ON24, Inc.

Good afternoon and welcome. Please note that the live and interactive webcast of today's call may be accessed via the investor relations section of the company's website at www.investors.on24.com. Upon completion of the prepared remarks, we will open the call for questions which may be submitted via the webcast portal or the dial-in line. Please note that this call is being recorded. And at this time, I would like to turn the conference over to Lauren Sloan with Blue Shirt Group.

Thank you. Hello, and good afternoon, everyone. Welcome to ON24's second quarter 2021 earnings conference call. On the call with me today are Shirat Charan, founder and CEO of ON24, and Chief Financial Officer Steve Attuoni. I would like to remind everyone that some information provided during this call may include forward-looking statements, including, without limitation, statements on ON24's future events, expected financial and operating results, business trends, global economic trends, and expected timing and benefit, if any, of such trends. These forward-looking statements may contain such words as project, outlook, future, expect, will, anticipate, believes, intends, or referred to as guidance. These forward-looking statements reflect beliefs, estimates, and predictions as of today, and ON24 expressively assumes no obligation to update any such forward-looking statements. These forward-looking statements are only predictions and are subject to substantial risks. Factors that could cause or contribute to such differences include, but are not limited to, risks associated with our ability to attract new customers and expand to existing customers, fluctuation in our performance, competition in our market, and any decline in demand for our solutions, our ability to expand our sales and marketing capabilities and otherwise manage our growth, the impact of COVID-19 pandemic, and other risks identified in the company's SEC filings. For a detailed description of risks and uncertainties which could impact these forward-looking statements, you should review ON24's periodic SEC filings, including the risks identified today in today's financial press release. We would like to point out that on today's call, you 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 reconciliation of these non-GAAP financial measures, please refer to today's financial press release. I'll now turn the call over to Shirat. Shirat, please go ahead.

Thank you. and welcome everyone to ON24's second quarter 2021 financial results conference call. Thank you for joining us. For the second quarter, we reported total revenue of $52.1 million, which grew 43% year over year. Subscription and other platform revenue grew by 68% year over year, excluding legacy. Additionally, we continue to demonstrate significant leverage, which drove non-GAAP operating income of $2.5 million and $5.7 million in free cash flow for the quarter. Our second quarter ARR was $164.1 million, up 44% from $114.2 million in the second quarter of 2020, which itself was up 70% from the second quarter 2019. Q2 2021 was a transition quarter where we went from a peak of COVID in Q2 2020 to peak of vaccinations in Q2 2021. New business bookings remained healthy even though in Q2 2021 there was some uncertainty as many businesses anticipated they might be starting to return to some form of post-pandemic normalcy. In the second quarter, we added 183 new customer logos, similar to Q1, and almost 10% higher than Q4. However, we also experienced higher-than-expected churn and downsell from customers we signed up in the second quarter of last year during the peak of COVID. This higher churn was primarily in the first-time renewal cohort, customers who signed up one-year contracts last year and who were up for renewal. We, of course, recognize that during the pandemic, companies of every size were searching for tools to quickly deploy to reach customers whom they could no longer connect with in person. That was true with SMB buyers and non-ICP ideal customer profile buyers focused on one-time events who rushed to find alternative solutions to in-person business. This is normally not our primary target audience. As a result, Q2 2021 was our largest renewal cohort ever, and the share of first-time renewals in Q2 2021 was outsized, accounting for over 60% of the cohort. We saw significantly higher churn and downsell within this group, while the rest of our business had strong retention equivalent to pre-pandemic levels. We expect the business from first-time renewal base that did renew to have the same strong retention profile as our existing customer base. We anticipate that this churn and downsell pressure will ease meaningfully in the second half of the year when the proportion of first-time renewals continues to drop from over 60% in Q2 to 30% in Q4, a significant reduction that brings us more in line with pre-COVID cohorts. Additionally, the total Q3 and Q4 renewal cohorts are meaningfully smaller than Q2. Most importantly, when we look at Q2, the logo churn was primarily in the SMB. Our enterprise customers remained very solid throughout the quarter. In addition, our customer quality has increased. For example, in Q2, we added over 20 net new 100K ARR customers, similar to recent quarters. Our gross enterprise logo retention was the same as our pre-COVID enterprise retention. We saw some downsizing in these accounts to normalize for some of the peak of COVID buying, but are very pleased with enterprise customer retention. We also saw multi-year deals grow as a percentage of ARR, and the number of customers buying multiple products increased in Q2 over Q1. As a result of these factors, we believe that we have gotten past the worst of the churn, and we have significantly reduced the number of customers that do not meet our normal target profile. It also speaks to the underlying strength of our business, especially in our focus area, the enterprise. Enterprises deploy our platform as a data-rich system of engagement, purpose-built for enterprise class marketing and sales. Many of our enterprise customers, enabled by the self-service capabilities in our platform, deliver hundreds or thousands of experiences per year. For many of these customers, we have become their top pipeline generating platform, and they're standardizing on ON24 for their prospect engagement and