Q1 2025 ON24 Inc Earnings Call
Okay.
Operator: Good day, everyone, and welcome to the ON24 Q1 2025 conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star and 2.
Speaker Change: Good day, everyone and welcome to the <unk> 20 for Q1, 'twenty 'twenty five conference call.
At this time all participants are in a listen only mode.
Speaker Change: Later, you will have the opportunity to ask questions. During the question and answer session. You may registered to ask a question at any time by pressing the star and one on your telephone keypad you may withdraw yourself from the queue by pressing star and two please.
Operator: Please note this call may be recorded and I will be standing by if you should need any assistance.
Speaker Change: Please note this call may be recorded and it will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Emily Greenstein Investor Relations. Please go ahead.
Operator: It is now my pleasure to turn the conference over to Emily Greenstein, Investor Relations. Please go ahead. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Emily Greenstein: Hello and good afternoon, everyone. Welcome to ON24's first quarter 2025 earnings conference call. On the call with me today are Sharat Sharan, co-founder and CEO of ON24, and Steve Vattuone, Chief Financial Officer of ON24.
Speaker Change: Hello, and good afternoon, everyone. Welcome to our 24 is first quarter of 2025 earnings conference call on the call with me today are sure Sharon co founder and CEO of on 24, and Steve I, Tony Chief Financial Officer of on 24.
Emily Greenstein: Before we begin, I would like to remind everyone that some information provided during this call will include forward-looking statements regarding future events and financial performance, including guidance for the second quarter and full fiscal year 2025, as well as certain second quarter and full year non-GAAP projections. These forward-looking statements are subject to known and unknown risks and uncertainties that can adversely affect ON24's future results and cause these forward-looking statements to be inaccurate, including our ability to grow our revenue, attract new customers and expand sales to existing customers, the success of our new products and capabilities, other statements regarding our ability to achieve our business strategies, growth, or other future events or conditions, such as the impact of adverse economic conditions and macroeconomic deterioration.
Speaker Change: Before we begin I would like to remind everyone that some information provided during this call will include forward looking statements regarding future events and financial performance, including guidance for the second quarter and full fiscal year 2025, as well as certain second quarter and full year non-GAAP projections.
Speaker Change: These forward looking statements are subject to known and unknown risks and uncertainties that could adversely affect on 24 as future results and cause. These forward looking statements to be inaccurate, including our ability to grow our revenue attract new customers and expand sales to existing customers. The success of our new products and capabilities other statements regarding our ability.
Speaker Change: To achieve our business strategies growth or other future events or conditions, such as the impact of adverse economic conditions and macroeconomic deterioration.
Emily Greenstein: On 24 cautions that these statements are not guaranteed a future performance. All forward looking statements made today reflect our current expectations only and we undertake no obligation to update any statement to reflect the events that occur after this call.
Speaker Change: On 24 cautions that these statements are not guarantees of future performance. All forward looking statements made today reflect our current expectations only and we undertake no obligation to update any statement to reflect events that occur after this call.
Emily Greenstein: Please refer to the company's periodic SEC filings and today's financial press release for factors that could cause our actual results to differ materially from any forward-looking statements.
Speaker Change: Please refer to the company's periodic SEC filings and today's financial press release for factors that could cause our actual results to differ materially from any forward looking statements we.
Emily Greenstein: We'd also like to point out that on today's call we will report both GAP and non-GAP results. We use these non-GAAP financial measures to evaluate our ongoing operations and for internal planning and forecasting purposes. Non-GAAP financial measures are presented in addition to, and not as a substitute for, financial measures calculated in accordance with GAAP.
Speaker Change: We'd also like to point out that on today's call. We will report both GAAP and non-GAAP results.
Speaker Change: We use these non-GAAP financial measures to evaluate our ongoing operations and for internal planning and forecasting purposes non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP.
Emily Greenstein: To see the reconciliations of these non-GAAP financial measures, please refer to today's financial press release.
Speaker Change: Reconciliations of these non-GAAP financial measures. Please refer to today's financial press release, I will now turn the call over to Sharon.
Sharat Sharan: I will now turn the call over to Sharat. Thank you and welcome everyone to the ON 24 First Quarter 2025 Earnings I appreciate you joining us today. With me is Steve Vattuone, our Chief Financial Officer, who will be sharing details on our Q1 performance shortly.
Sharon Co: Thank you and welcome everyone.
Speaker Change: So the on 24 first quarter 'twenty 25 earnings call.
Sharon Co: I appreciate you joining us today.
Sharon Co: With me is Steve back to earning our Chief Financial Officer, who will be sharing details on our Q1 performance shortly.
Sharat Sharan: Before we dive into the numbers, I'd like to take a moment to highlight a few key driving forces to be mindful of as we move through 2025. Constant innovation is mission critical at ON24. In this quarter, we will continue to roll out exciting AI innovation behind our Intelligent Engagement Platform roadmap. You'll see exciting product advancements around AI powered content nurture, hyper personalization, multi language capability, efficiency driven AI agents, and AI enabled performance insights. At the same time, we recognize we are operating in a time of macro uncertainty, where customer buying decisions and outcomes are more measured.
Sharon Co: Before we dive into the numbers I'd like to take a moment to highlight a few key driving forces to be mindful of as we move through 2025.
Sharon Co: Constant innovation is mission critical at 124, and this quarter, we will continue to rollout exciting innovation behind our intelligent engagement platform roadmap.
Sharon Co: Youll see exciting product advancements around AI powered content nurture hyper personalization multi language capability.
Sharon Co: Efficiency, driven EIA agents and AI enabled performance insights.
Sharon Co: The same time.
Sharon Co: Recognize we are operating in a timeless macro uncertainty.
Sharon Co: Customer buying decisions and outcomes are more measured.
Sharat Sharan: We have navigated through this type of environment before. And we know that in times of uncertainty, it is even more critical. focus on the customer. So we've doubled down on our commitment to customer satisfaction. engagement and retention, ensuring we are delivering measurable value for our clients at every stage of the journey with ON24. as we look to help our customers do more with less. We will sharpen our focus on ongoing product innovation and platform extensibility. particularly through AI powered features and enterprise grade capabilities. These enhancements deepen the impact of our platform, while also enabling us to better execute on our value added sales strategy, expanding within our existing customer base by aligning with their evolving needs and long term customer engagement goals.
Sharon Co: We have navigated through this type of environment before.
Sharon Co: And we know that in times of uncertainty it is even more critical.
Sharon Co: Focus on the customer so we've doubled down on our commitment to customer satisfaction <unk>.
Sharon Co: Engagement and retention, ensuring we are delivering measurable value for our clients at every stage of the journey with 120.
Sharon Co: As we look to help our customers do more with less.
Sharon Co: We will sharpen our focus on ongoing product innovation and platform extensibility.
Sharon Co: Do you can really true yeah powered features and enterprise grade capabilities.
Sharon Co: These enhancements deepened the impact of our platform, while also enabling us to better execute on our value added sales strategy expanding within our existing customer base by aligning with their evolving needs and long term customer engagement goals.
Sharat Sharan: from the ROLA of AI-powered analytics and content engine, ACE, to new product innovations, enterprise expansion wins, and improving customer retention trends, we are reinforcing ON24's position as the intelligent engagement platform of choice for global enterprises and laying the foundation for sustainable, profitable growth.
Sharon Co: From the rollout of.
Speaker Change: Yeah powered analytics and content engine Ace two new product innovations enterprise expansion wins and improving customer retention trends.
Speaker Change: Reinforcing on 24 its position as the intelligent engagement platform of choice for global enterprises, and laying the foundation for sustainable profitable growth.
Sharat Sharan: Our results for Q1 demonstrate our improving gross retention profile, operating expense discipline, and cash flow improvement. revenue from our core platform including services. was $34.2 million, and total revenue, including virtual conference, was $34.7 million. In terms of ARR, we ended the quarter with $125.9 million of core platform ARR and total ARR was $128.2 million. From a cash flow perspective, we drove positive free cash flow for the fifth consecutive quarter, and we remain committed to a long-term profitability target of generating double-digit EBITDA marks.
