ONTF - Earnings call 4 2023

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Operator

Greetings, and welcome to ON24 Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Sayo Denloye, Investor Relations. Thank you.

You may begin.

Olusayo Denloye

you. Thank afternoon, good everyone. and Hello, to quarter earnings full XXXX fourth call. Welcome and conference year ONXX's

On me Chief call of ONXX. the with ONXX; and Sharan, and CEO Co-Founder Steven Vattuone, Financial of today Officer are Sharat

including of sales we of to for that our of information to the during regarding the success strategies, and attract conditions some future and inaccurate, first the business Before everyone such our conditions and point call, report occur future statements. no forward-looking forward-looking known and periodic financial in operations We'd to GAAP both and presented statements our as be forward-looking deterioration, factors non-GAAP forecasting financial first as fiscal Sharat. out inflation. certain or that for unknown and or purposes. our will quarter to full today's of our including growth to non-GAAP new forward-looking statements over reconciliations provided as will made adverse statements are materially cause I that achieve well projections. These other Non-GAAP quarter use measures, to refer subject measures call. see ability to accordance update this for differ not guarantees ability press measures ongoing this economic call would from GAAP. remind cause begin, these that our to to please events existing performance, uncertainties could obligation our with ONXX's financial press that undertake as statements in financial like are XXXX measures include and forward-looking statements are today's year statements on any we these filings products with only, our future to to on a events any affect that reflect results regarding these future and SEC to current for increased and substitute release addition will customers, non-GAAP call year and and ONXX financial grow planning evaluate statements expand also we today's actual like capabilities, Sharat? revenue, risks impact including today full and To the adversely the guidance calculated the internal non-GAAP and could events after and reflect new Please performance. All release. I and to not other macroeconomic these turn to the cautions customers expectations results. We financial financial company's now results refer

Sharat Sharan

Thank today me everyone Conference Officer. year fourth you welcome is you Results Call. full Financial appreciate quarter Chief joining and We Steve XXXX and us. Vattuone, ONXX's to Financial With

will their of and engage accelerate. change companies and compliance customers portfolio forward fundamentally a that Our marketing with prospects scale, We through for BXB drive to industries moving that platform changed regulated experiences industry-leading deliver AI has growth. and enterprise believe cost-effective data-driven engagement support to highly revenue insights at BXB functions, allows sales and generate

combines milestone significant our develop thousands past the called Next. This And advance Engine, includes Content new platform. generation of customers next later platform our help We'll innovations, including and the now of gain content, weeks insights and builds to able which our our Platform, the that our scale. at Intelligent the to ROI, global customers and Over AI-powered ACE, and in those just share and data, year, our this intelligently Analytics of call. capture results prospects they act announcement our data on to ONXX enable virtual efficiency, powered experiences, digital these in from to launch ago, to ONXX to our generative AI-driven and exciting few customers at quickly launched significant because been event, on and AI, our called we best-in-class end, we've a with Engagement connected by that personalization first-party platform, more are innovations, our about

was performance and ongoing for million. remain we million, have and an to revenue which we million line including QX customers million. ARR including $XX.X QX Subscription lots the top services, budgets Turning of revenue of total in Virtual results, that quarter, core was while EBITDA. Revenue achieving work results; to investments QX revenue Services still improvement The environment adjusted from where targets positive their under pleased was their pressure. are revenue revenue $X.X in our solid the cautious platform, on an regarding $XX.X by delivered sequential Conference quarter in was performance Professional for marketing and and Of non-GAAP we the despite total ahead, solid XXXX our include our $XX.X remain report was results, EPS quarter, platform during profitability and and Other driven positive

the in-period was turning years, which it highest last with representing was in we the ARR; an Now million QX been platform, The has by gross in X new $X.X acquisition, approximately the driven sequential X from to million, core business highest sequentially. flat quarters. improvement retention, which and related in last to performance improvement was sequential our QX in ARR of $XXX.X ARR decrease ended a in

installed and our QX. both trends base, downsell in at looking improved Specifically, churn

consistent years. the the in seen reductions entitlements, which of as look improvement quarterly we X in year we almost saw in the lowest at or specifically, the a we we the cohorts, percentage seen in performance was As best within best fewer renewal in-period X contract have saw and downsells, was performance churn years. And, and the have we our with base, churn renewal based customer broad

starting are to clearly installed base. We in stability see our

which AI-powered still while end pleased and placed we ACE were $XXX,XXX are customers. increased launched newly increase December. budgets also of we at We have customers, pipeline even sequential initial the pressure, by to healthy some see demand X of for solution, orders in our And a plus marketing under ARR also a saw

On agreements of of multi-year or and saw we end for key using whole, percentage X in we the metrics. At in levels the XXXX, more ARR the record of improvements the saw products. percentage customers