conversion. The pandemic has accelerated the global enterprise awareness of our offerings, and we now have a larger served market than ever before. And as a new digital-first enterprise business pattern emerges and as our category leadership grows, our future is more exciting. Importantly, our digital system of engagement provides our customers with the assurance that regardless of the uncertainty of what the new normal may look like and any changes to it, ON24's platform will support our customers' revenue continuity by having a sales and marketing solution that drives revenue. Our solution is available globally with enterprise scale and options and features to enable our customers to make privacy and compliance choices that align to their needs. Our market leadership position has been further validated by the numerous industry recognitions and awards we have received. In June 2021, it was announced by G2, one of the largest software marketplace and user review platforms, that based on user reviews, ON24 Elite was recognized as the top webinar software for enterprises and mid-market companies. In addition, in July 2021, TrustRadius, another review site for business technology, named ON24 the best webinar software for enterprises. Let me now walk you through some Q2 customer examples. There are three core use cases that we focus on at ON24. These are demand generation, partner enablement, and event marketing. These are all categories with very large global and growing TAMs. Starting with demand generation, today we are enabling thousands of customers to convert millions of prospects to buyers. Our customers can scale prospect engagement and turn that engagement into actionable insights thereby increasing sales conversion and driving revenue growth. One great example is with a large, approximately $15 billion market cap, architecture, engineering, and construction software company. In Q2, they expanded the investment with ON24 with an approximately half-million-dollar deal. They standardized webinar demand generation and virtual customer engagement on ON24 using ON24 Elite, and engagement hubs, and adding new breakouts for two-way engagement. Last year, they ran more than 1,000 experiences. They also leveraged ON24 Connect for deep data integration with SAP's marketing cloud. Over the past two years, we've increased ARR with this customer by 800%. Another important use case is partner enablement. ON24 provides a scalable digital approach for companies to enable and train thousands of OEMs distributors, technicians, partners, and advisors on their extensive portfolio of products and services. These companies span industries including manufacturing, consumer package groups, financial services, and pharmaceuticals. One of the world's largest construction equipment manufacturer expanded their spend in Q2 and is nearing 1 million in annual spend with ON24. In Q2, they began to expand their solution globally, deploying ON24 elite and virtual conference across Europe and Latin America to provide training and education to the vast network of dealers and consultants. Finally, for event and field marketing professionals, ON24 provides webinars, virtual conferences, and integrated on-demand digital engagement hubs. We are seeing event marketing as a growing use case for our platform. In addition, the ON24 platform can uniquely support hybrid event engagement, providing the same interactive experiences to both virtual and physical audiences simultaneously. One of the world's leading exhibition organizers who runs thousands of physical and virtual events for leading B2B brands across Asia, North America, and the Middle East expanded their investment in ON24 after having successfully deployed nearly 3,000 ON24 experiences They recently increased the number of experiences by over 30% to meet growing client demand. In addition to these great use case examples, I wanted to highlight some additional new customer wins and customer expansions from this past quarter. In our second quarter, we acquired new customers from various industries, including technology, life sciences, financial services, higher education, and others. One new six-figure win was with one of the world's top medical device companies. They chose ON24 over other solutions. They use ON24 Elite and Engagement Hub to drive top-of-funnel engagement and continuous activity for their prospective and existing customers. The ability to deliver branded experiences and integrate our data with Salesforce's CRM and Adobe Marketo's marketing automation were deciding factors in choosing ON24. Next. A leading cloud-based HR solution company switched from a competitive solution to ON24 Elite. Our ability to collect audience engagement data and make that data actionable through our Salesforce CRM integration was viewed as critically important differentiator. A large Fortune 500 American bank holding company needing a platform purpose built for sales and marketing chose ON24 as the preferred vendor for their webinars. ON24's ability to provide first person data and buying readiness signals to the marketing and sales organization was a major competitive advantage. They're using ON24 Elite and ON24 Connect. In addition to the new customer wins we saw, a large number of expansion deals in Q2. Let me share just a few of the incredible examples. One large expansion deal nearing half a million dollars was with one of the world's largest pharmaceutical companies. They are quadrupling the number of experiences they deliver with ON24 Relate to engage and educate key opinion leaders and healthcare providers on new drugs and treatments. Second, a top 20 business insurance company increased their spend by almost 300% with ON24 for both lead generation and virtual events. They were previously using a combination of tools to host an event for thousands of attendees but wanted to deliver a better attendee experience, so they're shifting to ON24 Virtual Conference. One of the world's largest network telecommunication companies increased their spend 26% in Q2. They used ON24 Relate to track buying signals and ON24 Breakouts to connect prospects and customers with sales reps. In addition, we continue to see growth in our new international markets. One of the world's largest suppliers of contact lenses, pharmaceuticals, and eye surgery products is expanding use of ON24 