Speaker Change: Our results for Q1 demonstrated our improving gross retention profile operating expense discipline and cash flow improvement.
Speaker Change: Revenue from our core platform, including services.
Speaker Change: It was $34 2 million in total revenue, including virtual conference was $34 7 million.
Speaker Change: In terms of Iraq, we ended the quarter with 40 549 million of core platform <unk> and total <unk> was 120 $812 million.
Speaker Change: From a cash flow perspective, we drove positive free cash flow for the fifth consecutive quarter and we remain committed to our long term profitability target of generating double digit EBITDA margins.
Sharat Sharan: I'd like to highlight some areas where we have been effecting change and improved our business. We made meaningful progress in accelerating our enterprise focused go to market initiative. Under new North America sales leadership, we delivered the best enterprise new logo performance in the last five quarters. Specifically in Q1, we saw continued win-back momentum with Boomerang customers, with the largest number of customers and largest dollar value of ARR in the last five quarters. We continue to drive our AI-powered innovation product roadmap, which I will discuss in more detail shortly. At the end of Q1, low-teens percentage of our customers are paying for AI-powered ACE products.
Speaker Change: I'd like to highlight some areas.
Speaker Change: We have been affecting changed and improved our business.
Speaker Change: First.
Speaker Change: We made meaningful progress in accelerating our enterprise focus go to market initiatives.
Speaker Change: Under new North American sales leadership, we delivered the best Enterprise New logo performance in the last five quarters.
Speaker Change: Specifically in Q1, we saw continued win back momentum with Boomerang customers with the largest number of customers and largest dollar value of <unk> the last five quarters.
Speaker Change: We continue to drive our AI powered innovation product roadmap, which I will discuss in more detail shortly.
Speaker Change: At the end of Q1.
Speaker Change: Low teens percentage of our customers are paying for AI powered ace brought us.
Sharat Sharan: Customer retention measured by in period gross retention improved sequentially from last quarter and was at the highest level we have seen in the last four years. as we move ahead in 2025.
Speaker Change: That's why retention measured by NPL gross retention improve sequentially from last quarter and was at the highest level <unk> seen in the last four years.
Speaker Change: As we move ahead in 2025.
Sharat Sharan: We are focused on three core areas. EA Innovation improved enterprise go-to-market execution, and a commitment to positive cash. starting with product innovation. You'll continue to see a steady and exciting stream of AI advance. AI is fundamentally changing sales and marketing. And our customers trust us to help bring their engagement strategies into the AI era. Our product development focus is based upon ON24's five core pillars. all of which are directed towards enabling our customers to power positive business outcomes. achieve greater cost efficiency. and deliver massive enterprise grade scale.
Speaker Change: We're focused on three core areas.
Speaker Change: Yeah innovation.
Speaker Change: Improved enterprise go to market execution.
Speaker Change: And our commitment to positive cash flow.
Speaker Change: Starting with product innovation.
Speaker Change: You'll continue to see a steady and exciting stream of advancements.
Speaker Change: Yes, fundamentally changing sales and marketing and our customers Trust us.
Speaker Change: Bring their engagement strategies into the AI era.
Speaker Change: Our product development focus is based upon 124 five core pillars.
Speaker Change: All of which are directed towards enabling our customers to power positive business outcomes.
Speaker Change: Achieve greater cost efficiency.
Speaker Change: And deliver massive enterprise grade scalability.
Sharat Sharan: Let's briefly touch on these five pillars. First is our AI powered content and knowledge. which allows customers to leverage the ON24 platform with AI powered analytics and content engine ACE. to engage their audience in an entirely new way. with experiences that are intelligent and personalized and content that is always on. This not only accelerates content creation and execution, but also scales reach, ultimately propelling consistent pipeline growth for our Second, we are introducing ON24IQ, intelligent agents to expand the capability of our existing ON24 AI powered ACE so participants can minimize manual repetitive tasks, like event QA, handling and others.
Speaker Change: Let's briefly touch on these five pillars.
Speaker Change: The first is our AI powered content, then nurture which allows customers to leverage the on 24 platform with AI powered analytics and content engine Ace.
We engage their audience and an entirely new way.
Speaker Change: With experiences that are intelligent and personalized and content that is always on.
Speaker Change: This not only accelerates content creation and execution.
Speaker Change: It also scales reach.
Speaker Change: Ultimately propelling consistent pipeline growth for our customers.
Speaker Change: Second we are introducing onto me for IQ intelligent agents to expand the capability of our existing on 24, yeah powered ace. So participants can minimize manual repetitive tasks like eventuate handling and others.
Sharat Sharan: We believe every event can become a data driven, highly unique experience that keeps audiences engaged. Third, our platform's personalization capability. allow customers to dynamically customize event experiences based on audience behaviors, and to deliver personalized certifications and continued education programs that align with audience needs and regulatory requirements. Our fourth pillar leverages the platform's AI capabilities to provide deep performance insights that allow our customers go to market teams to capitalize on on 21st first party engagement data to make data driven decisions that drive growth. And lastly, our new multilingual capability unlocks global engagement. Now customers can automatically localize event registration and activation pages.
Speaker Change: We believe every event.
Speaker Change: Can become a data driven highly unique experience that keeps audiences engaged.
Speaker Change: Third our platform personalization capabilities.
Speaker Change: Allow customers to dynamically customized event experiences based on audience behaviors and to deliver personalized certifications and continued education programs that align with audience needs and regulatory requirements.
Speaker Change: Our fourth pillar leverages the platforms AI capabilities to provide deep performance insights that allow our customers go to market teams to capitalize on 24 is first party engagement data to make data driven decisions that drive growth.
Speaker Change: And lastly, our new multilingual capability unlocks global engaged.
Speaker Change: Now customers can automatically localized event registration and activation pages.
Sharat Sharan: translate post event recording and generate derivative content including ebooks, social posts, blogs, key takeaways, transcripts and more. This enables global enterprises to scale their efforts and drive faster results globally.
Speaker Change: Translate post event recording.
Speaker Change: And generate derivative content, including E books, social posts blogs key takeaways transcripts and more.
Speaker Change: This enables global enterprises to scale their efforts and drive faster results globally.
Speaker Change: The second core area is our enterprise focus go to market strategy.
Sharat Sharan: The second core area is our enterprise-focused go-to-market strategy. As part of our strategic evolution, ON24 has made meaningful progress in accelerating our enterprise-focused go-to-market initiatives. We are aligning our sales, marketing and customer success model to drive deeper value and long term growth in the global enterprise sector. First, we've shifted to a solutions based go to market approach, tailored to the complex needs of enterprise buyers. This strategy enables us to align more directly with our customer's strategic objectives, whether that's accelerating pipeline, improving buyer or client engagement, or delivering more personalized experiences at scale.
Speaker Change: As part of our strategic evolution 124 has made meaningful progress in accelerating our enterprise focus go to market initiatives.
Speaker Change: We are aligning our sales marketing and customer success model to drive deeper value and long term growth in the global enterprise segment.
Speaker Change: First we've shifted to a solutions based go to market approach tailored to the complex needs of.
Speaker Change: Enterprise buyers.
Speaker Change: This strategy enables us to align more directly with our customers strategic objectives, whether that's accelerating pipeline.
Speaker Change: Improving by our client engagement or.
Speaker Change: Or delivering more personalized experiences at scale.
Sharat Sharan: Second We are excited to announce the launch of a new global integrated marketing campaign called Propel Forward. focused on a solutions based go to market approach. Our Propel Forward campaign highlights the deep ROI we provide by segmenting. as well as our ability to enable customers to maximize the first party engagement experience and capitalize on the power of personalization and AI to accelerate the customer journey and propel positive business outcomes. ON24 can propel pipeline for technology providers. Accelerate Client Relationships for Financial Service and Deliver Engagement and Certification for Healthcare Professionals. This integrated campaign should increase demand and brand awareness, thereby driving new acquisition accounts and facilitating customer expansion.
Speaker Change: Second.
