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ON24 Announces Third Quarter 2022 Financial Results

November 09, 2022

  • Total Revenue of $47.6 million
  • ARR of $165.6 million, FX impact of negative $0.5 million
  • Drove meaningful improvement in cost structure since Q2 with approximately $16M in run-rate savings
  • Bolstered executive leadership team with two key hires

SAN FRANCISCO–(BUSINESS WIRE)– ON24 (NYSE: ONTF), a leading sales and marketing platform for B2B digital engagement, today announced financial results for the third quarter ended September 30, 2022.

“In the third quarter, we saw exciting expansions with some of our customers, meaningfully improved our cost structure, and deepened our leadership bench with the appointment of two new go-to-market executives,” said Sharat Sharan, co-founder and CEO of ON24. “While the economic outlook remains uncertain, we are optimistic on returning to top-line growth in 2023 with line of sight to break-even Non-GAAP EPS by Q4 2023. We are focused on capturing more of our TAM by continuing to add more products and use cases to our platform while driving efficient and durable growth.”

Third Quarter 2022 Financial Highlights

  • ARR of $165.6 million as of September 30, 2022, a decrease of 1% year-over-year. Foreign currency had an approximate $0.5 million negative impact in the quarter to ARR.
  • Revenue:
    • Total revenue was $47.6 million, a decrease of 4% year-over-year.
    • Subscription and Other Platform Revenue was $43.3 million, a decrease of 1% year-over-year.
    • Professional Services Revenue was $4.3 million, a decrease of 25% year-over-year.
  • GAAP Operating Loss was $14.8 million, compared to GAAP operating loss of $9.3 million in the third quarter of 2021.
  • Non-GAAP Operating Loss was $3.6 million, compared to non-GAAP operating loss of $1.4 million in the third quarter of 2021.
  • GAAP Net Loss attributable to common stockholders was $14.4 million, or $(0.30) per diluted share, compared to GAAP net loss attributable to common stockholders of $9.4 million, or $(0.20) per diluted share in the third quarter of 2021.
  • Non-GAAP Net Loss was $3.3 million, or $(0.07) per diluted share, compared to a non-GAAP net loss of $1.6 million, or $(0.03) per diluted share in the third quarter of 2021.
  • Cash Flow: Net cash used in operating activities was $3.5 million, compared to $0.9 million used in operating activities in the third quarter of 2021. Free cash flow was negative $4.2 million for the quarter, compared to negative $1.6 million in the third quarter of 2021.
  • Cash, Cash Equivalents and Marketable Securities totaled $341.8 million as of September 30, 2022.

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 / Industry Recognition

  • Appointed two new leaders to ON24’s management team; Jason Olkowski as Chief Customer Success Officer and Callan Young as Chief Marketing Officer.
  • Experienced strong expansion with a number of customers and average ARR per customer near record high.
  • Introduced new capability and features across the ON24 platform to increase audience engagement, capture more buyer insights, enhance analytics and data, and provide advanced data integrations with leading CRM and marketing automation solutions.

Financial Outlook

For the fourth quarter of 2022, ON24 expects:

  • Total revenue of $45.7 to $46.7 million.
  • Non-GAAP operating loss of $4.5 to $3.5 million.
  • Non-GAAP net loss per share of $(0.08) to $(0.06) using approximately 48.3 million basic and diluted shares outstanding.
  • Restructuring charge of $1.0 to $1.3 million, excluded from Non-GAAP amounts above.

For the full year 2022, ON24 expects:

  • Total revenue of $190 to $191 million.
  • Non-GAAP operating loss of $20.1 to $19.1 million.
  • Non-GAAP net loss per share of $(0.41) to $(0.39) using approximately 47.7 million basic and diluted shares outstanding.
  • Restructuring charge of $2.1 to $2.4 million, excluded from Non-GAAP amounts above.

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 +1 (786) 496-5601, and Canadian parties can access the call by dialing +1 (778)-800-8219, using the conference ID 7305243#.

A webcast 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

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, and restructuring costs. We define non-GAAP net income (loss) as net income (loss) excluding cumulative preferred dividends allocated to preferred shareholders, stock-based compensation, amortization of acquired intangible assets, and restructuring 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 size of our market opportunity, the success of our new products and capabilities, the impact of the COVID-19 pandemic and vaccines 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 a leading sales and marketing platform for digital engagement, delivering insights to drive revenue growth. ON24 serves more than 2,100 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. Through interactive webinars, virtual events, and personalized content experiences, ON24 provides a system of engagement powered by AI for businesses to scale engagement, conversions, and pipeline to drive revenue growth. The ON24 Platform supports millions of professionals a month who are totaling billions of engagement minutes per year. ON24 is headquartered in San Francisco with global offices in North America, EMEA, and APAC. For more information, visit www.ON24.com.