XXXX is proved, our business resilient. As

still can While what customers especially from as opportunity customers' there stabilize. is to budgets, capitalize controlling our marketing budgets control we the many we large of are with working uncertainty market position tremendous market, in our constrained ourselves on to our

also We are will platform's market, most excited coming we AI-powered about take that, AI-powered to new ACE it meaningful like growth. time products ACE for but our drive to solution Intelligent Platform and ARR Engagement offering, new recognize our

progress the our made stability with ARR made platform the of and AI-powered XXXX we have we driving in And year progress long-term our on for improvements growth, inflection which setting due cost we product back look improving customer tremendous in I launch cash of growth. that the our development generation in profitability business on that. with successfully started while We incremental strategies profitable margins customer these stage base gross at initiatives, to an As drive we and positioned XXXX, achieving to the and flow. to executed our stabilizing targets, implemented delivered led our exited in next with and roadmap the meaningful improvements the in retention. is We a on with goal reduction

seeing platform's ultimately AI-powered marketing drive are excited ACE pressure our macro we growth. continued that on am brings about budgets, opportunities to I While the

and we I color strategic thinking priorities. In XXXX. more have laid provide me on the progress out we how are business about made our Let XXXX, X

next First, the offering. of which Platform, new our launch Engagement our includes generation Intelligent ACE AI-powered

cases transformation strategy, enterprise to with strengthen continue use digital our especially across go-to-market mission-critical industries. Second, regulated

Third, continuing with deliver growth. a targets to to our on on returning profitability focus

BXB best-in-class of launch to of Backed innovation. of the platform's scale. We engagement millions act gives of believe and our and analyzing our competitive enterprises to by digital AI-driven the and been a portfolio Platform. professionals in provide of that's intelligent content, across AI data connected ONXX our lead next from center the uniquely our interactions, to our platform gathered millions discuss first-party is combines data AI our platform hundreds data me of insights on of with with positions Engagement Intelligent that foundation strategy of of our engagement. let foundation hundreds and millions intelligently market gathered experiences First, and generation business at experiences enable differentiated edge capture, of the digital customers to for a first-party that's at of us personalization

our feeding sales of Content believe connected generative automatically dynamically our our audience saving and and automatically our more our engagement customers with that generation developed platform ability more month to first-party continuous that With streamlined announced As last to heatmap and innovations for the the creates teams video engaging I ongoing we enables which content more pricing through adopt without Key of automate purchase our beginning we Platform part digital resources. engaging will a and call, data experiences that our portfolio experience scale, packaging it and AI-powered launch, the hyper-personalized AI-powered general which the including and and insights all availability finally, increasing teams Analytics And, unique year, the deliver of customers. X, this one, nurture platform. generation Moments make of snackable X, prospects to the on and act ONXX to we offerings. marketing ACE, our use brings past together ROI. impact time, includes report analytics at next segments live Engine. ACE and identifies and streams is of intelligent that mentioned to of calls-to-action, the next highlights Intelligent and introduced content segments messaging, straightforward drive Engagement of insights new analyze surface a keep ways most to creation, needing AI we've and at to

in the X We ways. Engagement are Intelligent monetizing Platform

packages as subscription our customers we existing ACE upgrade offering which AI-powered are are an to our new and customers. offering ACE We included AI-powered solution preconfigured solution to

we momentum are seeing getting positive As our feedback early already earlier, customer from I adopters. very and shared base enthusiastic installed within

to our to for visibility initial audiences; customers their teams growth. content personalize greater is able Some from into customers and of creating prospects the and we're savings videos; revenue and being experiences hearing help drive efficiently their insights time having benefits unique and more in

are on our We that vision feedback we've customers' first-party proud advantage. based a many roadmap long-term especially data behind is innovation over our years and gathered

this is already current further differentiated, is leader competitive and just believe the position. our we our And, platform launch market this beginning. will While enhance highly a

an of to expect suite next offerings generation and our of We platform. fuel AI the entire

regulated we to cases see our with the enterprise our to throughout second priority, go-to-market; use undergoing to our continued highly at stage go-to-market cases transformation. These like while an Moving require supporting our of customers enterprise-grade solution enterprise XXXX, execute mission-critical digital platform are use in industries who traction compliance. early

insurance; despite single-digits use and broker and difficult enterprise for their a support and use engagement sciences; on continuing aggregate, Our cases professional certification in to life go-to-market in enrollment services. education and enablement digital ability in this healthcare unique solutions professional In and year-over-year and a provide sequential including an commercial member macro pharma health ARR quarter, environment. quarter-over-quarter these professional drove the transformation cases growth scale,

our adopt that believe early-adopters, are combined track regulated As gives these earmarking AI mentioned generation innovations within enterprise are highly a as to technology our for we organizations We credibility verticals budgets, above. next we well platform, and I look as believe from industries the like us go-to-market companies, are and traditionally AI advantage. well-positioned with adoption record

our bigger to consolidate us process our onto that enable point packaging solutions land simplify will customers also the new and platform. believe help pricing We purchasing and deals,

solutions platform generation installed to In within we next addition, our packages further ACE strengthen motion and our our expect base. AI-powered expand also