Speaker Change: We are excited to announce the launch of a new global integrated marketing campaign called propel forward.
Speaker Change: On a solutions based go to market approach.
Speaker Change: Our propel forward campaign highlights the deep ROI, we provide by segment.
Speaker Change: As well as our ability to enable customers to maximize the first party engagement experience and capitalize on the power of personalization and AI to accelerate the customer journey and propel positive business outcomes.
Speaker Change: 124 can propel pipeline for technology providers.
Speaker Change: Accelerate client relationships for financial services.
Speaker Change: And deliver engagement and certification for health care professionals.
Speaker Change: This integrated campaign should increase demand and brand awareness, thereby driving new acquisition accounts and facilitating customer expansion.
Speaker Change: Third.
Sharat Sharan: We are pleased to announce David Lee as our new Chief Marketing Officer. David comes to us with extensive B2B experience, previously serving as Chief Marketing Officer for Investment Yodlee and Vice President of Marketing for Sonic. With the hiring of David and the previous changes that we made in our North America sales leadership, we are focused on driving improved sales velocity and customer expansion.
Speaker Change: We are pleased to announce David Lee as our new Chief Marketing Officer.
Speaker Change: David comes to us with extensive <unk> experienced previously serving as chief marketing officer for investment.
Speaker Change: Yodlee.
Speaker Change: And vice president of marketing or Sonicwall.
Speaker Change: With the hiring of David and the previous changes that we made in our North America sales leadership, we are focused on driving improved sales velocity and customer expansion.
Sharat Sharan: In fact, we've already seen meaningful progress in accelerating our enterprise focused go to market initiatives, having delivered the best new business performance in the to highlight some of the new logos that we closed in Q1. We acquired a new customer, one of the leading AI companies in the world, building a foundational AI With a clear focus on expanding the B2B and enterprise footprint, the customer turned to ON24 to shift their go to market strategy from traditional marketing to a scalable, data driven, digital In the pharmaceutical space, a commercial-stage biopharma company turned to ON24 to build a more mature omni-channel strategy.
Speaker Change: In fact, we've already seen meaningful progress in accelerating our enterprise focused go to market initiatives haven't delivered the best new business performance in the quarter.
Speaker Change: To highlight some of the new logos that we closed in Q1, we acquired a new customer one of the leading AI companies in the war building our foundational AI system.
Speaker Change: With a clear focus on expanding the b to B and enterprise footprint, the customer turned to <unk> 24 to shift their go to market strategy from traditional marketing to a scalable data driven digital funnel.
Speaker Change: In the pharmaceutical space, a commercial stage Biopharma company.
Speaker Change: Two on 24 to build a more mature omnichannel strategy.
Sharat Sharan: With compliance top of mind and a need to strong partner integration, they selected ON24 to deliver interactive experiences that could be reviewed before launch by compliance and access on demand by healthcare. Another major new logo is a leading provider of legal, tax and business services, providing multi-state certification. with the ON24 platform and AI Power Days. They've been able to automate the certification process by creating personalized on-demand experiences, leveraging real-time analytics.
Speaker Change: With compliance top of mind and a need to strong partner integration the selected on 24.
Speaker Change: To deliver interactive experiences that could be reviewed before launch by compliance and access on demand by health care professionals and.
Speaker Change: Another major new logo is a leading provider of legal tax and business services, providing multistate certifications.
Speaker Change: With the on 24 platform and airpower days, they've been able to automate the certification process by creating personalized on demand experiences leveraging real time analytics.
Sharat Sharan: Fourth, in Q1, we experienced the highest number of win backs from boomerang customers in the last five quarters. In the technology vertical, we re-engaged a Fortune 500 IT technology solutions provider. Their goals were ambitious. Elevate their event strategy, increase engagement and conversions, and scale their content strategy. By leveraging the ON24 platform, the team is now able to drive tangible growth by personalizing digital experiences based on their target audience. Specifically, they can scale channel effectiveness through a multimedia engagement hub that allows users to register once and consume all content. while tracking interactivity and attributing it back to revenue.
Speaker Change: Fourth in Q1, we experienced the highest number of win backs from Boomerang customers in the last five quarters.
Speaker Change: In the technology vertical we re engaged a fortune 500.
Speaker Change: <unk> technology solutions provider.
Speaker Change: The goals are ambitious elevate their event strategy increase engagement and conversions and scale their content strategy.
Speaker Change: By leveraging the on 24 platform. The team is not able to drive tangible growth at personalizing digital experiences based on their target audiences.
Speaker Change: Specifically, they can scale channel effectiveness through a multi media engagement hub that allows users to register once and consumed all content.
Speaker Change: While tracking interactivity and attributing it back to revenue.
Sharat Sharan: Additionally, They're accelerating content creation through ON24's AI-powered ACE to rapidly produce derivative assets and streamline operations.
Speaker Change: Additionally.
Speaker Change: They are accelerating content creation through 120 fours <unk> powered ace to rapidly produce derivative assets and streamline operations.
Sharat Sharan: Lastly, we remain focused on regulated industry verticals, including financial services and life sciences. are robust and secure offering is well suited to the high demands of these enterprise grade customers. that require automated workflows, reliability, security, and compliance.
Speaker Change: Lastly, we remain focused on regulated industry verticals, including financial services and life Sciences.
Our robust and secure offering is well suited to the high demands of these enterprise grade customers that require automated workflows reliability security and compliance.
Sharat Sharan: I want to highlight our work with one of the largest international financial services companies in the world, providing global investment management, investment services, and wealth management. We are working with this global financial institution to consolidate their disparate demand generation, education, and leadership training programs and systems under a single intelligent engagement solution to bring together institutional investors, financial advisors, wealth managers, and more. We have been able to consolidate multiple use cases on the ON24 platform while exiting some of the other point solutions that they were using.
Speaker Change: I want to highlight our work with one of the largest international financial services companies in the war, providing global investment management Investor.
Speaker Change: Investment services and wealth management.
Speaker Change: We are working with this global financial institution to consolidate their disparate demand generation education and leadership training programs and systems under a single intelligent engagement solutions to bring together institutional investors financial advisors wealth managers and more.
Speaker Change: <unk> been able to consolidate multiple use cases on the on 24 platform, while exiting some of the other point solutions.
Speaker Change: We're using.
Sharat Sharan: In summary, with continued improvement in our gross retention rate and positive free cash flow generation. We believe we have stabilized our business. As we focus on returning to growth, we have made significant strides in our go to market execution, including enhancements to our leadership team. Early results are good, with encouraging signs across multiple dimensions, including new business acquisition, winbacks from boomerang customers, and increased penetration with regulated industry verticals, which are now over a third of our business. In addition, our AI driven innovation, which has seen our AI age become an important growth vector, sets us up for continued innovation and momentum.
Speaker Change: In summary.
Speaker Change: With continued improvement in our gross retention rate and positive free cash flow generation.
Speaker Change: We believe we have stabilized our business.
Speaker Change: As we focus on returning to growth we have made significant strides in our go to market execution.
Speaker Change: Including enhancements to our leadership team.
Speaker Change: Early results are good with encouraging signs across multiple dimensions, including new business acquisition win backs from Boomerang customers and increased penetration with regulated industry verticals, which are now over a third of our business.
Speaker Change: In addition, our AI driven innovation.
Speaker Change: Which has seen our AIA has become an important growth vector sets us up for.
Speaker Change: Our continued innovation and momentum.
Speaker Change: While we have laid the foundation for a return to growth.
Sharat Sharan: While we've laid the foundation for a return to growth Our stock price has experienced new lows. Given this dynamic, We believe our current market valuation does not reflect our long term growth potential and strategy. presenting a compelling opportunity for us to repurchase our undervalued shares.
Speaker Change: Our stock price has experienced new lows.
Speaker Change: Given this dynamic.
Speaker Change: We believe our current market valuation does not reflect our long term growth potential and strategy.
Speaker Change: Presenting a compelling opportunity for us to repurchase our undervalued shares.
Steven Vattuone: Specifically, we are announcing a new $50 million share repurchase program that Steve will discuss. And with that, I will turn it to Steve.
