ON24(ONTF) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q4 2024 was $36.7 million, a decrease of 6% year-over-year, while revenue from the core platform was$ 36 million [39][12] - ARR from the core platform at the end of Q4 was $127.3 million, a decrease of$ 2.3 million from Q3, while total ARR was $129.7 million [41][13] - Non-GAAP gross margin improved from 75% in 2023 to 77% in 2024, and adjusted EBITDA margin improved by almost 200 basis points [11][51] - Free cash flow for 2024 was positive$ 2.6 million, an improvement of $17 million compared to negative$ 14.4 million in 2023 [11][60] Business Line Data and Key Metrics Changes - The percentage of customers using two or more products reached an all-time high of 39% at the end of 2024 [48] - ARR from multi-year deals increased to 51%, up from 29% at the end of 2019 [47] - Professional services revenue in Q4 was $3.1 million, a decrease of 13% year-over-year [39] Market Data and Key Metrics Changes - The company noted improvements in gross retention rates, with Q4 showing the best retention levels in three years [78] - The dollar-based net retention rate for Enterprise customers was 91%, a mid-single-digit improvement from 2023 [44] Company Strategy and Development Direction - The company is focused on platform innovation, particularly with the AI-powered ACE product, which accounted for over 20% of growth ARR bookings in Q4 [8][15] - The strategy includes enhancing the go-to-market approach, particularly in regulated industries such as life sciences and financial services [24][27] - The company aims for double-digit top-line revenue growth and double-digit EBITDA margins in the long term [16][68] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the marketing budget environment, noting some green shoots in the technology vertical [80] - The company expects to return to positive ARR growth in 2025, driven by improvements in customer spending and the adoption of AI tools [64][34] - Management highlighted the importance of maintaining a profitable cost structure while pursuing growth initiatives [29][62] Other Important Information - The company ended Q4 with$ 182.7 million in cash and marketable securities, and a new $25 million share repurchase program was announced [57][58] - The company achieved positive adjusted EBITDA and non-GAAP EPS profitability for the seventh consecutive quarter [30][56] Q&A Session Summary Question: Overview of the marketing budget environment - Management noted that 2024 was a tough year for marketing budgets, but there are signs of stabilization and reinvestment in growth initiatives for 2025 [76][78] Question: Guidance on operating margins and expense structure - Management indicated a balanced approach to returning to growth while maintaining profitability, with selected investments in product innovation and go-to-market strategies [81][84] Question: Expectation of free cash flow positivity in 2025 - Management expects to be free cash flow positive in 2025, excluding any one-time or restructuring charges [88]