ON24 Announces First Quarter 2023 Financial Results

  • On track to achieve Q2 2023 profitability target
  • ARR of $149.2 million on our Core Platform
  • First quarter total revenue of $43.1 million
  • Expanded capital return program to $125 million; cash dividend of $1.09 per share
  • Added three new board members: Cynthia Paul, Ron Mitchell and Teresa Anania

ON24 (NYSE: ONTF), a leading sales and marketing platform for B2B digital engagement, today announced financial results for the first quarter ended March 31, 2023.

“I am pleased with our first quarter results and the progress we have made accelerating our path to profitability. We are on track to reach break-even non-GAAP EPS by Q2 and are now targeting break-even non-GAAP EBITDA by Q4 2023, with continued improvement in the quarters ahead,” said Sharat Sharan, co-founder and CEO of ON24. “While many marketing budgets are facing temporary economic pressure, resulting in greater deal scrutiny and softness in our key customer verticals which has impacted our near-term top-line, we believe we are well positioned to capture market share and are confident in our ability to deliver profitable growth.”

First Quarter 2023 Financial Highlights

  • Core Platform ARR of $149.2 million as of March 31, 2023, a decrease of 4% year-over-year.
  • Total ARR of $155.6 million as of March 31, 2023, a decrease of 7% year-over-year.
  • Revenue:
    • Revenue from our Core Platform, including services, was $41.2 million, a decrease of 7% year-over-year.
    • Total revenue was $43.1 million, a decrease of 11% year-over-year.
  • GAAP Operating Loss was $19.9 million, compared to GAAP operating loss of $15.2 million in the first quarter of 2022.
  • Non-GAAP Operating Loss was $4.2 million, compared to non-GAAP operating loss of $5.7 million in the first quarter of 2022.
  • GAAP Net Loss was $17.6 million, or $(0.37) per diluted share, compared to GAAP net loss of $15.5 million, or $(0.32) per diluted share in the first quarter of 2022.
  • Non-GAAP Net Loss was $1.8 million, or $(0.04) per diluted share, compared to a non-GAAP net loss of $6.0 million, or $(0.13) per diluted share in the first quarter of 2022.
  • Cash Flow: Net cash used in operating activities was $4.2 million, compared to $6.8 million used in operating activities in the first quarter of 2022. Free cash flow was negative $4.3 million for the quarter, compared to negative $7.8 million in the first quarter of 2022.
  • Cash, Cash Equivalents and Marketable Securities totaled $315.7 million as of March 31, 2023.

For more information regarding non-GAAP operating income (loss), non-GAAP net income (loss) and free cash flows, see the section titled “Non-GAAP Financial Measures” below. For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measure, see the tables at the end of this press release.

Recent Business Highlights:

  • Strong enterprise customer tenure with our top 25 customers expanding Core Platform ARR at an aggregate rate of over 5X over 5 years.
  • Continued adoption of multiple products with Q1 2023 ASP for new customers increasing YoY to its highest level in the last 4 quarters.
  • Introduced two key generative AI capabilities, Smart Text for automated content creation and Key Moments for enhanced reporting, to help our customers improve revenue results with less resources.
  • Achieved industry recognition as a differentiated digital engagement platform based on excellent customer satisfaction ratings, earning the third consecutive “Top-Rated Award” by TrustRadius and winning the “Appealie Awards” that represents excellence in customer success for the marketing category.
  • Announced that the annual ON24 global user conference, The ON24 Experience 2023, will be held virtually on June 13 - 15, where our latest platform innovations and customer success stories will be showcased.

Financial Outlook

For the second quarter of 2023, ON24 expects:

  • Core Platform Revenue, including services, to be in the range of $39.5 million to $40.5 million.
  • Total revenue of $41.1 million to $42.1 million.
  • Non-GAAP operating loss of $2.4 million to $1.8 million.
  • Non-GAAP net income per share of $0.00 per share, or break-even EPS, using approximately 50.5 million diluted shares outstanding.
    • Restructuring charge of $1.5 million to $2.3 million, excluded from the Non-GAAP amounts above.
    • Charge for underutilized real estate of $1.3 million to $1.5 million, excluded from the Non-GAAP amounts above.

For the full year 2023, ON24 now expects:

  • Core Platform Revenue, including services, to be in the range of $156.5 million to $159.5 million.
  • Total revenue of $162.0 million to $165.0 million.
  • Non-GAAP operating loss of $10.5 million to $8.0 million.
  • Non-GAAP net loss per share of $(0.07) to net income of $0.00 per share using approximately 45.1 million basic and diluted shares outstanding and 49.7 million diluted shares outstanding, respectively.