Speaker Change: Specifically, we are announcing a new $50 million share repurchase program that Steve will discuss.
Steve: And with that I will turn it to Steve.
Steven Vattuone: Thank you, Sharat, and good afternoon, everyone. I'm going to start with our first quarter 2025 results and we'll then discuss our outlook for the second quarter of 2025 and full year 2025. revenue from our core platform, including services in Q1 of 2025. $34.2 million dollars, representing a decrease of 7% year over year. Total revenue for the first quarter, which includes revenue from our virtual conference product, was $34.7 million. Total subscription and other platform revenue was $32.3 million. Overage has represented a little over 1% of total revenue in Q1. Total professional services revenue was $2.4 million, representing approximately 7% of total revenue.
Steve: Thank you, Sean and good afternoon, everyone.
Speaker Change: I'm going to start with our first quarter 2025 results and will then discuss our outlook for the second quarter of 2025 and full year 2025.
Speaker Change: Revenue from our core platform, including services in Q1 of 2025.
Speaker Change: It was $34 2 million.
Speaker Change: Representing a decrease of 7% year over year.
Speaker Change: Total revenue for the first quarter.
Speaker Change: Which includes revenue from our virtual conference product was $34 $7 million.
Speaker Change: Total subscription and other platform revenue was $32 $3 million.
Speaker Change: <unk> represented a little over 1% of total revenue in Q1.
Speaker Change: Total professional services revenue was $2 4 million, representing approximately 7% of total revenue.
Steven Vattuone: Moving on to AR. AR represents the annualized value of all subscription contracts at the end of the period and excludes professional services and over. In Q1 2025, ending ARR related to our core platform totaled $125.9 million, a decrease of approximately $1.4 million compared to Q4 of 2024. Total ARR at the end of Q1 was 128.2 million. During Q1, we experienced further stability within our install base driven by our improved go-to-market strategy. Our end period gross retention in Q1 was the highest in the past four years and showed a sequential increase from Q4 of 2024. In addition, we saw our largest quarter in the past five quarters of customer win back.
Speaker Change: Moving onto <unk>.
Speaker Change: Ah represents the annualized value of all subscription contracts at the end of the period and excludes professional services and Overages and.
Speaker Change: In Q1, 2025, and <unk> <unk> related to our core platform.
Speaker Change: $125 9 million a decrease of approximately $1 4 million compared to Q4 of 2024.
Speaker Change: Total <unk> at the end of Q1 was $128 2 million.
Speaker Change: During Q1, we experienced further stability within our installed base driven by our improved go to market strategy.
Speaker Change: Our in period gross retention in Q1 was the highest in the past four years and showed a sequential increase from Q4 of 2024 and.
Speaker Change: In addition, we saw our largest quarter in the past five quarters of customer win backs.
Steven Vattuone: These Boomerang customers, which had previously left us for other tools return to us in Q1 after missing the benefits of our solution.
Speaker Change: Boomerang customers, which had previously left us or other tools returned to us in Q1 after missing the benefits of our solution.
Steven Vattuone: We did see some softness towards the end of Q1, primarily in our international and commercial business segments, as uncertainty increased in the broader macro environment.
Speaker Change: We did see some softness towards the end of Q1, primarily in our international and commercial business segments.
Speaker Change: Uncertainty increased and the broader macro environment.
Steven Vattuone: Training the Customer Metric. As we look at our business moving forward, we are focused on our enterprise customers and are seeing positive growth across those methods. The percentage of our ARR in multi-year contracts increased in Q1 to reach new highs. It was over 50% of our ARR at the end of Q1. The multiproduct adoption of our solution also continues, reaching an all-time high at the end of Q1. In Q1, the average core ARR per customer was approximately $78,000, up slightly from 2024 year-end level. The ARR contribution from the $100,000 plus customer cohort continues to represent approximately two thirds of our total ARR, which is consistent with the prior quarter.
Speaker Change: Turning to the customer metrics.
Speaker Change: As we look at our business moving forward, we are focused on our enterprise customers and are seeing positive growth across those metrics the percentage of our <unk> and multiyear contracts increased in Q1 to reach new highs was over 50% of our IRR at the end of Q1.
Speaker Change: The multi product adoption of our solution also continues reaching an all time high at the end of Q1.
Speaker Change: In Q1, the average core <unk> per customer was approximately $78000 up slightly from 2024 year end levels.
Speaker Change: The <unk> contribution from the $100000 plus customer cohort continues represent approximately two thirds of our total IRR, which is consistent with the prior quarter and we ended Q1 with 299 customers contributing more than $100000 of total IRR.
Steven Vattuone: And we ended Q1 with 299 customers contributing more than $100,000 in total ARR. Well, we saw impressive new logo wins in Q1. We also did see some customers renewing Q1 under the $100,000 threshold. Total customer count at the end of Q1 was 1,604. In Q1, we had our largest renewal cohort of the year of smaller customers, which contributed to the reduction in our customer count during the quarter.
Speaker Change: While we saw impressive new logo wins in Q1, we also did see some customers renewal in Q1 under the $100000 threshold total customer count at the end of Q1 was 1604.
Speaker Change: In Q1, we had our largest renewal cohort of the year or smaller customers, which contributed to the reduction in our customer counts during the quarter.
Steven Vattuone: Before turning to expense items and profitability, I would like to point out that I will be discussing non-GAAP results going forward. Our non-GAAP results exclude stock-based compensation, restructuring charges, Impairment Charges for Real Estate, Amortization of Acquired Intangibles, Shareholder Activism-Related Costs, Certain Legal Costs Related to Litigation Regarding our 2021 IPO, as well as certain other items. Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP results, can be found within our earnings release. Our gross margin in Q1 was 77%, consistent with the past several quarters and with Q4 of last year.
Speaker Change: Before turning to expense items and profitability I would like to point out that I will be discussing non-GAAP results going forward.
Speaker Change: Our non-GAAP results exclude stock based compensation restructuring charges impair.
Speaker Change: Impairment charges real estate <unk>.
Speaker Change: Amortization of acquired intangibles shareholder activism related costs and certain legal costs related to litigation regarding our 2021, IPO as well as certain other items, our GAAP financial results along with a reconciliation between GAAP and non-GAAP results can be found within our earnings release.
Speaker Change: Our gross margin in Q1 was 77% consistent with the past several quarters and with Q4 of last year.
Steven Vattuone: Now moving to operating expenses. sales and marketing expense in Q1 was $15.6 million compared to $16.3 million in Q1 last year. This represents 45% of total revenue compared to 43% in the same period last year, and 44% last quarter. As Sharat mentioned earlier, we have better aligned our go-to-market organization and our sales and marketing expenses have decreased in absolute dollars, both year-over-year and from last quarter, largely due to the cost-savings measures we have implemented to improve efficiency in that organization. R&D expense in Q1 was $6.8 million compared to $6.7 million in Q1 last year. This represents 20% of total revenue compared to 18% in the same period last year and last quarter.
Speaker Change: Now moving to operating expenses.
Speaker Change: Sales and marketing expense in Q1 was $15 6 million compared to $16 $3 million in Q1 last year. This.
Speaker Change: This represents 45% of total revenue compared to 43% in the same period last year and 44% last quarter.
Speaker Change: As Sean mentioned earlier, we have better aligned our go to market organization and our sales and marketing expenses have decreased in absolute dollars both year over year and from last quarter largely due to the cost savings measures, we have implemented to improve efficiency in that organization.
Speaker Change: R&D expense in Q1 was $6 8 million compared to $6 7 million in Q1 last year.
Speaker Change: This represents 20% of total revenue compared to 18% in the same period last year and last quarter.
Steven Vattuone: Our R&D expenses have remained relatively flat over the past year in absolute dollars as we have continued to invest in product innovation for our platform, including AI-enabled features such as AI-powered ACE on 24IQ and enhanced personalization. Q&A expense in Q1 was $6.3 million compared to $6.7 million in Q1 last year. This represents 18% of total revenue compared to 18% in the same period last year and 16% last quarter. We continue to take actions to reduce our G&A spending and streamline our G&A functions. And as a result, our G&A expenses and absolute dollars have decreased as compared to the same period last year.