With we our disciplined sheet to and maintained in implementation X EPS adjusted finally, highest a strategies also these improvements our gross achieve And, level profitability of QX our while QX. of also million with an years. The which ACE, and saw and EBITDA orders consistently a $XXX non-GAAP products, modest allowed balance targets shareholders in initiatives. to We returning for cost driving taking effective over the positive us approximately on of QX, approach by achieved customers profitability. margin capital healthy at to reduction was uptick quarter-over-quarter positive year QX. reduction AI-powered by plus a Throughout we XXXX in the cost update initial the X our

between disciplined to We adjusted and cost look balance while growth growth. is we committed on structure, The a always breakeven well-positioned launch are focus, maintaining are profitable believe next also and We we EBITDA this EPS a and the of juncture, Platform. positive achieving approach at is as profitability non-GAAP in Intelligent growth are for in generation our investing to to Engagement our capitalize we long-term XXXX. ONXX

resulting logo Platform and ACE QX, want especially and offerings. few new it from Intelligent Before handing to Engagement those expansion to over initial orders highlight deals Steve, our premium AI-powered in a I of

United telecommunications with the logo more a largest On landed we employees. dollar than in the of one multibillion States, XX,XXX wireless carriers the front, new leader

customer BXB moved As that arm, they focus partner scale each and marketing data to solution and platform against organization their up-market pipeline goals. This our experiences their real-time first-party AI-powered their different a to trusted advanced their insights company provide them provide prospects. and this to help and pre-ordered personalized their and of to provide needed teams customers could support to ACE revenue a deliver

to QX to new employees development meet organization the their off looking purpose-built with and and their and business because ability detailed provide revenue. platform, our solution deal scale team's needed needs their breadth in Their saving the their a and Another legacy certification compliance with billion business live point firm continuing and team of their X,XXX over support law it was acquire $X.X retain to multinational time the was clients. process, professional over audience, improving lacked depth With education insights automate ability to use this and case. has about move

The management financial and trillions asset needed their management new that assets With financial largest and I management, and organizations XX,XXX of of to qualify goal will a the advisors highlight millions employees. is sales. way them under over acquire win first a acquire assets and with quickly to team for world's marketing expansion in institutional investors under one has services

a we in first-party Our larger our key in a footprint. is resulting initiative for their platform with transformation integrations digital linchpin and a initiative role Xx growth generated playing for go-to-market organization provide, became growth their and, of data

employees. treatments continue products proven already experiences Lastly, as content retention, different pre-order was we and understand at ahead, came to I'll AI $X by revenue new Because they and new and different platform educate, in wrap that to will and by look and achieving to of trusted they up XX,XXX sharing platform's we more healthcare for capabilities and these XXXX confident our behavior improving momentum from our global HCPs focus segment. medical our of of profitability scale, types QX increasing by the will company install solution base multiple provide with innovations. Ladies customer team, felt a and personalize acquisition device types than AI-powered their our our a billion use pharmaceutical ACE With providers adopting gentlemen, our on over to unique targets.

brought business and about bringing our next excited are to competitive this our Generative in with Intelligent the AI provide help strengthen quarter, our generation a Against will intelligent environment engagement positions Platform digital Engagement strategy of to market of us our demand a stronger monumental with in moat. our a AI-powered better earlier stable XXXX, We customers, to market and that digital uniquely in future TAM platform that the believe position more engagement. We AI prospects macroeconomic customer which is believe we XXXX data for define at tailwind we first-party believe uncertainty platform's profitable enterprises base. continue a to center has and of growth. much a our providing address ultimately and in business will a shift and and be differentiated advantage we ONXX the enter a a for customer contraction to

return continue we delivering that growth to we call and second targets. committed macro around half generating to optimistic go-to-market goal in in I'd yet marketing the our seeing Steve. of ARR we we prospects' that, signs long-term the interim, improving our to are improving. In stabilization see strategy sequential we over what can our margins. With are yet seen and customers' will that which a in and regulated in XXXX, EBITDA topline I on like will have we focus remain XXXX, leading have of innovation and into growth should turn double-digit with profitability AI, abate to we continue see our our industries on to especially the uncertainty double-digit business, control: industry especially to Although not remain budgets the

Steve Vattuone

will XXXX and XXXX and I'm for XXXX. discuss going results quarter year Sharat, our the first good our and quarter fourth to you, Thank with full then start of afternoon, everyone. outlook

X% numbers, We from Services will $X.X Virtual the Total XXXX for of in Revenue product, platform as revenue Conference everyone a revenue as was focus X% year-over-year, Conference that of deemphasized get represented product. platform, was we total Services revenue core platform the million. total I view of it million, decrease Virtual includes representing our year-over-year. Total core XX% our measure which the be and as compared revenue including was Before I in was to best platform the representing $XX.X was metrics fourth into Total the a on quarters, prior to such Overages the business our as remind from million, KPIs revenue XX% have other million. the ARR period. core our to quarter, revenue $XX.X performance. the Professional and approximately of QX subscription XX% from revenue our in in of approximately decrease QX. year-ago $XX.X wanted