Conference Call Information

ON24 will host a conference call and live webcast for analysts and investors today at 2:00 p.m. Pacific Time. Parties in the United States can access the call by dialing (877) 497-9071 or +1 (201) 689-8727.

A webcast and management’s prepared remarks for today’s call will be accessible on ON24’s investor relations website at investors.on24.com. Approximately one hour after completion of the live call, an archived version of the webcast will be available on the Company’s investor relations website.

Definitions of Certain Key Business Metrics

Core Platform: The ON24 Core Platform products include:

ON24 Elite: live, interactive webinar experience that engages prospective customers in real-time and can be made available in an on-demand format.

ON24 Breakouts: live breakout room experience that facilitates networking, collaboration and interactivity between users.

ON24 Forums: live, interactive experience that facilitates video-to-video interaction between presenters and audiences.

ON24 Go Live: live, interactive video event experience that enables presenters and attendees to engage face-to-face in real-time and can also be made available in an on-demand format.

ON24 Engagement Hub: always-on, rich multimedia content experience that prospective customers can engage anytime, anywhere.

ON24 Target: personalize and curate, rich landing page experience that engages specific segments of prospective customers to drive desired action.

Annual Recurring Revenue (“ARR”): ARR is calculated as the sum of the annualized value of our subscription contracts as of the measurement date, including existing customers with expired contracts that we expect to be renewed. Our ARR amounts exclude professional services, overages from subscription customers and Legacy revenue.

Non-GAAP Financial Measures

In addition to our results determined in accordance with generally accepted accounting principles in the United States, or “GAAP”, we consider our non-GAAP operating income (loss), non-GAAP net income (loss) and free cash flow in evaluating our operating performance. We define non-GAAP operating income (loss) as net income (loss) excluding, interest expense, other (income) expense, net, income tax, stock-based compensation, amortization of acquired intangible assets, shareholder activism related costs, restructuring costs, charges for underutilized real estate, and certain other costs. We define non-GAAP net income (loss) as net income (loss) excluding stock-based compensation, amortization of acquired intangible assets, shareholder activism related costs, restructuring costs, charges for underutilized real estate, and certain other costs. We define free cash flow as net cash provided by (used in) operating activities, less purchases of property and equipment.

We use non-GAAP operating income (loss) and non-GAAP net income (loss) to evaluate our ongoing operations and for internal planning and forecasting purposes, and we use free cash flow to measure and evaluate cash generated through normal business operations. We believe non-GAAP operating income (loss) and non-GAAP net income (loss) may be helpful to investors because they provide consistency and comparability with past financial performance. We believe free cash flow may be helpful to investors because it reflects that some purchases of property and equipment are necessary to support ongoing operations, while providing a measure of cash available to acquire customers, expand within existing customers and otherwise pursue our business strategies.

However, these non-GAAP financial measures are each presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Non-GAAP financial measures have no standardized meanings prescribed by GAAP and are not prepared under a comprehensive set of accounting rules or principles. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measure as a tool for comparison.

Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measure are included in the tables at the end of this press release.

Forward-Looking Statements

This document contains “forward-looking statements” under applicable securities laws. Such statements can be identified by words such as: “outlook,” “expect,” “convert,” ��believe,” “plan,” “future,” “may,” “should,” “will,” and similar references to future periods. Forward-looking statements include express or implied statements regarding our expected financial and operating results, the execution of our capital return program, the size of our market opportunity, the success of our new products and capabilities, the impact of the COVID-19 pandemic on the way people do business, and other statements regarding our ability to achieve our business strategies, growth, or other future events or conditions. Such statements are based on our current beliefs, expectations, and assumptions about future events or conditions, which are subject to inherent risks and uncertainties, including our ability to attract new customers and expand sales to existing customers, decline in our growth rate; fluctuation in our performance, our history of net losses and expected increases in our expenses; competition and technological development in our markets 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 the COVID-19 pandemic; disruptions or other issues with our technology or third-party services; compliance with data privacy, import and export controls, customs, sanctions and other laws and regulations; intellectual property matters; and matters relating to our common stock, along with the other risks and uncertainties discussed in the filings we make from time to time with the Securities and Exchange Commission. Actual results may differ materially from those indicated in forward-looking statements, and you should not place undue reliance on them. All statements herein are based only on information currently available to us and speak only as of the date hereof. Except as required by law, we undertake no obligation to update any such statement.

About ON24

ON24 is on a mission to re-imagine how companies engage, understand and build relationships with their audience in a digital world. Through our leading sales and marketing platform for digital engagement, businesses use our portfolio of webinar, virtual event and content experiences to drive engagement and generate first-party data, delivering revenue growth across the enterprise – from demand generation to customer success to partner enablement.

