TechDogs-"ON24 Announces Second Quarter 2023 Financial Results"

Sales Technology

ON24 Announces Second Quarter 2023 Financial Results

By Business Wire

Business Wire
Overall Rating
  • Second quarter total revenue of $42.1 million
  • Achieved Q2 2023 profitability target, and Q4 2023 profitability milestone ahead of schedule
  • Launched new Generative AI Optimization Suite with strong customer trial adoption
  • Continued to execute on capital return program; returned approximately $73.5 million to stockholders in Q2

SAN FRANCISCO--(BUSINESS WIRE)--ON24 (NYSE: ONTF), a leading sales and marketing platform for B2B digital engagement, today announced financial results for the second quarter ended June 30, 2023.

“In the second quarter, we continued to make significant progress on our path to profitability by achieving positive non-GAAP EPS. We also achieved breakeven non-GAAP EBITDA, which is two quarters ahead of our original goal,” said Sharat Sharan, co-founder and CEO of ON24. “We continued to operate in a period of uncertainty in which our customers’ budgets remained under pressure. In this environment, we remain laser-focused on what we can control by executing against our strategic priorities of delivering profitability, developing the next generation of our platform enabled by generative AI, and further enhancing our enterprise go-to-market strategy. Looking ahead, we are confident that we have positioned our company to drive long-term profitable growth.”

Second Quarter 2023 Financial Highlights

  • Revenue:
    • Revenue from our Core Platform, including services, was $40.5 million, a decrease of 9% year-over-year.
    • Total revenue was $42.1 million, a decrease of 13% year-over-year.
  • ARR:
    • Core Platform ARR of $140.6 million as of June 30, 2023, a decrease of 10% year-over-year.
    • Total ARR of $144.8 million as of June 30, 2023, a decrease of 14% year-over-year.
  • GAAP Operating Loss was $15.8 million, compared to GAAP operating loss of $16.0 million in the second quarter of 2022.
  • Non-GAAP Operating Loss was $0.9 million, compared to non-GAAP operating loss of $6.2 million in the second quarter of 2022.
  • GAAP Net Loss was $12.8 million, or $(0.28) per diluted share, compared to GAAP net loss of $16.2 million, or $(0.34) per diluted share in the second quarter of 2022.
  • Non-GAAP Net Income was $2.1 million, or $0.04 per diluted share, compared to a non-GAAP net loss of $6.4 million, or $(0.14) per diluted share in the second quarter of 2022.
  • Cash Flow: Net cash used in operating activities was $4.3 million, compared to $2.7 million used in operating activities in the second quarter of 2022. Free cash flow was negative $4.9 million for the quarter, compared to negative $3.4 million in the second quarter of 2022.
  • Cash, Cash Equivalents and Marketable Securities totaled $240.5 million as of June 30, 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:

  • Achieved accelerated profitability targets through greater operational efficiency.
  • Launched new Generative AI Optimization Suite built on strong foundation of first-party data to fuel the next generation of the ON24 platform; over 200 customers in free trial with positive outlook for expansion sales.
  • Strengthened relationships with enterprise customers as percentage of Core Platform ARR in multiyear agreements hit an all-time high.
  • Continued to advance enterprise go-to-market execution with focus on mission-critical digital transformation initiatives requiring a differentiated enterprise-grade solution that supports compliance.

Financial Outlook

For the third quarter of 2023, ON24 expects:

  • Core Platform Revenue, including services, to be in the range of $36.5 million to $37.5 million.
  • Total revenue of $37.5 million to $38.5 million.
  • Non-GAAP operating loss of $2.7 million to $1.7 million.
  • Non-GAAP net income per share of $0.00 per share, or break-even EPS, using approximately 49.2 million diluted shares outstanding.
    • Restructuring charge of $0.7 million to $1.4 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 $152.0 million to $155.0 million.
  • Total revenue of $157.0 million to $160.0 million.
  • Non-GAAP operating loss of $9.5 million to $7.5 million.
  • Non-GAAP net loss per share of $(0.02) to net income of $0.02 per share using approximately 44.8 million basic and diluted shares outstanding and 49.6 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.

We do not provide a quantitative reconciliation of the forward-looking non-GAAP financial measures included in this press release to the most directly comparable GAAP measures due to the high variability and difficulty to predict certain items excluded from these non-GAAP financial measures; in particular, the effects of stock-based compensation expense, and restructuring and transaction expenses. We expect the variability of these excluded items may have a significant, and potentially unpredictable, impact on our future GAAP financial results.