Moving ARR net was ARR the value represents new core end and services all on to million ARR; platform totaled annualized of compared ARR approximately and our to excludes $XXX.X subscription to period at QX. the of flat contracts overages. Ending related and professional the

our the anticipated, levels improving performance in in and ARR to years. was new represents significantly installed by QX. with QX base, from retention Our we driven net performance seen was in primarily better in highest X improvement improvement a we have The last from QX gross than had meaningful ARR stabilization the

churn in across also we downsells broad-based our prior customer renewal compared less from pressure to and improvements cohorts. saw saw We quarters,

challenging, contribution to earlier including Expansions Total XXXX. improvements did QX New in compared ARR, the strongest was product, at compared of million QX end $XXX.X million our the virtual from see the X quarters. business but $XXX.X XXXX at continue we in be of conference quarters. the was to activity end QX to

certain of metrics; demonstrates from Turning the we customers cohort as continued to continues to our ARR our our in platform. which to Multi-year with represent us at X-thirds their and Throughout our last approximately ARR new longer-term than due more as This see $XXX,XXX the strength which continued to contribution commitment to highest plus ARR have XXX, was of quarter, $XXX,XXX increase enterprise largest the to logo is wins consistent total from the XXXX, platform. The customers to customer up with ARR, spend our customers make increased of customer in our XXXX. in the customers QX, was of number $XXX,XXX the quarter. prior contracts increasing their ever above QX. and of our total threshold well XXX up increased and of to end at the ARR XX% end versus XX% level XXXX, notably commitments the of contributing

our to dealing In our XXXX the at addition, X increase during percentage of see with this X,XXX year year customers customer ended pleased tighter products XX%, of or many constraints. metric was budgets year up customers spending levels. We when the more were in end and count were Total with customers. a from XXXX slightly marketing

XXXX for net Our was retention, or our core NRR, dollar-based platform. in XX%

downsells a experienced difficult indicator budgets in the earlier NRR reminder, is in a reflects our As a many macro-environment. customers and we their of marketing of reduced XXXX as impact lagging elevated

in that we we are customer our will trend retention base, XXXX. in Given NRR in the upwards metrics seeing stabilization believe

and expense results I discussing would like will items I Before turning point forward. out non-GAAP to profitability, to going be that

of items. shareholder charges restructuring as real-estate, certain Our exclude compensation, charges, other well intangibles, activism-related stock-based as non-GAAP amortization costs, impairment results acquired for

our sequential cost last GAAP margin Our XX% actions be non-GAAP can from margin between release. to along XX% increased we in found GAAP XXXX. reduction QX and The the from results, in took in QX gross quarter. within increase financial Gross earnings our results, reconciliation a with reflects in

in in compared expenses; sales XX% last and in XX% of $XX.X QX XX% last represents year. expense was to period the This $XX.X turning year operating QX compared million Now, last and quarter. marketing to total to same revenue, million

the absolute both represents implemented cost XX% same QX in expense QX total on marketing and last compared as largely savings driving we of $X.X and R&D efficiency. dollars improved we revenue, year. and last in year, have the to decreased year-over-year last quarter. was sequentially in measures expenses million sales million to due Our have period sales in to This XX% compared XX% focus $X.X

our adjustments product XXXX, in in we spending to we to While levels innovation. continued invest made

in As next ACE with million we expense million about Platform. have discussed, Solution, year. in along compared G&A we Engagement in QX the ONXX was $X.X $X.X excited generation our new AI are early to our launched powered platform, XXXX we which of Intelligent QX last This to revenue, our slightly our as the of represents total year. dollars took to and reduce a up last year the absolute as period same which G&A prior with in last quarter. have result, is in expenses XX% consistent XX% We G&A decreased from the actions costs, and XXXX compared

per loss $X.X million shares basic share on a million XX compared $X.X last million a income million same margin operating achieved negative profitability was year. Net to X% in The million us or profitability on QX. we outstanding. for XX.X operational and based $X.X earnings period a income, that last QX million Operating XXXX made more XXXX. positive in approximately an and improvements efficient to We with we bottom-line share streamlined I positive of shares This or and or position am structure X% the QX income in diluted operating we have of the per for continued outstanding. operating margin cost $X.XX and in throughout QX the our report efficiency using pleased off, compares and exceeded year, call. EBITDA, to in that a operating non-GAAP paid our loss Moving targets diluted adjusted $X.X EPS was provided to performance; in net $X.XX prior approximately that