ON24 powers digital engagement for industry-leading customers worldwide, including 3 of the 5 largest global technology companies, 3 of the 6 largest US banks, 3 of the 5 largest global healthcare companies, and 3 of the 5 largest global industrial manufacturers, enabling organizations to reach millions of professionals a month for billions of engagement minutes per year with all the first-party data being captured, generated and integrated from one place. ON24 is headquartered in San Francisco with global offices in North America, EMEA, and APAC. For more information, visit www.ON24.com.

© 2023 ON24, Inc. All rights reserved. ON24 and the ON24 logo are trademarks owned by ON24, Inc., and are registered in the United States Patent and Trademark Office and in other countries.

ON24, INC.

Condensed Consolidated Balance Sheets

(in thousands)

(Unaudited)

 

 

March 31, 2023

 

December 31, 2022

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

100,777

 

 

$

26,996

 

Marketable securities

 

214,908

 

 

 

301,125

 

Accounts receivable, net

 

33,451

 

 

 

43,757

 

Deferred contract acquisition costs, current

 

12,571

 

 

 

13,136

 

Prepaid expenses and other current assets

 

8,431

 

 

 

6,281

 

Total current assets

 

370,138

 

 

 

391,295

 

Property and equipment, net

 

5,957

 

 

 

7,212

 

Operating right-of-use assets

 

5,119

 

 

 

5,606

 

Intangible asset, net

 

1,711

 

 

 

1,979

 

Deferred contract acquisition costs, non-current

 

17,991

 

 

 

17,773

 

Other long-term assets

 

1,486

 

 

 

1,608

 

Total assets

$

402,402

 

 

$

425,473

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities

 

 

 

Accounts payable

$

3,187

 

 

$

4,611

 

Accrued and other current liabilities

 

17,322

 

 

 

18,465

 

Deferred revenue

 

81,166

 

 

 

83,453

 

Finance lease liabilities, current

 

1,245

 

 

 

1,554

 

Operating lease liabilities, current

 

2,644

 

 

 

2,648

 

Total current liabilities

 

105,564

 

 

 

110,731

 

Operating lease liabilities, non-current

 

4,389

 

 

 

5,040

 

Other long-term liabilities

 

1,513

 

 

 

1,741

 

Total liabilities

 

111,466

 

 

 

117,512

 

Stockholders’ equity

 

 

 

Common stock

 

5

 

 

 

5

 

Additional paid-in capital

 

562,151

 

 

 

562,555

 

Accumulated deficit

 

(271,317

)

 

 

(253,727

)

Accumulated other comprehensive income (loss)

 

97

 

 

 

(872

)

Total stockholders’ equity

 

290,936

 

 

 

307,961

 

Total liabilities and stockholders’ equity

$

402,402

 

 

$

425,473

 

ON24, INC.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

 

 

Three Months Ended March 31,

 

2023

 

2022

Revenue:

 

 

 

Subscription and other platform

$

39,364

 

 

$

43,477

 

Professional services

 

3,699

 

 

 

5,015

 

Total revenue

 

43,063

 

 

 

48,492

 

Cost of revenue:

 

 

 

Subscription and other platform(1)(4)

 

9,889

 

 

 

9,602

 

Professional services(1)(4)

 

3,317

 

 

 

3,342

 

Total cost of revenue

 

13,206

 

 

 

12,944

 

Gross profit

 

29,857

 

 

 

35,548

 

Operating expenses:

 

 

 

Sales and marketing(1)(3)

 

24,417

 

 

 

29,193

 

Research and development(1)(2)(4)

 

11,099

 

 

 

10,644

 

General and administrative(1)(3)(4)

 

14,278

 

 

 

10,877

 

Total operating expenses

 

49,794

 

 

 

50,714

 

Loss from operations

 

(19,937

)

 

 

(15,166

)

Interest expense

 

29

 

 

 

54

 

Other (income) expense, net

 

(2,572

)

 

 

177

 

Loss before provision for income taxes

 

(17,394

)

 

 

(15,397

)

Provision for income taxes

 

196

 

 

 

82

 

Net loss

 

(17,590

)

 

 

(15,479

)

Net loss per share:

 

 

 

Basic and diluted

$

(0.37

)

 

$

(0.32

)

Weighted-average shares used in computing net loss per share:

 

 

 

Basic and diluted

 

47,304,983

 

 

 

47,631,813

 

(1) Includes stock-based compensation as follows:
 

Three Months Ended March 31,

2023

 

2022

Cost of revenue

 

 

 

Subscription and other platform

$

785

 

$

868

Professional services

 

152

 

 

 

174

 

Total cost of revenue

 

937

 

 

 

1,042

 

Sales and marketing

 

3,057

 

 

 

3,692

 

Research and development

 

2,021

 

 

 

1,981

 

General and administrative

 

4,106

 

 

 

2,792

 

Total stock-based compensation expense

$

10,121

 

 

$

9,507

 

(2)

Research and development expense for the three months ended March 31, 2023 includes amortization of acquired intangible asset of $142 thousand in connection with the Vibbio acquisition in April 2022.

