ON24, the leading intelligent engagement platform for B2B sales and marketing, has been on a transformative journey, navigating the dynamic landscape of digital marketing and virtual event solutions. With a rich history spanning over two decades, this innovative company has continuously evolved to meet the changing needs of its customers, solidifying its position as a pioneer in the industry.
Company History and Evolution
Founded in 1998 as NewsDirect, Inc., the company quickly changed its name to ON24, Inc. in December of the same year. Initially established to provide a platform for broadcasting press conferences, ON24 has undergone significant transformations to become the cloud-based intelligent engagement platform it is today. Prior to 2013, the company offered services and licensed software for managing webinars and virtual events primarily on a per-event basis. This business model laid the foundation for ON24's future success and helped the company gain valuable insights into the needs of its customers.
The year 2013 marked a pivotal moment in ON24's history, as the company transitioned to a software-as-a-service (SaaS) model, releasing its flagship product, ON24 Elite, a self-service cloud-based subscription platform. This strategic shift allowed ON24 to offer more scalable and flexible solutions to its clients, setting the stage for rapid growth and innovation. Since then, ON24 has expanded its portfolio, introducing six additional products to its core platform, including complementary experience products such as ON24 Engagement Hub and ON24 Target in 2018.
In 2021, ON24 further enhanced its offerings by launching ON24 Breakouts, which expanded the functionality and interactivity of webinars built with ON24 Elite, and ON24 Go Live, a self-service virtual event solution. These additions demonstrated the company's commitment to staying at the forefront of digital engagement technology and meeting the evolving needs of its customers. Most recently, ON24 introduced the game-changing ON24 Intelligent Engagement Platform, which includes the AI-powered Analytics and Content Engine (ACE).
Financials and Liquidity
ON24's financial performance has been a mix of stability and growth, with the company reporting annual revenue of $148.1 million and net income of -$42.2 million as of its latest fiscal year. The company's quarterly revenue stood at $36.7 million, while its operating cash flow and free cash flow were $1.0 million and $0.4 million, respectively, in the same period. Year-over-year revenue decreased 6.8% in the most recent quarter.
The company operates in two main product segments: Subscription and other platform revenue, and Professional services revenue. In the second quarter of 2024, Subscription and other platform revenue was $34.15 million, down 11% compared to the same period in 2023. For the first half of 2024, Subscription and other platform revenue was $68.98 million, down 11% year-over-year. The decrease was primarily due to lower net customers and reduced annual recurring revenue (ARR) as the company saw reduced demand, particularly for its de-emphasized Virtual Conference product.
Professional services revenue in the second quarter of 2024 was $3.20 million, down 15% compared to the same period in 2023. For the first half of 2024, Professional services revenue was $6.10 million, down 18% year-over-year. The decreases were primarily due to more customers electing to be self-service and not utilizing the company's professional services offerings.
Overall, ON24's total revenue in the second quarter of 2024 was $37.35 million, down 11% compared to the same period in 2023. For the first half of 2024, total revenue was $75.08 million, down 12% year-over-year.
In terms of liquidity, ON24 has a debt-to-equity ratio of 0.021 and a current ratio and quick ratio of 2.59. The company has a $50 million revolving credit facility, of which none was drawn as of the most recent quarter. The facility is secured by substantially all of the company's assets.
Innovation and Success
The company's focus on innovation has paid off, as evidenced by the success of its AI-powered ACE offering. In the latest quarter, ACE accounted for over 20% of ON24's growth in Annual Recurring Revenue (ARR) bookings, an all-time high. This innovative solution empowers customers to create personalized, data-driven engagement experiences at scale, delivering tangible results and driving customer loyalty.
ON24's commitment to enterprise-grade solutions has also been a key differentiator, as the company has positioned itself as a trusted partner for regulated industries such as life sciences and financial services. The company's ability to address the unique needs of these sectors, with features like data privacy and compliance, has contributed to its growing customer base, which includes global pharmaceutical giants and leading asset management firms.
Challenges and Resilience
However, the company has not been without its challenges. In 2024, the marketing budget environment was particularly challenging, with a decline of close to 8% compared to the previous year, according to Gartner. This macroeconomic headwind put pressure on ON24's top-line performance, with the company reporting a year-over-year decline in revenue. Additionally, in June 2021, ON24 faced a security incident involving ransomware, which impacted certain internal systems and a limited number of customer events. The company swiftly launched an investigation, engaged with law enforcement, and took steps to contain the incident and restore impacted event types. Fortunately, this security incident did not result in any material impact on ON24's operations, ability to provide services, results of operations, or financial position.