the in million update the special of QX utilized $XX In announced in million which marketable first year, and program to balance a $XX quarter XXXX. program, million on XXXX, the to return to of the share $XXX repurchase million of million and approximately an months $XXX.X repurchase that securities. cash equivalents, $XX total QX of $X the $XX.X we return under and progress $XX for of the million I with a Turning completing program. Under ended the QX in cash, million dividend million dividend share during flow; the million $XXX XXXX, the of an cash provide paid additional shareholders capital sheet shareholders a paid the we and returned with of XXXX, this repurchase approximately want million program, $XX.X share X comprised in XXXX, remaining March we program. XXXX, in of approximately approximately have million in special to Combined we entire QX $XX utilized capital program. under this we

started late repurchase As through February returned XXXX. XXXX, under a we prior $XX reprogram in reminder, our share we million

end With and sheet X balance we the million now XXXX, $XXX returned of to of in have the completion at continues these investments our programs, strong. cash to million With approximately almost $XXX remain shareholders.

the of Free was million in negative use QX in compared cash used of in year. compared in cash $X.X last to $X million year. last $X.X quarter; in of $X.X Turning flow was operations cash our QX to used cash negative million QX to in million QX in operations

costs our a flow As in reminder, restructuring to cash includes related efforts. QX our

allowed to X us EBITDA provide to positive past want positive I guidance, adjusted the reduction achieve EPS we quarters to have quarters. for turning the cost over update our on plans have non-GAAP reduction cost an past efforts. The and initiated Before

it structure of cost approximately QX in $XX was total annual earlier lower QX rate X run quarters was Our XXXX. than million in

costs We as across will growth. focus the business remain continue disciplined on to on driving we profitable

business guidance; and marketing we see operating to are to installed QX, in in face many base a are still we customers where improvement to net in choppy new our pleased budgets. stabilization environment while the Moving during continue constrained

top-line As approach are a to for taking our XXXX. we financial modeling prudent such,

QX QX, us core of the services, of guidance; approximately total includes typically the X.X% to is million. $XX.X to product, QX and million platform range total of which which is million $XX.X in Virtual Services, revenue. Conference our softer in expected range $XX.X seasonally represent we Turning expect $XX.X Professional to for million revenue, to including in revenue,

to margins gross in expect QX. mid-XXs We the be in

in operating the million. $X.X non-GAAP loss of a expect range We million $X.X to

XX.X earnings basic we net and income non-GAAP to net share break-even based respectively. EPS, per and a loss outstanding, $X.XX share, or For million per $X.XX diluted per diluted shares of share shares of million per on expect share, XX.X outstanding,

top business, and bottom including reflects QX. audit costs the which costs such our historical line in taxes and as seasonally Our guidance QX seasonality certain payroll are in annual employer higher

charge from We which efforts, expect non-GAAP million provided a our restructuring to is QX million to ongoing related reduction in cost $X.X $X.X the excluded of amounts above.

Before to are we we move thinking want how color some XXXX on guidance, provide to ARR. I about

the marketing new account for expansion year. ARR historical of for the seasonality Our for half software environment expectations QX with for first business the in take into and in coupled our assumption a demand constrained

we to compared to X.X% by in as core platform QX ARR QX to XXXX. sequentially decline this our expect Given backdrop, X%

conference In sequentially addition, million. approximately would ARR from our product $X.X in de-emphasized reduce QX virtual by

in will is of the return view we that growth current in Our macro-environment. is XXXX, there assuming the ARR to deterioration second half no sequential

to turn me guidance. our let annual Now, XXXX

be million. $XXX.X range year, For the including platform expect million to in to revenue, the $XXX.X core we services, full of

total $XXX expect of revenue in X% We $XXX be million the Professional to to approximately expected of total represent revenue. range to Services million. is

million $X.X per per $X.XX non-GAAP using per XX.X We range non-GAAP diluted shares to share, of of to outstanding. $X.XX net a the operating million, and share in million expect $X.X share income loss

program. account capital into of return our impact takes outstanding shares of estimate the Our

above. which amounts charges provided to with We of expect acquired from XX%. XXXX, consistent full and be year Restructuring gross amortization margins non-GAAP was intangibles the are excluded

in achieve in importance growth. In of to are providing second in guidance we assumes guidance year recognizes our quarterly optimistic bottom-line QX summary, we in XXXX. that the ARR by also of seeing are growth half guidance stabilization are we that for our and annual approach This not specific will QX while encouraging XXXX. While investing full signs of improvement balanced adjusted breakeven QX, return with a reflects EBITDA the discipline we fiscal EBITDA QX sequential across beyond business the adjusted breakeven resulting and

On and even key cost drive reductions the will growth. significant front, X past we products quarters the to in invest AI disciplined remain over profitability our fiscally we made as

the open We and strong that, pipeline I customer throughout feedback for by our are and year. With for to the up excited questions. new build the products, expect will call Sharat

Operator

first Blair. the with comes Our of William question Instructions] Bhatia [Operator Arjun line from