© 2022 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)

September 30, 2022

December 31, 2021

Assets

Current assets

Cash and cash equivalents

$

36,367

$

164,948

Marketable securities

305,457

217,609

Accounts receivable, net

31,213

46,117

Deferred contract acquisition costs, current

12,018

11,921

Prepaid expenses and other current assets

8,375

8,467

Total current assets

393,430

449,062

Property and equipment, net

8,129

8,780

Operating right-of-use assets

6,011

Intangible asset, net

1,931

Deferred contract acquisition costs, non-current

18,980

20,887

Other long-term assets

1,824

1,760

Total assets

$

430,305

$

480,489

Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable

$

4,283

$

3,123

Accrued and other current liabilities

17,058

19,011

Deferred revenue

81,029

96,225

Finance lease liabilities, current

1,762

1,768

Operating lease liabilities, current

2,676

Total current liabilities

106,808

120,127

Finance lease liabilities, non-current

300

1,648

Operating lease liabilities, non-current

5,628

Other long-term liabilities

1,685

3,624

Total liabilities

114,421

125,399

Stockholders’ equity

Common stock

5

5

Additional paid-in capital

559,381

550,839

Accumulated deficit

(241,597

)

(195,519

)

Accumulated other comprehensive loss

(1,905

)

(235

)

Total stockholders’ equity

315,884

355,090

Total liabilities and stockholders’ equity

$

430,305

$

480,489

ON24, INC.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Revenue:

Subscription and other platform

$

43,271

$

43,601

$

129,812

$

130,888

Professional services

4,304

5,761

14,493

20,691

Total revenue

47,575

49,362

144,305

151,579

Cost of revenue:

Subscription and other platform(1)(3)

10,120

8,718

29,680

24,382

Professional services(1)(3)

3,182

3,349

9,867

10,252

Total cost of revenue

13,302

12,067

39,547

34,634

Gross profit

34,273

37,295

104,758

116,945

Operating expenses:

Sales and marketing(1)(3)

26,553

26,591

84,596

75,981

Research and development(1)(2)(3)

11,324

9,114

32,916

25,222

General and administrative(1)(3)

11,164

10,851

33,199

29,719

Total operating expenses

49,041

46,556

150,711

130,922

Loss from operations

(14,768

)

(9,261

)

(45,953

)

(13,977

)

Interest expense

42

65

145

402

Other (income) expense, net

(463

)

106

(183

)

433

Loss before provision for (benefit from) income taxes

(14,347

)

(9,432

)

(45,915

)

(14,812

)

Provision for (benefit from) income taxes

40

(32

)

163

(65

)

Net loss

(14,387

)

(9,400

)

(46,078

)

(14,747

)

Cumulative preferred dividends allocated to preferred stockholders

(558

)

Net loss attributable to common stockholders

$

(14,387

)

$

(9,400

)

$

(46,078

)

$

(15,305

)

Net loss per share attributable to common stockholders:

Basic and diluted

$

(0.30

)

$

(0.20

)

$

(0.97

)

$

(0.36

)

Weighted-average shares used in computing net loss per share attributable to common stockholders:

Basic and diluted

47,640,200

47,101,200

47,357,711

42,149,108

(1)

Includes stock-based compensation as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Cost of revenue

Subscription and other platform

$

849

$

607

$

2,540

$

1,190

Professional services

165

109

505

248

Total cost of revenue

1,014

716

3,045

1,438

Sales and marketing

3,597

2,364

10,986

5,627

Research and development

2,019

1,235

5,925

2,879

General and administrative

3,273

3,516

9,152

7,851

Total stock-based compensation expense

$

9,903

$

7,831

$

29,108

$

17,795

(2)

Research and development expense for the three and nine months ended September 30, 2022. Includes amortization of acquired intangible asset of $148 and $285, respectively, in connection with the Vibbio acquisition in April 2022.

