expected to be key drivers for growth in 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.