Arjun Bhatia

start because taking more talking about bit with fragmentation bit -- space. the questions. the perspective. be can a and But more talk it whether data, ACE. Can front is an we the a in about an can happens? And and start there's the experience on platform. perspective when adoption, like-for-like or open that once is be both capabilities And from allow comes migration know we better what for existing then do talking quite you it new a doing the I'm customers you're Sharat, customers the with of about AI from you're and Appreciate new maybe first-party you to we about curious uplift going this data to right, is, little that a consolidate with there an ACE that

Sharat Sharan

take let me the Arjun second question first.

things. X we we are doing to -- as I we go market, are think

subscription packages, ACE, X business preconfigured offerings, and AI-powered include the are but premium those premium we created On a of are new of side, they X them have packages.

are AI-powered On ACE to front, existing their we is upgrade offering. our are can add what we the that they expansion customers doing our offering

AI-powered of monetized new front. that. retention ACE help to also is clearly And on in the expect it So business we on expansion, and top

side. the So that's on adoption

of ask a of or if customers, you them from first-party sources data if for the others, we you whether already. perspective, look first-party technology are it's Now a one data BXB company largest --

with on are are with build is we we are ACE, doing ACE, what doing AI-powered is are that -- them helping momentum. what we we So

capabilities of You how the segment? one now is you you have So help in can hyper-personalize ACE prospects. you have do and customers, can

you can what you different but can there, You the have different get provide and have. to to data allows have add already same to things points different webinar, experiences you

data. your audiences, with prospects key allowing we beyond the based on what you it's to others you On get done the is Once most of the important webinar. things, other are interacted people to more how and some nurture based with moments, have allow side, the the it webinar on

So CRM allowing data and customers doing their provide then have with important that so stack and them AI-powered and becoming essentially, from allow are prospects first-party and data more we're a us what automation and more in them their their the already we we perspective our to that. through customers build with them insights is do even integration will in to marketing to ACE

Arjun Bhatia

most -- Okay. been it metrics was talking when and getting hear helpful. we're some thinking to thinking might that you of thinking When that the of sense when that about do some are or renewals through you're just contracts, multiyear renewing but for multiyear you're some That's in now, [ churn when encouraging favorable. at time a we time ]? be so more of those at of cohorts we've And are downsell of point the first for this trial or

Sharat Sharan

some we've talked talked we Arjun, about when time. for

one What am where choppy stabilizing. we in maybe through about years. gross are stabilized. QX has retention much impacting all was encouraged pretty So I the been us X been we cohorts the the They've levels that's normalization. been our pre-COVID see with in that of as macro marketing business in-period highest talked budgets. for X environment been We've has or have

move to XX% It that we ARR It's XXXX, to close to stabilize As retention agreements continue XX% multiyear last and to having going gross now. continue of year. was into XX% expect helps. our in our we is

products exciting we have I So getting now good we are -- that feel optimistic which reaction. quite new

stability installed We our base. are seeing in

mid-XXs We generate with down the margins some line. double-digit believe positioned EBITDA top EBITDA and assist are and company I growth to line is now margins. the gross profitable double-digit with

Arjun Bhatia

done, me. for that And now repurchase is Steve, complete. $XX million is for the one Maybe just last

$XXX have just from bit the million still you little philosophy allocation You here? on balance about your capital Can sheet. a talk

Steve Vattuone

returned Yes. $XXX to We return share started million of this we the year prior million, capital And we've a under $XX shareholders the approximately we repurchase years. in month $XXX earlier. the program just program, X finished which million with returned

our Now invest our strong, strategic remains to priorities. and balance allow that sheet in us will

of sheet our capital goal shareholder and always value. Board maximizing with In future our plans, of any terms evaluates the structure balance

Operator

the from Robert Baird. Schulz comes with question line Patrick next W. Our of

Patrick Schulz

afternoon. [indiscernible] guys you Appreciate

some you're ACE success you there. of I with offering, the seeing mentioned early the the appreciate So color all and

this incremental additional out pricing you to or from of is [indiscernible] Are coming any Just is around signs with consolidation helpful. spend the platform your where onto budgets. feedback curious going of ACE for Just spend be customers' early customers? seeing color would be

Sharat Sharan

Yes.

they're Let our their spends, to me got also spend, okay, let spending our customers back I terms drive now, those investments, consolidate or growth and look think right -- cost that dollars them me customers, are of customers when up but they've we revenue in at AI-based at look seeing are help trying -- when you incremental you optimization.

to course, we share more more drive but AI-powered at of the less, example, when time that them them revenue, same ability to So for do kind help the with them, ACE allows with can you do earlier that like using and lot of of derivative them e-books which takeaways, more ACE. They with create to can took time less. more simply content and do very can a do, PDFs AI-powered

more spend they within current it to organization Also, use costs. because at more drive their AI of less. more budgets revenue, more looking reducing X with the to same adding time kind allows the do while they because they budgets them are they're at -- So dollars more across AI finding AI are things, to deploying want -- their

budgets, on. So some AI is is some that focused allocations coming coming from existing the they are from