(3)

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

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Cost of revenue

Subscription and other platform

$

363

$

$

363

$

Professional services

27

27

Total cost of revenue

390

390

Sales and marketing

582

582

Research and development

61

61

General and administrative

37

37

Total restructuring costs

$

1,070

$

$

1,070

$

ON24, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Cash flows from operating activities:

Net loss

$

(14,387

)

$

(9,400

)

$

(46,078

)

$

(14,747

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization

1,407

1,129

3,953

3,423

Stock-based compensation expense

9,903

7,831

29,108

17,795

Amortization of deferred contract acquisition cost

3,833

3,803

11,850

11,305

Provision for allowance for doubtful accounts and billing reserve

456

67

1,203

1,276

Non-cash lease expense

474

1,475

Other

(344

)

166

(14

)

191

Change in operating assets and liabilities:

Accounts receivable

8,096

2,026

13,741

10,543

Deferred contract acquisition cost

(2,672

)

(4,355

)

(10,040

)

(13,947

)

Prepaid expenses and other assets

1,572

1,720

(5

)

(5,358

)

Accounts payable

(51

)

(778

)

263

(2,219

)

Accrued liabilities

(1,624

)

96

(1,369

)

3,122

Deferred revenue

(9,745

)

(2,714

)

(15,231

)

(1,055

)

Other non-current liabilities

(373

)

(485

)

(1,749

)

(648

)

Net cash (used in) provided by operating activities

(3,455

)

(894

)

(12,893

)

9,681

Cash flows from investing activities:

Purchase of property and equipment

(726

)

(706

)

(2,400

)

(2,440

)

Acquisition, net of cash acquired

(2,495

)

Purchase of marketable securities

(99,690

)

(162,558

)

(211,310

)

(207,039

)

Proceeds from maturities and paydowns of marketable securities

59,867

8,237

121,965

11,401

Net cash used in investing activities

(40,549

)

(155,027

)

(94,240

)

(198,078

)

Cash flows from financing activities:

Proceeds from initial public offering, net of underwriting discounts

353,397

Proceeds from exercise of stock options

729

2,487

2,467

4,282

Proceeds from issuance of common stock under ESPP

833

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

(1,756

)

(2,001

)

Payment for repurchase of common stock

(21,808

)

Repayment of equipment loans and borrowings

(68

)

(54

)

(201

)

(22,532

)

Repayment of finance lease obligations

(427

)

(501

)

(1,399

)

(1,885

)

Payment of offering costs

(3,481

)

Net cash provided by (used in) financing activities

234

1,932

(21,864

)

327,780

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

211

46

487

154

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

(43,559

)

(153,943

)

(128,510

)

139,537

Cash, cash equivalents and restricted cash, beginning of period

80,092

351,825

165,043

58,345

Cash, cash equivalents and restricted cash, end of period

$

36,533

$

197,882

$

36,533

$

197,882

Supplemental disclosures of cash flow data:

Cash paid for taxes, net of refunds

$

75

$

217

$

353

$

359

Cash paid for interest

$

33

$

86

$

120

$

489

ON24, INC.

Reconciliation from GAAP to Non-GAAP Results

(in thousands, except share and per share data)

(Unaudited)

Reconciliation of gross profit and gross margin

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

GAAP gross profit

$

34,273

$

37,295

$

104,758

$

116,945

Add:

Stock-based compensation

1,014

716

3,045

1,438

Restructuring costs

390

390

Non-GAAP gross profit

$

35,677

$

38,011

$

108,193

$

118,383

GAAP gross margin

72

%

76

%

73

%

77

%

Non-GAAP gross margin

75

%

77

%

75

%

78

%

Reconciliation of operating expenses

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

GAAP sales and marketing

$

26,553

$

26,591

$

84,596

$

75,981

Less:

Stock-based compensation

(3,597

)

(2,364

)

(10,986

)

(5,627

)

Restructuring costs

(582

)

(582

)

Non-GAAP sales and marketing

$

22,374

$

24,227

$

73,028

$

70,354

GAAP research and development

$

11,324

$

9,114

$

32,916

$

25,222

Less:

Stock-based compensation

(2,019

)

(1,235

)

(5,925

)

(2,879

)

Restructuring costs

(61

)

(61

)

Amortization of acquired intangible asset

(148

)

(285

)

Non-GAAP research and development

$

9,096

$

7,879

$

26,645

$

22,343

GAAP General and administrative

$

11,164

$

10,851

$

33,199

$

29,719

Less:

Stock-based compensation

(3,273

)

(3,516

)

(9,152

)

(7,851

)

Restructuring costs

(37

)

(37

)

Non-GAAP General and administrative

$

7,854

$

7,335

$

24,010

$

21,868

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) income

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Net loss

$

(14,387

)

$

(9,400

)

$

(46,078

)

$

(14,747

)

Add:

Interest expense

42

65

145

402

Other (income) expense, net

(463

)

106

(183

)

433

Provision for (benefit from) income taxes

40

(32

)

163

(65

)

Stock-based compensation

9,903

7,831

29,108

17,795

Amortization of acquired intangible asset

148

285

Restructuring costs

1,070

1,070

Non-GAAP operating (loss) income

$

(3,647

)