(3)

General and administrative expense for the three months ended March 31, 2023 includes fees related to shareholder activism of $2,446 thousand.

(4)

Includes restructuring costs, which primarily represent severance and related expense due to restructuring activities, as follows.

 

Three Months Ended March 31,

 

2023

 

2022

Cost of revenue

 

 

 

Subscription and other platform

$

785

 

$

Professional services

 

54

 

 

 

 

Total cost of revenue

 

839

 

 

 

 

Sales and marketing

 

1,211

 

 

 

 

Research and development

 

773

 

 

 

 

General and administrative

 

230

 

 

 

 

Total restructuring costs

$

3,053

 

 

$

 

ON24, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

2023

 

2022

Cash flows from operating activities:

 

 

 

Net loss

$

(17,590

)

 

$

(15,479

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Depreciation and amortization

 

1,417

 

 

 

1,207

 

Stock-based compensation expense

 

10,121

 

 

 

9,507

 

Amortization of deferred contract acquisition cost

 

3,893

 

 

 

4,067

 

Provision for allowance for doubtful accounts and billing reserve

 

901

 

 

 

260

 

Non-cash lease expense

 

497

 

 

 

519

 

Other

 

(1,698

)

 

 

254

 

Change in operating assets and liabilities:

 

 

 

Accounts receivable

 

9,405

 

 

 

3,779

 

Deferred contract acquisition cost

 

(3,546

)

 

 

(3,627

)

Prepaid expenses and other assets

 

(2,069

)

 

 

(3,555

)

Accounts payable

 

(1,353

)

 

 

1,742

 

Accrued liabilities

 

(1,089

)

 

 

(752

)

Deferred revenue

 

(2,287

)

 

 

(4,098

)

Other non-current liabilities

 

(769

)

 

 

(594

)

Net cash used in operating activities

 

(4,167

)

 

 

(6,770

)

Cash flows from investing activities:

 

 

 

Purchase of property and equipment

 

(178

)

 

 

(984

)

Purchase of marketable securities

 

(119,591

)

 

 

(60,271

)

Proceeds from maturities of marketable securities

 

199,210

 

 

 

14,708

 

Proceeds from sale of marketable securities

 

9,321

 

 

 

 

Net cash provided by (used in) investing activities

 

88,762

 

 

 

(46,547

)

Cash flows from financing activities:

 

 

 

Proceeds from exercise of stock options

 

255

 

 

 

1,157

 

Payment of tax withholding obligations related to net share settlements on equity awards

 

 

 

 

(1,756

)

Payment for repurchase of common stock

 

(10,720

)

 

 

(13,074

)

Repayment of equipment loans

 

(71

)

 

 

(66

)

Repayment of finance lease obligations

 

(411

)

 

 

(417

)

Net cash used in financing activities

 

(10,947

)

 

 

(14,156

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

130

 

 

 

27

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

73,778

 

 

 

(67,446

)

Cash, cash equivalents and restricted cash, beginning of period

 

27,169

 

 

 

165,043

 

Cash, cash equivalents and restricted cash, end of period

$

100,947

 

 

$

97,597

 

ON24, INC.

Reconciliation of GAAP to Non-GAAP Results

(in thousands, except share and per share data)

(Unaudited)

 

Reconciliation of gross profit and gross margin

 

 

Three Months Ended March 31,

 

2023

 

2022

GAAP gross profit

$

29,857

 

 

$

35,548

 

Add:

 

 

 

Stock-based compensation

 

937

 

 

 

1,042

 

Restructuring costs

 

839

 

 

 

 

Non-GAAP gross profit

$

31,633

 

 

$

36,590

 

GAAP gross margin

 

69

%

 

 

73

%

Non-GAAP gross margin

 

73

%

 

 

75

%

Reconciliation of operating expenses

 

 

Three Months Ended March 31,

 

2023

 

2022

GAAP sales and marketing

$

24,417

 

 

$

29,193

 

Less:

 

 

 

Stock-based compensation

 

(3,057

)

 

 

(3,692

)

Restructuring costs

 

(1,211

)

 

 

 

Non-GAAP sales and marketing

$

20,149

 

