ON24, Inc. Q2 FY2025 earnings call

Product and AI Innovation Strategy

• AI innovation builds on first-party data, with over 1 billion engagement minutes annually. Vision includes moving to omnichannel global campaigns and improving content discoverability in AI search.
• Core pillars: AI-powered segmentation and personalization, AI-powered Analytics and Content Engine, ON24 Translate with multilingual capabilities, ON24 IQ for event automation, and enhanced first-party engagement data insights.

Enterprise-Focused Go-to-Market Strategy

• Aligned sales, customer success, and marketing around solutions-based approach for global enterprises.
• Saw new customer wins, including a leading global payments platform and financial services company.
• Notable renewals and expansions, such as a high 7-figure renewal from an education technology company and a 50%+ commitment increase from a life sciences company.

Total revenue for the second quarter was $35.3 million. Total ARR ended the quarter at $127.1 million with core platform ARR at $125.1 million. The $100,000-plus ARR customer base grew in Q2. The average core ARR per customer reached approximately $80,000, the highest reported. Over 50% of ARR was in multi-year agreements, and the percentage of customers using 2 or more products hit an all-time high. Total customers at the end of Q2 were 1,566, with a net reduction in SMB customers.

Q3 Guidance

• Expected total revenue (including Virtual Conference product) in range of $33.6 million to $34.2 million, core platform revenue (including services) in range of $33.0 million to $33.6 million.
• Gross margin expected to be approximately 76% in Q3.
• Non-GAAP operating loss range $1.3 million to $0.7 million, non-GAAP net income per share $0.00 to $0.02.

Annual Guidance

• Full year total revenue expected $137.7 million to $138.7 million, core platform revenue $135.2 million to $136.2 million.
• Non-GAAP operating loss range $5.2 million to $3.8 million, non-GAAP net income per share $0.02 to $0.05.
• Expect ARR growth to return in Q4 2025, with core ARR increase $0 to $1 million compared to Q3, and Virtual Conference ARR expected $1.8 million at end of Q4.

Risks

• Forward-looking statements subject to known and unknown risks including ability to grow revenue, attract new customers, success of new products, impact of adverse economic conditions and macroeconomic deterioration.

Q: Rob Oliver asked about customer buying trends and Gen AI catalyst, and pipeline confidence for Q4.

A: Sharat Sharan said customer conversations were good in Q2, with Gen AI being a catalyst, and Steve Vattuone mentioned Q3 is seasonally softer but expecting ARR growth in Q4 driven by improved retention and gross bookings.

Q: Ian Black asked about driving greater penetration within enterprise customers.

A: Sharat Sharan said it's due to improved enterprise execution, focus on regular industries, win backs, with average core ARR per customer highest ever and high percentage of ARR in multiyear agreements.