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)

June 30, 2023

December 31, 2022

Assets

Current assets

Cash and cash equivalents

$

25,158

$

26,996

Marketable securities

215,372

301,125

Accounts receivable, net

31,314

43,757

Deferred contract acquisition costs, current

12,452

13,136

Prepaid expenses and other current assets

7,293

6,281

Total current assets

291,589

391,295

Property and equipment, net

5,668

7,212

Operating right-of-use assets

3,717

5,606

Intangible asset, net

1,523

1,979

Deferred contract acquisition costs, non-current

16,876

17,773

Other long-term assets

1,370

1,608

Total assets

$

320,743

$

425,473

Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable

$

4,269

$

4,611

Accrued and other current liabilities

16,866

18,465

Deferred revenue

74,459

83,453

Finance lease liabilities, current

718

1,554

Operating lease liabilities, current

2,640

2,648

Total current liabilities

98,952

110,731

Operating lease liabilities, non-current

3,730

5,040

Other long-term liabilities

1,075

1,741

Total liabilities

103,757

117,512

Stockholders’ equity

Common stock

4

5

Additional paid-in capital

501,416

562,555

Accumulated deficit

(284,164

)

(253,727

)

Accumulated other comprehensive loss

(270

)

(872

)

Total stockholders’ equity

216,986

307,961

Total liabilities and stockholders’ equity

$

320,743

$

425,473

ON24, INC.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Revenue:

Subscription and other platform

$

38,336

$

43,064

$

77,700

$

86,541

Professional services

3,750

5,174

7,449

10,189

Total revenue

42,086

48,238

85,149

96,730

Cost of revenue:

Subscription and other platform(1)(4)

9,066

9,958

18,955

19,560

Professional services(1)(4)

3,134

3,343

6,451

6,685

Total cost of revenue

12,200

13,301

25,406

26,245

Gross profit

29,886

34,937

59,743

70,485

Operating expenses:

Sales and marketing(1)(4)

22,628

28,850

47,045

58,043

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

10,930

10,948

22,029

21,592

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

12,105

11,158

26,383

22,035

Total operating expenses

45,663

50,956

95,457

101,670

Loss from operations

(15,777

)

(16,019

)

(35,714

)

(31,185

)

Interest expense

33

49

62

103

Other (income) expense, net

(3,193

)

103

(5,765

)

280

Loss before provision for income taxes

(12,617

)

(16,171

)

(30,011

)

(31,568

)

Provision for income taxes

230

41

426

123

Net loss

(12,847

)

(16,212

)

(30,437

)

(31,691

)

Net loss per share:

Basic and diluted

$

(0.28

)

$

(0.34

)

$

(0.65

)

$

(0.67

)

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

Basic and diluted

45,866,022

47,187,586

46,581,527

47,408,479

(1)

Includes stock-based compensation as follows:

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Cost of revenue

Subscription and other platform

$

709

$

823

$

1,494

$

1,691

Professional services

144

166

296

340

Total cost of revenue

853

989

1,790

2,031

Sales and marketing

3,555

3,697

6,612

7,389

Research and development

2,363

1,925

4,384

3,906

General and administrative

4,834

3,087

8,940

5,879

Total stock-based compensation expense

$

11,605

$

9,698

$

21,726

$

19,205

(2)

Research and development expense includes amortization of acquired intangible asset of $135 thousand and $277 thousand for the three and six months ended June 30, 2023, respectively, and $137 thousand for the three and six months ended June 30, 2022, in connection with the Vibbio acquisition in April 2022.

(3)

General and administrative expense for the three and six months ended June 30, 2023 includes fees related to shareholder activism of $210 thousand and $2,656 thousand, respectively.

(4)

The results of operations for the three and six months ended June 30, 2023 includes restructuring costs, which primarily represent severance and related expense due to restructuring activities, and impairment charges on our headquarters lease, as follows:

Three Months Ended June 30, 2023

Six months ended June 30, 2023

Severance
and related
Charges(1)

Lease
Impairment
Charge(2)

Total

Severance
and related
Charges(1)

Lease
Impairment
Charge(2)

Total

Cost of revenue

Subscription and other platform

$

720

$

89

$

809

$

1,505

$

89

$

1,594

Professional services

50

101

151

104

101

205

Total cost of revenue

770

190

960

1,609

190

1,799

Sales and marketing

597

208

805

1,808

208

2,016

Research and development

340

472

812

1,113

472

1,585

General and administrative

52

339

391

282

339

621

Total restructuring costs

$

1,759

$

1,209

$

2,968

$

4,812

$

1,209

$

6,021

ON24, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Cash flows from operating activities:

Net loss

$

(12,847

)

$

(16,212

)

$

(30,437

)

$

(31,691

)

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

Depreciation and amortization

1,375

1,339

2,792

2,546

Stock-based compensation expense

11,605

9,698

21,726

19,205

Amortization of deferred contract acquisition cost

3,951

3,950

7,844

8,017

Provision for allowance for doubtful accounts and billing reserve

798

487

1,699

747

Non-cash lease expense

444

482

941

1,001

Amortization (accretion) of marketable securities

(1,885

)

77

(3,711

)

330

Lease impairment charge

1,209

1,209

Other

28

(1

)