 

$

25,501

 

 

 

 

 

GAAP research and development

$

11,099

 

 

$

10,644

 

Less:

 

 

 

Stock-based compensation

 

(2,021

)

 

 

(1,981

)

Restructuring costs

 

(773

)

 

 

 

Amortization of acquired intangible asset

 

(142

)

 

 

 

Non-GAAP research and development

$

8,163

 

 

$

8,663

 

 

 

 

 

GAAP General and administrative

$

14,278

 

 

$

10,877

 

Less:

 

 

 

Stock-based compensation

 

(4,106

)

 

 

(2,792

)

Restructuring costs

 

(230

)

 

 

 

Fees related to shareholder activism

 

(2,446

)

 

 

 

Non-GAAP General and administrative

$

7,496

 

 

$

8,085

 

ON24, INC.

Reconciliation of GAAP to Non-GAAP Results

(in thousands, except share and per share data)

(Unaudited)

 

Reconciliation of net loss to non-GAAP operating loss

 

 

Three Months Ended March 31,

 

2023

2022

Net loss

$

(17,590

)

$

(15,479

)

Add:

 

 

Interest expense

 

29

 

 

54

 

Other (income) expense, net

 

(2,572

)

 

177

 

Provision for income taxes

 

196

 

 

82

 

Stock-based compensation

 

10,121

 

 

9,507

 

Amortization of acquired intangible asset

 

142

 

 

 

Restructuring costs

 

3,053

 

 

 

Fees related to shareholder activism

 

2,446

 

 

 

Non-GAAP operating (loss) income

$

(4,175

)

$

(5,659

)

Reconciliation of net loss to non-GAAP net loss

 

 

Three Months Ended March 31,

 

2023

 

2022

Net loss

$

(17,590

)

 

$

(15,479

)

Add:

 

 

 

Stock-based compensation

 

10,121

 

 

 

9,507

 

Amortization of acquired intangible asset

 

142

 

 

 

 

Restructuring costs

 

3,053

 

 

 

 

Fees related to shareholder activism

 

2,446

 

 

 

 

Non-GAAP net loss

$

(1,828

)

 

$

(5,972

)

Reconciliation of GAAP to Non-GAAP basic and diluted net loss per share

 

 

Three Months Ended March 31,

 

2023

 

2022

GAAP basic and diluted net loss per share:

 

 

 

Net loss

$

(17,590

)

 

$

(15,479

)

Weighted average common stock outstanding, basic and diluted

 

47,304,983

 

 

 

47,631,813

 

Net loss per share, basic and diluted

$

(0.37

)

 

$

(0.32

)

 

Three Months Ended March 31,

 

2023

 

2022

Non-GAAP basic and diluted net loss per share:

 

 

 

Net loss

$

(17,590

)

 

$

(15,479

)

Add:

 

 

 

Stock-based compensation

 

10,121

 

 

 

9,507

 

Amortization of acquired intangible asset

 

142

 

 

 

 

Restructuring costs

 

3,053

 

 

 

 

Fees related to shareholder activism

 

2,446

 

 

 

 

Non-GAAP net loss

$

(1,828

)

 

$

(5,972

)

Non-GAAP weighted-average common stock outstanding, basic and diluted

 

47,304,983

 

 

 

47,631,813

 

Non-GAAP net loss per share, basic and diluted

$

(0.04

)

 

$

(0.13

)

ON24, INC.

Reconciliation of GAAP to Non-GAAP Results

(in thousands)

(Unaudited)

 

Reconciliation of GAAP Cash Flow from Operating Activities to Free Cash Flow

 

 

Three Months Ended March 31,

 

2023

 

2022

Net cash used in operating activities:

$

(4,167

)

 

$

(6,770

)

Less: Purchases of property and equipment

 

(178

)

 

 

(984

)

Free cash flow

$

(4,345

)

 

$

(7,754

)

ON24, INC.

Revenue

(in thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

2023

 

2022

Core Platform

 

 

 

Subscription and other platform

$

37,811

 

$

40,070

Professional services

 

3,395

 

 

 

4,437

 

Total core platform revenue

$

41,206

 

 

$

44,507

 

 

 

 

 

Virtual Conference

 

 

 

Subscription and other platform

$

1,553

 

 

$

3,407

 

Professional services

 

304

 

 

 

578

 

Total virtual conference revenue

$

1,857

 

 

$

3,985

 

 

 

 

 

Revenue

 

 

 

Subscription and other platform

$

39,364

 

 

$

43,477

 

Professional services

 

3,699

 

 

 

5,015

 

Total revenue

$

43,063

 

 

$

48,492

 

 

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