$

(1,430

)

$

(15,490

)

$

3,818

Reconciliation of net loss to non-GAAP net (loss) income

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Net loss

$

(14,387

)

$

(9,400

)

$

(46,078

)

$

(14,747

)

Add:

Stock-based compensation

9,903

7,831

29,108

17,795

Amortization of acquired intangible asset

148

285

Restructuring costs

1,070

1,070

Non-GAAP net (loss) income

$

(3,266

)

$

(1,569

)

$

(15,615

)

$

3,048

Reconciliation of net loss attributable to common stockholders

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Net loss attributable to common shareholders

$

(14,387

)

$

(9,400

)

$

(46,078

)

$

(15,305

)

Add:

Cumulative preferred dividends allocated to preferred shareholders

558

Stock-based compensation expense

9,903

7,831

29,108

17,795

Amortization of acquired intangible asset

148

285

Restructuring costs

1,070

1,070

Non-GAAP net (loss) income attributable to common stockholders

$

(3,266

)

$

(1,569

)

$

(15,615

)

$

3,048

GAAP net loss per share, basic and diluted

$

(0.30

)

$

(0.20

)

$

(0.97

)

$

(0.36

)

Non-GAAP net (loss) income per share, basic

$

(0.07

)

$

(0.03

)

$

(0.33

)

$

0.07

Non-GAAP net (loss) income per share, diluted

$

(0.07

)

$

(0.03

)

$

(0.33

)

$

0.06

Shares Used in GAAP Per Share Calculations:

GAAP weighted-average shares used to compute GAAP net loss per share, basic and diluted

47,640,200

47,101,200

47,357,711

42,149,108

Shares Used in Non-GAAP Per Share Calculations:

Non-GAAP weighted-average shares used to compute non-GAAP net (loss) income per share, basic

47,640,200

47,101,200

47,357,711

42,149,108

Non-GAAP weighted-average shares used to compute non-GAAP net (loss) income per share, diluted

47,640,200

47,101,200

47,357,711

50,630,225

ON24, INC.

Reconciliation of GAAP to Non-GAAP Results

(in thousands, except share and per share data)

(Unaudited)

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

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

GAAP basic and diluted net loss per share:

Net loss

$

(14,387

)

$

(9,400

)

$

(46,078

)

$

(14,747

)

Less: Cumulative preferred dividends allocated to preferred stockholders

(558

)

Net loss attributable to common stockholders, basic and diluted

$

(14,387

)

$

(9,400

)

$

(46,078

)

$

(15,305

)

Weighted average common stock outstanding, basic and diluted

47,640,200

47,101,200

47,357,711

42,149,108

Basic and diluted net loss per share of common stock

$

(0.30

)

$

(0.20

)

$

(0.97

)

$

(0.36

)

Reconciliation of GAAP to non-GAAP net (loss) income per share

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Non-GAAP basic and diluted net (loss) income per share:

Net loss attributable to common stockholders

$

(14,387

)

$

(9,400

)

$

(46,078

)

$

(15,305

)

Add:

Cumulative preferred dividends allocated to preferred stockholders

558

Stock-based compensation

9,903

7,831

29,108

17,795

Amortization of acquired intangible asset

148

285

Restructuring costs

1,070

1,070

Non-GAAP net (loss) income attributable to common stockholders, basic and diluted

$

(3,266

)

$

(1,569

)

$

(15,615

)

$

3,048

Non-GAAP weighted-average shares used to compute non-GAAP net (loss) income per share, basic

47,640,200

47,101,200

47,357,711

42,149,108

Non-GAAP weighted-average shares used to compute non-GAAP net (loss) income per share, diluted

47,640,200

47,101,200

47,357,711

50,630,225

Non-GAAP net (loss) income per share of common stock:

Non-GAAP net (loss) income per share, basic

$

(0.07

)

$

(0.03

)

$

(0.33

)

$

0.07

Non-GAAP net (loss) income per share, diluted

$

(0.07

)

$

(0.03

)

$

(0.33

)

$

0.06

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 September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Net cash (used in) provided by operating activities:

$

(3,455

)

$

(894

)

$

(12,893

)

$

9,681

Less: Purchases of property and equipment

(726

)

(706

)

(2,400

)

(2,440

)

Free cash flow

$

(4,181

)

$

(1,600

)

$

(15,293

)

$

7,241

 

Contacts

Media Contact:
Tessa Barron
press@on24.com

Investor Contact:
Lori Barker, The Blueshirt Group for ON24
investorrelations@on24.com