Speaker Change: Our R&D expenses have remained relatively flat over the past year in absolute dollars as we have continued to invest in product innovation for our platform, including AI enabled features such as AI powered ace on 24 IQ.
Speaker Change: And enhance personalization.
Speaker Change: G&A expense in Q1 was $6 3 million compared to $6 7 million in Q1 last year.
Speaker Change: This represents 18% of total revenue compared to 18% in the same period last year and 16% last quarter.
Speaker Change: We continue to take actions to reduce our G&A spending and streamline our G&A functions and as a result, our G&A expenses in absolute dollars have decreased as compared to the same period last year.
Steven Vattuone: Moving on to our bottom line performance and cash flow. Operating loss for Q1 was $2.1 million or a negative 6% operating margin compared to an operating loss of $0.8 million and a negative 2% operating margin in the same period last year. Net loss in Q1 was $0.4 million or one cent per share based on approximately 42.1 million basic and diluted shares outstanding. This compares to net income of $1 million, or $0.02 per share in Q1 last year, using approximately 45.6 million diluted shares outstanding. Our Q1 bottom line results reflect Q1 being a seasonally softer quarter for revenue, and I do expect our bottom line results to improve this year from Q1 levels, which I will discuss when I cover our financial analysis.
Speaker Change: Moving on to our bottom line performance and cash flow metrics.
Speaker Change: Operating loss for Q1 was $2 1 million or a negative 6% operating margin compared to an operating loss of zero point $8 million and a negative 2% operating margin in the same period last year.
Speaker Change: Net loss in Q1, with zero point $4 million or <unk> <unk> per share based on approximately $42 1 million basic and diluted shares outstanding.
Speaker Change: This compares to net income of $1 million or <unk> <unk> per share in Q1 last year using approximately $45 6 million diluted shares outstanding.
Speaker Change: Our Q1 bottom line results reflect Q1 being a seasonally softer quarter for revenue and I do expect our bottom line results to improve this year from Q1 levels, which I will discuss when I cover our financial guidance.
Steven Vattuone: Thank you. Now turn into our cash flow method. Our free cash flow in Q1 was positive $2.8 million when we exclude cash outflows related to our restructuring efforts, shareholder activism fees, and certain other legal costs, which collectively totaled $0.9 million in Q1 2025. Our free cash flow in Q1, including all of these items, was positive $1.9 million, compared to positive $1.1 million in Q1 last year.
Speaker Change: Now turning to our cash flow metrics.
Speaker Change: Our free cash flow in Q1 was positive $2 8 million when we exclude cash outflows related to our restructuring efforts.
Speaker Change: Holder activism fees.
Speaker Change: And certain other legal costs, which collectively totaled zero point $9 million in Q1 2025.
Speaker Change: Our free cash flow in Q1, including all of these items was positive $1 $9 million.
Speaker Change: Compared to positive $1 1 million in Q1 last year.
Steven Vattuone: This is our fifth consecutive quarter of positive free cash flow. Cash provided by operations in Q1 was $3.4 million compared to cash provided by operations of $2.1 million in Q1 of last year.
Speaker Change: This is our fifth consecutive quarter of positive free cash flow.
Speaker Change: Cash provided by operations in Q1 was $3 $4 million.
Speaker Change: Compared to cash provided by operations of $2 1 million in Q1 of last year.
Steven Vattuone: I would like to provide an update on our previously announced capital return program. In March 2025, we completed the $25 million share repurchase program we announced in March 2024. We utilize the full $25 million allocated under that program with $4.5 million utilized in Q1 2025. This share purchase program followed the completion of two earlier capital return programs, which collectively returned $166 million to shareholders. We have now returned a total of $191 million to shareholders.
Speaker Change: I would now like to provide an update on our previously announced capital return program and.
Speaker Change: In March 2025, we completed the $25 million share repurchase program, we announced in March 2024.
Speaker Change: Utilize the full $25 million allocated under that program with $4 $5 million utilized in Q1 2025.
Speaker Change: This share repurchase program. Following the completion of two earlier capital return programs, which collectively returned $166 million to shareholders. We have now returned a total of $191 million to shareholders.
Steven Vattuone: In light of our strong balance sheet, positive free cash flow and undervalued stock, the Board of Directors has authorized a new $50 million share repurchase program to drive shareholder value. Our balance sheet continues to remain strong with almost $181 million of cash and investments at the end of Q1 2025.
Speaker Change: In light of our strong balance sheet positive free cash flow and undervalued stock. The board of directors has authorized a new $50 million share repurchase program to drive shareholder value.
Speaker Change: Our balance sheet continues to remain strong with almost $181 million of cash and investments at the end of Q1 2025.
Steven Vattuone: Now, I want to provide some context for how we were thinking about 2025. As Sharat and I have discussed, we are seeing many positive signs of improvement in our business. And we are fundamentally pleased with our progress in a choppy market. We are focused on several key tenets to drive our business forward and create shareholder value, including delivery of a steady stream of market leading AI innovation, improve sales and marketing execution under new leadership, and generating positive cash flow and positive adjusted EBITDA in 2025. That being said, the economic uncertainty has increased significantly over the last month, and like many businesses, we do have another layer of risk to factor in due to a lack of clarity and visibility into the potential health of the economy.
Speaker Change: Now I want to provide some context for how we're thinking about 2025.
Speaker Change: As Sean and I have discussed we are seeing many positive signs of improvement in our business and.
Speaker Change: And we are fundamentally pleased with our progress in a choppy market we.
Speaker Change: We are focused on several key tenants to drive our business forward and create shareholder value, including delivery of a steady stream of market, leading AI innovation improved sales and marketing execution under new leadership and generating positive cash flow and positive adjusted EBITA in 2025.
Speaker Change: That being said the economic uncertainty has increased significantly over the last month and like many businesses. We do have another layer of risk to factor in due to a lack of clarity and visibility into the potential health of the economy given.
Steven Vattuone: Given the wider range of potential macro and policy driven outcomes, we have decided to take a more conservative approach to our near term top line guidance.
Speaker Change: Given the wider range of potential macro and policy driven outcomes, we have decided to take a more conservative approach to our near term top line guidance.
Steven Vattuone: Now turning to our guidance. Regarding Q2 guidance, we expect Q2 core platform revenue, including services, in the range of $33.8 million to $34.4 million, and total revenue, which includes our virtual conference product, in the range of $34.5 million to $35.1 million. Professional Services is expected to represent approximately 8% of total revenue. We expect our gross margin to be 76%. We expect a non-GAAP operating loss in the range of $1.5 million to $0.7 million in non-GAAP net income per share of 0 cents per share to 2 cents per share using approximately 45.6 million diluted shares outstanding.
Speaker Change: Now turning to our guidance.
Speaker Change: Regarding Q2 guidance, we expect Q2 core platform revenue, including services and a range of $33 8 million to $34 4 million and total revenue, which includes our virtual conference product in the range of $34 5 million to $35 1 million.
Speaker Change: Professional services is expected to represent approximately 8% of total revenue.
Speaker Change: We expect our gross margin to be 76% in Q2.
Speaker Change: We expect a non-GAAP operating loss in the range of $1 $5 million to zero point $7 million and non-GAAP net income per share of zero cents per share to <unk> <unk> per share using approximately $45 6 million diluted shares outstanding.
Steven Vattuone: In Q2, we also expect to be adjusted EBITDA positive. We expect a restructuring charge of $0.5 million to $0.8 million in Q2 related to our ongoing cost reduction efforts, which is excluded from the non gap amounts provided amortization of acquired intangibles, shareholder activism costs. certain other legal costs, and certain other items are excluded from the Q2 non-GAAP amounts provided On ARR, we assume core ARR will be down $0.5 million to $1.5 million compared to Q1 level. For a virtual conference product, we expect Q2 ARR to decline approximately $0.2 million in Q2. Ending Q2 at $2.1 million.
Speaker Change: In Q2, we also expect to be adjusted EBITA positive.