156

Change in operating assets and liabilities:

Accounts receivable

1,339

1,866

10,744

5,645

Deferred contract acquisition cost

(2,717

)

(3,741

)

(6,263

)

(7,368

)

Prepaid expenses and other assets

1,221

1,978

(848

)

(1,577

)

Accounts payable

882

(1,428

)

(471

)

314

Accrued liabilities

(1,658

)

1,007

(2,747

)

255

Deferred revenue

(6,707

)

(1,388

)

(8,994

)

(5,486

)

Other non-current liabilities

(1,354

)

(782

)

(2,123

)

(1,376

)

Net cash used in operating activities

(4,316

)

(2,668

)

(8,483

)

(9,438

)

Cash flows from investing activities:

Purchase of property and equipment

(554

)

(690

)

(732

)

(1,674

)

Acquisition, net of cash acquired

(2,495

)

(2,495

)

Purchase of marketable securities

(76,234

)

(51,349

)

(195,825

)

(111,620

)

Proceeds from maturities of marketable securities

77,260

47,390

276,470

62,098

Proceeds from sale of marketable securities

9,321

Net cash provided by (used in) investing activities

472

(7,144

)

89,234

(53,691

)

Cash flows from financing activities:

Proceeds from exercise of stock options

629

581

884

1,738

Proceeds from issuance of common stock under ESPP

546

833

546

833

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

(1,756

)

Payment for repurchase of common stock

(22,586

)

(8,734

)

(33,306

)

(21,808

)

Payment of cash dividend

(49,872

)

(49,872

)

Repayment of equipment loans

(60

)

(67

)

(131

)

(133

)

Repayment of finance lease obligations

(531

)

(555

)

(942

)

(972

)

Net cash used in financing activities

(71,874

)

(7,942

)

(82,821

)

(22,098

)

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

99

249

229

276

Net decrease in cash, cash equivalents and restricted cash

(75,619

)

(17,505

)

(1,841

)

(84,951

)

Cash, cash equivalents and restricted cash, beginning of period

100,947

97,597

27,169

165,043

Cash, cash equivalents and restricted cash, end of period

$

25,328

$

80,092

$

25,328

$

80,092

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 June 30,

Six Months Ended June 30,

2023

2022

2023

2022

GAAP gross profit

$

29,886

$

34,937

$

59,743

$

70,485

Add:

Stock-based compensation

853

989

1,790

2,031

Restructuring costs

770

1,609

Impairment charge

190

190

Non-GAAP gross profit

$

31,699

$

35,926

$

63,332

$

72,516

GAAP gross margin

71

%

72

%

70

%

73

%

Non-GAAP gross margin

75

%

74

%

74

%

75

%

Reconciliation of operating expenses

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

GAAP sales and marketing

$

22,628

$

28,850

$

47,045

$

58,043

Less:

Stock-based compensation

(3,555

)

(3,697

)

(6,612

)

(7,389

)

Restructuring costs

(597

)

(1,808

)

Impairment charge

(208

)

(208

)

Non-GAAP sales and marketing

$

18,268

$

25,153

$

38,417

$

50,654

GAAP research and development

$

10,930

$

10,948

$

22,029

$

21,592

Less:

Stock-based compensation

(2,363

)

(1,925

)

(4,384

)

(3,906

)

Restructuring costs

(340

)

(1,113

)

Impairment charge

(472

)

(472

)

Amortization of acquired intangible asset

(135

)

(137

)

(277

)

(137

)

Non-GAAP research and development

$

7,620

$

8,886

$

15,783

$

17,549

GAAP general and administrative

$

12,105

$

11,158

$

26,383

$

22,035

Less:

Stock-based compensation

(4,834

)

(3,087

)

(8,940

)

(5,879

)

Restructuring costs

(52

)

(282

)

Impairment charge

(339

)

(339

)

Fees related to shareholder activism

(210

)

(2,656

)

Non-GAAP general and administrative

$

6,670

$

8,071

$

14,166

$

16,156

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 June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Net loss

$

(12,847

)

$

(16,212

)

$

(30,437

)

$

(31,691

)

Add:

Interest expense

33

49

62

103

Other (income) expense, net

(3,193

)

103

(5,765

)

280

Provision for income taxes

230

41

426

123

Stock-based compensation

11,605

9,698

21,726

19,205

Amortization of acquired intangible asset

135

137

277

137

Restructuring costs

1,759

4,812

Impairment charge

1,209

1,209

Fees related to shareholder activism

210

2,656

Non-GAAP operating loss

$

(859

)

$

(6,184

)

$

(5,034

)

$

(11,843

)


Contacts

Media Contact:
Tessa Barron
press@on24.com

Investor Contact:
Lauren Sloane, The Blueshirt Group for ON24
investorrelations@on24.com

Read full story here

First published on Wed, Aug 9, 2023

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