Elite into Europe for prospect engagement and continuing medical education of eye care professionals. They're increasing their annual spend with ON24 by 500%. A new six-figure win was with one of the world's largest multinational conglomerate corporations. They're using ON24 Elite, breakouts, and virtual conferences to enable 2,500 sales, distributors, and partners in Europe, Latin America, and Asia Pacific. A billion-dollar Japanese chemicals company in a new six-figure one is standardizing on ON24 Elite and virtual conferences for the newly established digital experience organization. As you can see, we continue to see tremendous momentum on a global basis. Now let's shift to the topic of innovation. I'm very pleased with the progress we have made in this area. We recently made advancements in three key areas, customer experience, AI-based analytics, and international support. Starting with experiences, I want to first and importantly discuss our leadership and hybrid experiences and engagement. We are bringing the benefits of digital engagement to physical events. ON24 enables our customers to deliver unified experiences, where both physical and digital audiences can interact and engage with the same experience at the same time. Virtual attendees can now view the same presentations, interact with the same digital content, participate in the same Q&A, polls, and network with breakouts. The in-person attendee has access to the same interactivity tools. Importantly, we are collecting first-person engagement data and buying signals creating profiles across both in-person and virtual attendees. Finally, our hybrid engagement platform preserves for our customers the digital-first benefits of extended audience reach and ecosystem integration. As I mentioned earlier, our ability to support hybrid engagement provides our customers with the assurance that regardless of the uncertainty of what the new normal may look like and any changes to it, that can help them drive prospect engagement and ensure revenue continuity. And we continue to further enhance the self-service capability of all our experience platforms. Another key innovation in customer experience was with the launch of ON24 Breakouts. This expanded the functionality and interactivity of webinars built with ON24 Elite and will also be generally available in our virtual conference product by the end of this month. Breakouts enable attendees and presenters to network with each other face-to-face virtually. Sales teams to connect immediately with prospects and subject matter experts to offer two-way communication to support customer education and training. This new product has been met with a great deal of early success. The other key area of innovation for ON24 is in our AI-based analytics and personalization engine, ON24 Intelligence. In Q2, we launched a new AI-based personalized recommendation engine. Based on the user's engagement history, our AI engine creates unique content recommendations specifically tailored to their individual interests, creating journeys that are uniquely matched with each individual lead or prospect, helping to accelerate the conversion of prospects to buyers. In addition to this, we recently expanded the first-party data displayed for each individual user, to now include virtual conference engagement data points. We are now able to track over 50-plus data points over the prospect's lifetime of behavior across live, always-on, and personalized content experiences. Finally, I would like to talk about the platform enhancements that we have made to support our global enterprise growth and increase into new international markets. One example is in the Japan market. we are supporting our Japanese market clients with a new back-end user interface. With Japanese language availability in ON24 Elite, ON24 is expanding global localization of its platform and services. And we can see the impact of these investments with the great momentum and wins that we are seeing in this region. Those were just a few recent innovation highlights. We look forward to continuing to update you in this area. Finally, I would like to update you on some important investments that support our core growth vectors. First, we continue to grow our investment in our sales capacity to drive new customer acquisition, expansion, and upsell. These sales investments are focused across both the enterprise and mid-market segments. Second, we continue to invest in international markets in both EMEA and APAC with specific focus on Japan and DOC. Third, we are increasingly focused on building channel leverage into our business model. There are two key new channels we are developing. The first is a partner network made of sales and marketing agencies. These agencies have the ability to standardize on the ON24 platform to deliver digital engagement and virtual events on behalf of their clients. The second area of channel focus is with our key ecosystem technology partners. We are making investments into joint go-to-market with major CRM, marketing automation, and other vendors. While the percentage contribution of the channel business is currently in the mid-single digits, we expect this to grow in the subsequent quarters. And finally, we continue investing in our R&D organization to develop new products to add to our overall platform offering. To wrap up, I wanted to highlight a few things. We are an industry leader in a market space that has been redefined and is a very large market. The pandemic has accelerated the global enterprise awareness of our offerings, and we now have a larger served market than ever before. And as our category leadership grows, our future is more exciting than ever before. With sales and marketing increasingly shifting to digital channels even before the pandemic, Gartner projects 80% of B2B sales and marketing to be over digital channels by 2025. ON24 is increasingly becoming a must-have in the enterprise. Finally, our digital system of engagement provides our customers with the assurance that regardless of the uncertainty of what the new normal may look like and any changes to it, ON24's platform will support our customers' revenue continuity and growth by having a sales and marketing solution that drives revenue. With that, I'll hand it over to our CFO, Steve Dattuani, to walk you through our Q2 results in more detail.