Speaker Change: We expect a restructuring charge of <unk> 5 million to zero point $8 million in Q2 related to our ongoing cost reduction efforts, which is excluded from the non-GAAP amounts provided above.
Speaker Change: Amortization of acquired intangibles shareholder activism costs.
Speaker Change: Certain other legal costs and certain other items are excluded from the Q2 non-GAAP amounts provided above.
Speaker Change: On.
Speaker Change: We assume core <unk> will be down zero point $5 million to $1 $5 million compared to Q1 levels.
Speaker Change: For a virtual conference product, we expect Q2 to decline approximately zero point $2 million in Q2.
Speaker Change: Ending Q2 at $2 1 million.
Steven Vattuone: Now turning to our annual guidance for 2025, which assumes the macro conditions do not worse. For the full year, we expect core platform revenue, including services, to be in the range of $133.7 million to $136.7 million. We expect total revenue to be in the range of $136 million to $139 million. Professional Services is expected to represent approximately 7.5% of total revenue. We expect a non-GAAP operating loss in the range of $5.5 million to $3.5 million in non-GAAP net income per share of $0.02 per share to $0.05 per share using approximately 45 million diluted shares outstanding.
Speaker Change: Now turning to our annual guidance for 2025, which assumes the macro conditions do not worsen.
Speaker Change: For the full year, we expect core platform revenue, including services to be in the range of $133 7 million to $136 $7 million.
Speaker Change: We expect total revenue to be in the range of $136 million to $139 million.
Speaker Change: Professional services is expected to represent approximately seven 5% of total revenue.
Speaker Change: We expect a non-GAAP operating loss in the range of $5 5 million to $3 5 million and non-GAAP net income per share of <unk> <unk> per share to <unk> <unk> per share using approximately 45 million diluted shares outstanding.
Steven Vattuone: We expect gross margins for the year to be approximately 76%. We expect to be adjusted EBITDA positive for 2025. And we expect to deliver positive adjusted EBITDA in each quarter of 2025, starting in Q2. In addition to delivering positive adjusted EBITDA, we also expect to deliver positive free cash flow in 2025. excluding any incremental non-GAAP expenses. For structuring charges and amortization of acquired intangibles, shareholder activism costs, certain other legal costs, and certain other items are excluded from the full year non-GAAP amounts provided.
Speaker Change: We expect gross margins for the year to be approximately 76%.
Speaker Change: We expect to be adjusted EBITA positive for 2025, and we expect to deliver positive adjusted EBITA in each quarter of 2025, starting in Q2.
In addition to delivering positive adjusted EBITA. We also expect to deliver positive free cash flow in 2025, excluding any incremental non-GAAP expenses.
Speaker Change: Restructuring charges and amortization of acquired intangibles shareholder activism costs.
Speaker Change: Certain other legal costs and certain other items are excluded from the full year non-GAAP amounts provided above.
Steven Vattuone: Given the decreased visibility into the second half of the year, we are not providing an outlook for our 2025 ARR. However, we remain 100% focused on returning to ARR growth. And it is worth noting that our annual revenue guidance does assume improved core AR performance in the second half of this year. ARR from our virtual conference product is expected to decrease minimally during the second half of 2025.
Speaker Change: Given the decreased visibility into the second half of the year, we are not providing an outlook for our 2025% IRR. However.
Speaker Change: However, we remain 100% focused on returning to a growth.
Speaker Change: And it is worth noting that our annual revenue guidance does assume improved core performance in the second half of this year.
Speaker Change: <unk> from our virtual conference product is expected to decrease minimally during the second half of 2025.
Steven Vattuone: In summary, our goals for 2025 are to deliver another year of positive adjusted EBITDA and positive free cash flow, to continue investing in AI-focused innovation, and to continue improving our go-to-market motion. We are confident we are taking the right steps to improve our business and return to AR growth.
Speaker Change: In summary, our goals for 2025 are to deliver another year of positive adjusted EBITA and positive free cash flow.
Speaker Change: To continue investing in AI focused innovation and to continue improving our go to market motion.
Speaker Change: We are confident we are taking the right steps to improve our business and return to <unk> growth.
Steven Vattuone: We have announced a new $50 million share repurchase program to enhance shareholder value and are excited to have the opportunity to acquire our undervalued stock. We remain strongly committed to our long term goal of generating double digit top line revenue growth and double digit EBITDA margin.
Speaker Change: <unk> announced a new $50 million share repurchase program to enhance shareholder value and are excited to have the opportunity to acquire our undervalued stock.
Speaker Change: We remain strongly committed to our long term goal of generating double digit topline revenue growth and double digit EBITA margins.
Operator: With that, Sharat and I will open the call up for questions. At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, to ask a question, that is star and 1.
Speaker Change: With that I will open the call up for questions.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: At this time, if you would like to ask a question. Please press the star and one on your telephone keypad.
Speaker Change: You may remove yourself from the queue at any time by pressing star two.
Speaker Change: Once again to ask a question that is star one.
Rob Morelli: We'll take our first question from Scott Berg with Needham & Co. Your line is open. Hi, everyone.
Speaker Change: We will take our first question from Scott Berg with Needham <unk> Company. Your line is open.
Speaker Change: Yeah, Hi, everyone. This is Robert Rob <unk> on for Scott Berg. Thanks for taking the question and congrats on the quarter just one for me. So it's been a couple of quarters.
Rob Morelli: This is Rob Morelli, I'm for Scott Berg. Thanks for taking the question. And congrats on the quarter. Just one for me. So it's been a couple quarters of declines in the 100k AR cohort, you know, as you noted, some customer retention improvement. Do you have any visibility or insight into where when that metric troughs out? Thanks.
Speaker Change: Declines would be 100, KAR cohort as you noted some customer retention improvement do you have any visibility or insight into where when that metric troughs out. Thanks.
Speaker Change: Okay.
Sharat Sharan: Rob, let me take that. You know, we are very close to turning this number positive. Rob, enterprise customers continue to be our focus with the 100K plus customer cohort being a proxy for that, and that makes about two-thirds of our ARR. And we have seen these customers continue to make longer-term commitments to our platform. As you said, the number of customers contributing more than 100K in total ARR at the end of Q1 was 299, a very modest decline of mid-single digits from Q4, and a large portion of that were customers downgrading under the 100K threshold, which was the largest contributor there.
Rod let me take that.
Speaker Change: We are very close to turning does this number positive.
Rob: Rob Enterprise customers continued to be our focus with the 100 K plus customer cohort.
Rob: Being a proxy for that and then makes about two thirds of our Iraq and we have seen these customers continued to make longer term commitments to our platform.
Rob: And as you said the number of customers contributing more than 100 gain total <unk> at.
Rob: At the end of Q1 was $2 99.
Rob: A very modest decline of mid single digits from Q4.
Rob: A large portion of that where customer just downgrading under the 100 gig threshold, which was the largest contributor there. So as I said, we are very close to turning this number positive.
Sharat Sharan: So as I said, we are very close to turning this number positive. I mean, that is an important focus of ours. At the same time, our average core ARR per customer was the highest, so we are retaining the overall spend level with our larger enterprise customers, even with some churn at the lower end. Now, on the lower end, we have talked about that in this market environment, that does impact the lower end a little more, but overall, our focus is in the cohort 100K and above, and we believe and we feel that we are very close.
Rob: I mean that is an important focus of ours at the same time, our average core <unk> per customer was the highest Sylvia we're denting the overall spend level with our larger enterprise customers, even with some churn at the lower end on the lower end, we've talked about that.
Rob: This market environment.
Rob: And that does impact the lower end, a little more but overall our focus is in the core 100 gain above and we believe and we feel that we're very close.
Rob Morelli: got out of trouble. Thanks for your question.
Rob: Got it that's helpful. Thanks for taking the question.
Luke: Our next question comes from D.J. Hines with Canaccord. Your line is open.
DJ Hynes: Our next question comes from DJ Hynes with Canaccord. Your line is open.