Patrick Schulz

future comes margins, I are revenue, then No, on any flow-through Very that to the your Okay. current natural drivers And year? with of just could this roadmap at potential ACE hiring then maybe plans the maybe the there. color Is a too. margin for on the one and a cause And what levels any offering your headcount comments it step product year? R&D appreciate outside up biggest upside the that I for mean or of some in possible the investments? helpful. disposal

Steve Vattuone

Yes.

and There were of me there. ahead questions couple Let take a that. go

with So the margins. let start me

XXXX, also well our margins we've And higher see margins QX bit year. at XX%. were typically margins in our So XXXX. cost as we helps seasonal which In revenue efforts QX reduction QX strength as throughout the taken a with gross XX% our for reflect some the of

we gross say were margins year the margin we with our time mid-XXs, for consistent to margins, gross expect do to in be XX% full to did XXXX our at gross improvement models XX%. We those target have in our which continue Now see expect to over XXXX, XX%. to

you asked Now levels. investment current about

it as the expense currently of that where want now. adjust terms But structure, In we'll to for we needed. of course, be it's

to We're forward line, top we'll are the that. also always on going to optimizing and return be the balancing continue and based investments of to going evaluate line Our top growth profitability.

continuing market of some of the terms looking develop we're at, it. it and In bringing investments AI-powered to ACE to

are making cases We of regulated in use financial services. pharma and progress

on and And are investments investments made focused productivity by we've also those while certain sales there making seeing to we and are categories we're So be in on going the being there. select investments progress there. driven seen disciplined that costs

Operator

question Our comes with Noah of from next Herman the line JPMorgan.

Noah Herman

any quarter you the in insight can through the Just just saw the first, color some year-to-date well? [Technical you just with respect profit as conversions to and linearity quarter, on provide and Difficulty] the

Sharat Sharan

talking you about Are linearity Sharat. is this in QX? Noah,

Noah Herman

exactly. Yes,

Sharat Sharan

Yes.

in and that. We I October quarter. November strong very saw think a let December me compared the take to

say XX% XX% would think be closed even in December. more to or maybe business than that the closer it to of fair I

so QX. what in And saw that's kind of we

if at the the that that's continue of expansion saw it retention business, profile on new XXXX. -- quarter, especially as within business, the newer stability installed the expect throughout the look to pertains to Now we and about and base, you side. But we the

quarters Now there that are cohorts, saw a linearity perspective. you smaller, -- larger quarters a some we are from QX some But that's color how gives cohorts some a is variability.

Noah Herman

stabilization you're scrutiny, around But layering helpful. the But layer that extra under the marketing retention some the and are of you has still guidance. with just Yes, changed compared the maybe budgets time? that's see metrics. prudent totally And are just of last this great given approach made comment respect the conservatism super ARR an around then understand, guidance. the to to year to with on It's being that And curious, guidance? you

Sharat Sharan

Yes.

me start that. Let

time installed is base, about and last I at think I this to think of -- say now is year one feel our when compared last stabilizing. year when things, time, you the you what asked -- we the and between difference this key

tail -- right macro of So of we end stragglers have view are since contracts. now because believe strong this to There pre-COVID point that last on. the uncertainty what what have began. were a from macro renewal very are in build I believe in we We the cycle. the its of a I don't some year we foundation That's quarters kind at

base end do the of we at where end the and So this at lot confident installed with -- a is. more feel QX our comfortable of

Now a expect we we -- about -- course, you question of guidance. asked

give metrics So you improved. ] more QX a let key me there. little [ Noah in all

budgets, in you excited talked a macro-environment I'm incredibly but marketing So about are as for that, we choppy about.

So we enthusiasm to on that. our XXXX temper have for based

launch of It's it to a ARR last X for back we've launched. years, just about the early call, factoring is it most marketing uptick outlined product I'm but the for expect macro, last it the stronger, budgets. If are turn will ACE. to be and important excited half comes ONXX especially not We AI-powered Engagement the the of still earnings has in us. it as And good Platform too, positive second in significant we we've our had year. as days the in Intelligent

the that's marketing where on Now new taking to guidance. towards have business in our temper we mind, and enthusiasm the is prudent based and we expansion keeping approach And place that on that's expectations are budgets. the a

Operator

Canaccord. from comes with Hynes question next Our of the DJ line

Lucas Morison

This is DJ. for on Luke

of count signal as maybe us? see customer do to again. that foresee I'm that positive that go metric customer large net perhaps behind forward? positive you the you $XXX,XXX a encouraging worth do wondering And new going downsells your So see staying

