ON24, Inc.

Greetings. Welcome to On24, fourth quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Shio Dinloya, Investor Relations. Thank you. Please go ahead.

Thank you. Hello and good afternoon, everyone. Welcome to ON24's fourth quarter and full year 2024 earnings conference call. On the call with me today are Sherrod Sherron, co-founder and CEO of ON24, and Steve Batuoni, 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. ON24 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'd 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 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 Sherrod.

Thank you and welcome everyone to ON24's fourth quarter and full year 2024 financial results conference call. I appreciate you joining us today. With me is Steve Vattuoni, 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 a return to growth by diligently focusing on improving our growth 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%. Growth retention for 2024 improved to its highest level in the last three years. Net retention for our enterprise business was 91%, amid 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 percent in 2023 fiscal year to 77 percent 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 $2.6 million compared to negative $14.4 million in 2023. an improvement of $17 million. Turning to Q4 results. Q4 revenue from our core platform, including services, was $36 million, and total revenue, including virtual conference, was $36.7 million. Of total revenue for the quarter, subscription and other platform revenue was $33.6 million, and professional services revenue was $3.1 million. In terms of ARR, we ended the quarter with $127.3 million of core platform ARR, a decrease of $2.3 million from Q3 in line with our guidance. Total ARR at the end of Q4, including ARR from our virtual conference product, was $129.7 million. Steve will elaborate more on the results, including ARR, but I'd like to highlight that even though Q4 is the largest renewal base in the year, our in-peer growth retention in Q4 was consistent with the highest levels we have seen in 2024 and was up by mid single digits compared to the growth 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's 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 and 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 deploying 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 PowerDays offering at the beginning of 2024, we were laser focused on driving adoption across our install 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 techs, 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 a 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 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 and 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 for platform innovation. We plan to expand our roadmap with our latest innovations to be announced at ON24Next, 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 regulated 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 multibillion-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 their healthcare professional or HCP digital engagement strategy. Through our platform, they're transforming their ability to engage and interact with hard-to-reach HCPs and integrating ON24 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, they recognized that without a purpose-built platform for engaging experiences and first-party actionable data and insights, that their program could not be successful. coming into a new four-year agreement. They return 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 2024. 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 a 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 million 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 install base to continue and anticipate more improvement in gross retention in 2025 as churn and downsell 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 vertical, 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 am 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 PowerDays as a percentage of revenues. We will return to customer growth in 100K 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 2025 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 Vattuoni, our CFO, to share the financial details of Q4 and full year 2024.