Luke: Okay guys, this is Luke on for DJ. Thanks for taking the question. I was wondering if you could expand on the comment you made about seeing softness towards the end of the quarter and just how much of that contributed to the new outlook versus how much is incremental conservatism just given the macroeconomic environment. Thanks.
DJ Hynes: Hey, guys. This is Luke on for DJ. Thanks for taking the question I was wondering if you could expand on the comment you made about <unk>.
DJ Hynes: Softness towards the end of the quarter.
DJ Hynes: And just how much of that contributed to that the new outlook versus how much is incremental conservatism just given that the macroeconomic environment.
DJ Hynes: Yeah.
Steven Vattuone: Let me let me go ahead and take that. Let me start by saying that we are seeing some good signs in the business and we are making progress. Now, that being said, there is now a lot more macro uncertainty than there was earlier in the year, and there's now a wider range of outcomes because of that. Now, we don't have a crystal ball, and we're not sure how this will play out. So we are being incrementally more conservative with our annual revenue guidance because of that primarily in the back half of the year since that.
DJ Hynes: Let me let me go ahead and take that.
DJ Hynes: Let me start.
DJ Hynes: Alright by saying that we are seeing some good signs in the business and we are making progress now.
DJ Hynes: That being said there is now a lot more macro uncertainty than there was earlier in the year and Theres now a wider range of outcomes because of that now we don't have a crystal ball and we're not sure. How this will play out so we are.
DJ Hynes: Incrementally more conservative with our annual revenue guidance because of that primarily in the back half of the year.
Steven Vattuone: further out.
DJ Hynes: Further out in terms of.
Steven Vattuone: In terms of ARR. We're not providing annual guidance at this time, but for Q2, the midpoint of our ARR guidance is the decrease of a million dollars from Q1, which is actually a modest improvement from our Q1 ARR performance. So we are expecting to make some progress there in Q2, and we were previously expecting sequential improvement in ARR performance through the year, and we're still expecting that now with more progress in the second half of the year, but we are being more conservative in our Now for revenue, we are being incrementally more conservative with our ARR revenue guidance, through bank and another layer of conservatism, primarily in the back half of the year, as I mentioned earlier.
DJ Hynes: We're not providing annual guidance at this time, but for Q2, the midpoint of our guidance.
DJ Hynes: Decrease of $1 million.
DJ Hynes: Q1, which is actually a modest improvement from our Q1 performance. So we are expecting to make some progress there in Q2.
DJ Hynes: And we were previously expecting sequential improvement in <unk> performance through the year and we're still expecting that now with more progress in the second half of the year, but we are being more conservative in our outlook now for revenue, we are being incrementally more conservative with our revenue guidance revenue guidance to bacon another layer of concern.
DJ Hynes: <unk> primarily.
DJ Hynes: In the back half of the year as I mentioned earlier.
Steven Vattuone: Let me quickly also touch on profitability and cash flow. We do expect to be adjusted EBITDA EPS positive in Q2 and for the rest of the quarters in 2025, and for 2025 as a quarter, and we expect to be cash flow positive for 2025, excluding any incremental non-GAAP items like restructuring.
DJ Hynes: Let me quickly also touch on profitability and cash flow, we do expect to be adjusted EBITA at EPS positive in Q2 and for the rest of the quarters in 2025 and for 2025 as a whole and we are free cash flow positive in Q1 for the fifth consecutive quarter.
DJ Hynes: And we expect to be cash flow positive for 2025, excluding any incremental non-GAAP items like restructuring.
DJ Hynes: Yes, let me add to what Steve just said this will show up look.
Sharat Sharan: Yes, let me add to what Steve just said.
Sharat Sharan: This is Sharat. Look, look, we can't control the macro. But in the immediate term, like most businesses, we've had to add another layer of risk to our projections for 2025.
DJ Hynes: Look we can't control the macro.
DJ Hynes: But in the immediate term like most businesses, we've had to add another layer of risk.
<unk> for 2025.
Sharat Sharan: And as I hope my prepared remarks conveyed my enthusiasm around the changes that we are making in our business and why that gives me confidence. And again, just to reiterate, the five core drivers. You know, Q1 was the best gross retention in the last four years, and we expect that to improve this year. For many of you who have practiced, you know how important that is for us. Two, we have significantly improved our go to market execution leadership team with the hiring of a new CMO and previously a new head of North America sales. And again, Q1 was the best enterprise new business quarter over the last five AI Power Days, we've got 30% of our customers using our AI capabilities, and low teens percentage of our customers are paying for these solutions.
DJ Hynes: And as I hoped my prepared remarks conveyed my enthusiasm around the changes that we're making in our business and why that gives me confidence and again just to reiterate the five core drivers.
DJ Hynes: Q1 was the best growth potential in the last four years and we expect that to improve this year for many of you who practice you know how important that is for us too.
DJ Hynes: We have significantly improved our go to market execution leadership team with the hiring of our new CMO and previously a new head of North America sales and again Q1 was the best enterprise new business quarter over the last five quarters.
DJ Hynes: Yes power days, you've got 30% of our customers using our AI capabilities and low teens percentage of our customers are paying for the solutions. We have a very aggressive product agenda. So we have a lot of room to run here.
Sharat Sharan: We have a very aggressive AI product agenda. So we have a lot of room to run. Win backs, as Steve has talked about, the best win back quarter Q1 was in the last five quarters. And so we are expecting sequential ARR improvement during 2025. I think Steve also talked about our cash flow performance, our margin performance. So overall, we believe our shares are undervalued. And so our confidence is underscored by the just announced $50 million share repurchase program. That's helpful.
DJ Hynes: Win backs as Steve has talked about the best went back quarter Q1 was in the last five quarters and so we are expecting sequential improvement during 2025, I think Steve also talked about our cash flow performance our margin performance. So overall, we believe our shares are undervalued and so our confidence is underscored by the judge.
DJ Hynes: Announced $50 million share repurchase program.
Speaker Change: That's helpful. Thanks, guys and then maybe just a quick follow up wondering if you could just expand on on 24 IQ how that fits into the broader AI strategy and then how youre thinking about pricing those season.
Luke: Thanks, guys.
Sharat Sharan: And then maybe just a quick follow up, wondering if you could just expand on on 24 IQ, how that fits into the broader AI strategy, and then how you're thinking about pricing those Yeah, so you know, look, let me take that. I just talked about the 30% of our customers are using our AI capabilities, and a low team percentage of our customers are paying for it. So we have room to run. And it's an exciting growth vector for us. But, you know, when we think about our innovation agenda for AI, we really focus on how are we providing positive business outcomes?
DJ Hynes: Yes.
DJ Hynes: Look let me take that I, just talked about that 30% of our customers are using our AI capabilities and a low teen percentage of our customers are paying for it. So we have room to run and it's an exciting growth vector for us but.
DJ Hynes: When we think about our innovation agenda for AI, we really focus on how are we providing positive business outcomes. How are we helping customers achieve greater cost efficiency.
Sharat Sharan: How are we helping customers achieve greater cost efficiency, and delivering massive enterprise grade scalability. So now as we've evolved our AI strategy, and, you know, our focus here is to be extremely aggressive and continuous on our innovation agenda. So there are five core pillars there. One, we have talked about this before, is our AI powered content and nurture engine, which allows customers to create more derivative content and do more with more. Second, you talked about ON24IQ. These are intelligent agents that streamline and automate actions across our platform. So our customers can now let ON24IQ take away a lot of the automation, take away a lot of the heavy and repetitive task work, and allows our customers to do a lot more with less.
DJ Hynes: And delivering massive enterprise grade scalability. So now as we've evolved our strategy and our focus here is to be extremely aggressive and continuous on our innovation agenda.
DJ Hynes: So there are five core pillars. There one we have talked about this before is our AI powered content and nurture engine, which allows customers to create more video content and do more with less second you talk about on 24 IQ. These are intelligent agents that streamline and automate actions across our platform.
DJ Hynes: Our customers can now let on 24 IQ take away a lot of the automation take away a lot of the heavy and repetitive task work and and.
DJ Hynes: It allows our customers to do a lot more with less.