Sharat Sharan

on was also customers ARR And quarterly by It the increased and Luke, pleased in we best above less based that was plus moved single XXXX, performance ARR some that. of than $XXX,XXX that based are high with on was we're digits. $XXX,XXX up. some customer excited the that wins new the that are of from because threshold by customer we So X% so

we've seen best probably the the performance last X in quarters. QX our was downsell said, we As in

choppy. overall from we stabilizing, cohorts So worst we've seen downsells. It's believe the the just the from of an still sense do

still are overall, may we saw forward. I that. feel QX cohorts even and that QX, downsells past we but are the I we it's be the choppy, So But of stabilizing. we There worst issues think think as our in move that last episodic year, some QX

growth, Now sense better I will the once consistent budgets. plus saying be about a of to little ARR we macro that regarding environmental $XXX,XXX have marketing more have we expect confidence

more prudent that. So be a I about need just little to

Lucas Morison

Got makes That it. sense. one maybe And more then me. for

overtime low sort about on think where ARR but towards you you today, sales of could yet are your lean as efficiency those focus seeing I of sales And regulated you think go reorient are you sales do into that that As as percentages industries, think your single-digit those? said we motion? you strategy better

Sharat Sharan

and What one single I'll regulated engagement, clarification, professional about the in okay? that ARR we ARR, the was total to the growth aggregate enablement, about question. our live talked cohort industries, digits. -- of and we a quarter in that those talked a and year-to-year enrollment of basis on make broker are we want professional productivity The healthcare about I sales talked member answer certification about

manufacturing So that. technology And under companies to with and I control focus, we been improve. has of to expect what to that a our been part make focus pressure. And can control to where -- our we in like continue environment yes, we just that wanted have an companies

high board question still was the Actually, go-to-market It improved and those size of the with the regulated related like people sales XXXX. mentioned, the across reallocated in segments. And regulated investors. especially adjusted direction. the to I half trending the our sales I in best productivity is would of the have be it was sales as to industries, QX, as productivity highly is and our of it teams, as the across second Now we in to the focus relates right on direction but resources year of in pointing our not broad-based as in sales

Operator

KeyBanc. comes of Tom Blakey Our line the question with next from

Thomas Blakey

that negative in the though XX% when ] the folks with way. -- bit you exiting the one I'll metrics? And improvement you're that overly coming it's your with prudent [ would What X 'XX. typical it's gleaning here maybe here maybe the maybe your tell platform was talking year, the Sharat, your some to different really are from of data probably I initial X, be all or one I C-suite it little secondly, use a with are asked think. in cases couple maybe big maybe wondering already of stragglers in are just are for guide seeing insights helpful, The top vertical, That large sounds XQ years what talk been times, anyway. terms rate or there's exit that just that this another they're first-party to X that try think the positive. you're from are leading a top neglecting one the customers contracts to or were very items due, improving you What with of beginning about by maybe I the top then maybe the improvements ACE,

Sharat Sharan

expected. pipeline of was pipeline than linearity October stronger December had okay. saw was for build, a were November December and especially But point AI-powered about, from We ACE you view think overly why your we seeing things strength Yes, of talked first we what being in that are I good about -- I question just as I think the you are one and prudent that saw very strong. we built. But saw

we still for budgets. come choppy we came environment marketing as seeing As are we a into QX, -- have

ramp seasonally launched too. a to ACE the have And we just our back. beginning building a more up only AI-powered are softer, little to month pipeline be QX as of generally We tends

or be macro, an had very little is come sense, be if for we move able us, they business. if there's for year behind is to -- we'd the what our And the it months if us as we better good the but budgets So forward. stronger, uptick in will back improve, give that kind X making a X marketing prudent be of the

retention for the -- are, year. on installed thinking factoring are and are the thing at look we of point downsell of XXXX, base in and churn that's how we the as So view the we the on in the business. But about from an improvement improvement

that We as improve to forward. expect move we

AI-powered Now is and different. ACE about specific how your that question

examples, me is how you different. X Let give just it

Within can the same X things. webinar experience, different now you do

You your from can for your you and prospects. have different content -- can separately customers target

different have to action. can call You

kind You of may have different surveys.

people one signals hyper-personalization can part. experience. so getting -- different segmentation. same and That's within but spending and for You you're webinar in have the things to less money, -- more That's the

XX we're is part beyond is webinar. just an It's which the other for not going event The minutes.

who that you not figure you be are clips and X X, them to going different out You're out join. highlights, of can that, to join key send able the and people say, did didn't to "Hey,

bring Here and engage those are be of the those highlights." Those content, there amounts with that can data monetized. more bite-sized people they key will basically is

our So going some And a are make just with additions AI-powered allowing ACE the beyond to people you're to sense, less give adding are and Those going you and with in of there keep things more customers. to going webinar do the it like to adding there. Tom, valuable segmentation personalization. to that for we doing. we're more keep

Thomas Blakey

great. Very you're a top Thank And sitting That's helpful, of lot data. Sharat. you. of on

Operator

all gentlemen, your Thank for participation. our also conclude Ladies you conclude conference. question-and-answer session. our this and does does This

You may at this time, lines disconnect have a wonderful your and day.

ON24 (ONTF) 22 Feb 242023 Q4 Earnings call transcript