Despite these challenges, ON24 has demonstrated its resilience. The company's focus on improving gross retention rates, executing on its product innovation roadmap, and delivering margin and profitability improvements has paid dividends. In 2024, the company's gross retention reached its highest level in the last three years, and its non-GAAP gross margin improved from 75% to 77%.
Future Outlook
Looking ahead, ON24 is cautiously optimistic about the future. The company expects to return to ARR growth in 2025, with guidance indicating a 1-2% increase in ending 2025 Core ARR compared to 2024. For Q1 2025, ON24 expects their core platform ARR to be flat to down 1% compared to Q4 2024. For full year 2025, ON24 expects core platform revenue (including services) to be in the range of $136.3 million to $139.3 million, and total revenue to be in the range of $138.6 million to $141.6 million.
Furthermore, ON24 has remained committed to its long-term profitability targets, guiding for double-digit EBITDA margins in the future. The company's focus on cost management and operational efficiency has enabled it to maintain profitability, with positive adjusted EBITDA and non-GAAP EPS reported in the latest quarter. For 2025, ON24 expects a non-GAAP operating loss in the range of $5.5 million to $3.5 million, and non-GAAP net income per share of $0.02 to $0.05. The company expects gross margins for 2025 to be approximately 76% and to be adjusted EBITDA positive for 2025, with positive EBITDA in each quarter starting in Q2.
Risks and Challenges
Risks facing ON24 include the highly competitive nature of the digital marketing and virtual event solutions market, the potential for further economic headwinds, and the challenge of maintaining its innovative edge in a rapidly evolving industry. The company's ability to navigate these risks and capitalize on its strengths will be crucial to its long-term success.
Additionally, ON24 faced a legal challenge in 2021 when the company, its CEO, CFO, certain current and former board members, and the IPO underwriters were named as defendants in a consolidated securities class action lawsuit. The lawsuit alleged that the company's IPO registration statement contained untrue statements and omissions about the company's growth and customer base. However, the lawsuit was dismissed with prejudice in March 2024, resolving this potential risk for the company.
Key Metrics and Market Position
ON24 operates primarily in the U.S. market and has shown resilience in key metrics despite challenging market conditions. The company reported an ending ARR of $129.7 million as of the most recent quarter, which includes $127.3 million from the core platform. The percentage of customers with 2+ products reached an all-time high of close to 40%, indicating successful cross-selling efforts. Additionally, the percentage of ARR from multi-year deals increased to 51%, suggesting strong customer commitment.
The company's net retention rate for enterprise customers was 91%, showing a mid-single-digit improvement over 2023. This improvement in retention, coupled with the highest gross retention rate in the last three years, demonstrates ON24's ability to maintain and grow its customer base even in challenging economic conditions.
Industry Trends and Outlook
ON24 operates in the software industry, which has seen strong growth in recent years driven by the increasing adoption of cloud-based solutions and digital transformation initiatives. The industry's compound annual growth rate (CAGR) is estimated to be in the high single-digits, providing a favorable backdrop for ON24's future growth prospects.
The company's focus on AI-powered solutions, such as the Analytics and Content Engine (ACE), positions it well to capitalize on the growing demand for intelligent engagement platforms in the B2B sales and marketing technology landscape. As businesses continue to prioritize digital engagement and data-driven marketing strategies, ON24's innovative offerings are likely to remain in high demand.
Conclusion
In conclusion, ON24 has demonstrated its resilience and adaptability in the face of industry challenges. With a strong focus on innovation, enterprise-grade solutions, and operational efficiency, the company is poised to capitalize on the growing demand for intelligent engagement platforms. As it continues to execute on its strategic priorities, ON24 aims to return to growth, maintain profitability, and solidify its position as a leader in the B2B sales and marketing technology landscape. The company's guidance for 2025 reflects a cautious optimism, with expectations of modest growth and continued focus on profitability. As the digital engagement landscape evolves, ON24's ability to innovate and adapt will be crucial in maintaining its competitive edge and driving long-term success.