Sharat Sharan: Third, our platform's hyper-personalization capabilities to dynamically customize event experiences based on audience profiles. We've talked about that before. Fourth, we are now leveraging our platform's AI capabilities and our first-party data. We have over a billion engagement minutes per year. We are leveraging that to really provide much more performance insights, and that's our fourth tier. And finally, for our enterprise customers, we are launching a lot more capability on multilingual capability that allows them a platform for global scale. You talk about how we are looking to, we currently have AI HQs.
DJ Hynes: Our platform's hyper personalization capabilities to dynamically customize event experiences based on audience profiles that we've talked about that before.
DJ Hynes: Fourth we are now leveraging our platforms AI capabilities and our first party data we have over 1 billion engage on minutes for a year, we are leveraging that to really provide much more performance insights.
DJ Hynes: And that's our fourth tier and finally for our enterprise customers.
DJ Hynes: We're launching a lot more capability on multilingual capability that allows them a platform for global scale.
DJ Hynes: Talk about how we are looking to we currently have eight skus I think I expect that in the next 30 to 60 days, we will launch many more skus more packages related to AI for our customers, especially for our enterprise customers that allow them to do more with less and to scale massively globe.
Sharat Sharan: I think I expect that in the next 30 to 60 days, we will launch many more SKUs, more packages related to AI for our customers, especially for our enterprise customers that allow them to do more with less and to scale massively globally and leveraging multiple languages across.
DJ Hynes: Billy.
DJ Hynes: Leveraging multiple languages across the world.
Sharat Sharan: That's great. Thank you.
DJ Hynes: That's great. Thank you.
DJ Hynes: Okay.
Linda Lee: Our last question will come from a Linda Lee with William Blair. Your line is open. Perfect. Thanks for taking my question, guys.
Speaker Change: Our last question will come from Arlinda Lee with William Blair. Your line is open.
Arlinda Lee: Perfect. Thanks for taking my question guys.
Linda Lee: First one, with David on a team at CMO now, what are some action plans David has in mind from a marketing perspective, and also plans together with the North American Head of Sales? Yeah, so, you know, we are, this is Sharat, we are fundamentally transforming our go to market motion, with extreme focus on outcome driven action. So if you go to our website, now, you'll already see that we talk about how our solutions, whether you are in technology, whether you're in financial services, whether you are in life sciences, how we help companies drive pipeline, propel pipeline forward for technology, how we help companies propel customer relationships for financial services, how for life sciences, we propel healthcare professional engagement for those forward.
Speaker Change: First one with David on the Tms CMO now what is the action plans David has in mind from a marketing perspective, and also plans together western North American head of sales.
Speaker Change: Yes so.
Speaker Change: We have this issue that we are fundamentally transforming our go to market motion.
Speaker Change: Extreme focus on outcome driven actions. So if you go to our website now you'll already see that we talk about how our solutions whether you are in technology, whether you're in financial services, whether you are in life Sciences, how we help companies drive pipeline propel propel pipeline forward for technology, how we.
Speaker Change: Help companies propel customer relationships for financial services, all four life Sciences will propel.
Speaker Change: Health care professional engagement for those forward.
Sharat Sharan: And it's now going to be supplemented by a lot of very strong ROI stories. In this market environment, CFOs and CMOs and CEOs really want to impact. Is ON24 one of the top three sources of pipeline for what they're spending with ON24? How is ON24 helping you in driving more client relationships and others? So David's job first is to really drive extreme solutions based approach and ROI based approach for our customers. We all, his other focus is also to work with sales and SDRs to continue to focus in improving pipeline. And by the way, early indications on the pipeline front are improving.
Speaker Change: Now going to be supplemented by a lot of very strong rois stories in this market environment CFO and CMO has them Ceos really wanted the impact is on 24, one of the top three sources of pipeline 444.
Speaker Change: For what they are spending with on 24 hours on 24, helping you in driving more client relationships and others. So David's job forced us to really drive extreme solutions based approach and ROI based approach for our customers.
Speaker Change: Other focus is also to work with sales and SD yards to continue to focus in improving pipeline and by the early indications on the pipeline front.
Speaker Change: Our improving so I'm excited about that so those are really the two core things the new solutions positioning and message out there with very strong focus on demand generation and pipeline and this completely ties with you asked about how the size of the with the head of North America sales and now the head of North America sales work with working with our Chief revenue Officer.
Sharat Sharan: So I'm excited about that. So those are really the two core things, the new solutions, positioning and message out there with very strong focus on demand generation and pipeline. And this completely ties with you asked about how this ties with the head of North America sales. Now, the head of North America sales works with our chief revenue officer and of course, with David now to make sure we have an end to end execution. So after the campaign, we are very closely aligned with pipeline. How we are selling in the marketplace is also very dependent on that.
Speaker Change: And of course with David now to make sure. We have an end to end execution. So after the campaign is they're very closely aligned with pipelines everybody. How we are selling in the marketplace.
Speaker Change: It's also very dependent on that and then of course from a customer success point of view, how we are implementing our customers. So my hope is we yes. We have started the campaign, but very soon you're going to see a lot more end to end execution from 124 really helping our customers drive rois based results.
Sharat Sharan: And then of course, from a customer success point of view, how we are implementing our customers. So my hope is we have started the campaign, but very soon you're going to see a lot more end to end execution from ON24, really helping our customers drive ROI based results. at a very cost effective and cost efficient price. So that's, that's the focus for David and the, and the, and the sales.
Speaker Change: At a very cost effective and cost efficient price. So that's that's the focus for David and.
Speaker Change: And the and the sales team.
Linda Lee: Awesome, thank you. Another question to follow up.
Speaker Change: Well. Thank you another question to follow up any verticals that argument, particularly better than others from a turn in down sell perspective.
Linda Lee: Any verticals that are doing particularly better than others from a turn and down sale perspective? Yeah, you know, I think we previously talked about that a lot of our focus is, is to diversify from a concentration and technology in technology and manufacturing verticals that were about 50% of our ARR in 2019, to more verticals like life sciences and financial services that drive mission critical digital transformation use cases. And the good news is the share of Lifesigns and Financial Services is now a third of our business. It's an important part of our enterprise go-to-market focus. Just as an example in Q1, we highlighted our work in the prepared remarks with one of the largest international financial services companies in the world.
Speaker Change: Yes, yes.
Speaker Change: We've previously talked about that a lot of our focus is is to diversify from a concentration in technology in technology and manufacturing verticals that are about 50% of <unk> in 2019 to more verticals like life Sciences, and financial services that drive mission critical digital transformation use cases.
Speaker Change: <unk>.
Speaker Change: The good news is the share of life Sciences financial services and now a third of our business. It's an important part of our enterprise go to market a market focus just as an example in Q1.
Speaker Change: We highlighted our work in the prepared remarks was one of the largest international financial services companies in the world.
Sharat Sharan: Now, they've been able to consolidate multiple use cases on the platform. They exited viewpoint solutions that they were using. And so, and overall, you know, on the Lifesigns and Financial Services, we also see generally higher gross retention, better net retention.
Speaker Change: They've been able to consolidate multiple use cases on the platform. The exited few point solutions that they were using and so.
Speaker Change: And overall.
Speaker Change: On the life Sciences and financial services, we also see.
Speaker Change: Generally higher gross retention better a better net retention. So overall, we feel that our business is a lot more diversified and well positioned to drive broad based growth as we are.
Sharat Sharan: So overall, we feel that our business is a lot more diversified and well-positioned to drive broad-based growth, especially as we on the Propel Forward campaign and these various Perfect, thank you.
Speaker Change: Especially as we execute on the propel forward campaign in these various verticals.
Speaker Change: Perfect. Thank you.
Operator: It appears we have no further questions.
Speaker Change: It appears we have no further questions I'll turn the program back to the speakers for closing remarks.
Sharat Sharan: I'll turn the program back to the speakers for closing remarks. Well, thank you everyone for joining. I really appreciate it. Thank you.
Speaker Change: Okay.
Speaker Change: Well. Thank you everyone for joining really appreciate it thank you.
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