ONTF - Earnings call transcript Q1 2024

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Operator

Good day ladies and gentlemen, and welcome to the ON24 First Quarter 2024 Investor Call.

Our host for today's call is Sayo Denloye, Investor Relations. [Operator Instructions]I would now like to turn the call over to your host. Mr. Denloye, you may begin.

Olusayo Denloye

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

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

Sharat Sharan

get appreciate and we ONXX's innovation. Chief to Steve today Financial welcome quarter joining Officer.Before conference results, us. our results and a quick me XXXX the you Thank reminder of everyone call. Vattuone, financial you, first is We platform With into recent

QX to with row, into target call.Turning share customer to platform combines our and the EPS to continued launched engine where I'm positive an services $XX.X in Core to fourth a cost-effective milestones performance momentum engagement. sciences, adjusted of we more to innovations, solid achieved QX also our the effective brought XXXX, fit quarter, and the in platform end row.Revenue professional top-line which quarter services including called of related intelligently We'll was later of in deliver Platform, and other platform further and enterprise in efficient education services technology our commercial profitability such $XX.X sequential revenue and our for quarter content while our healthcare professional and generation insights, continuing demand in ACE, connected from we a ARR in $XX.X that last call. revenue results. million, ARR. with provided which earnings was and patient report compliance the engagement leading digital expectations class achieved supporting as XXXX total total ideal from and generation regulated platform life EBITDA our new in insurance.In drive experiences evolution, the pleased non-GAAP personalization on on analytics at decrease QX and including significant execution QX intelligent representing We enablement revenue for million. in Virtual profitability update enrollment with drives our focus, in ended revenue health our an and $X.X from another AI-powered a line the revenue, and $XXX.X the our the Of act best and quarter growth with Core QX enterprise companies Conference, enable Platform, of positive subscription on revenue million and million, million, Our scale, in platform, industry was industry, agent BXB AI-powered fourth and content make was QX QX including manufacturing, in turning engagement $X.X use for to capabilities broker on professional and for member AI-powered highly and engagement next-generation for also industries.These we cases and January, and million.Now on

posting a actions XXXX.We improve AI-powered our also downsells gross We the reductions renewal positive the see about are The average meaningful to our our of having of as in in install continued excited solution. with mid-single another sign signs the and in improvement our continued growing ACE stability gross within meaningful base, retention see gross to retention percentage have are install base. we both compared a year-over-year retention impact, digit to of taken improvement base.We a to

of are are the early initial we in ARR still Although signs positive. contribution, stages the

for important due to uncertain QX a a believe booked constraints AI-powered renewals as growth is expectation products it priorities. see am and double-digit progress ARR the trends we expectations excited initiatives, deterioration our half growth prudent decided go-to-market reiterate enhanced to the in the in we X as in we in our marketing during an revenue remain in QX. some provide note made, acquisitions our begin saw we in our quarter, we positive logo in At future.Despite and generating ACE coming that be I ARR by growth are we reinvest same affect believe in the ARR the that with ARR in assuming to normalize, improving budgets time, reached will AI-powered macro will marketing to in we will no such as by an platform.Further, a to our I'd operating that return to the of we percentage this, Our update driven sequential as environment, of continue Because still installed focus.Overall, to have the mark, growth our the strategic ARR holding be environment, with pattern. stability tailwind XXXX new we second incrementally larger our continue in our ACE longer new QX, the and prospects growth base, budget like on where to and of customers customer quarter coupled

our AI-powered our First, next new intelligent includes platform, engagement which generation ACE offering. the rollout of

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

generation continuing to Third, next to deliver our on targets.Starting growth returning while focus platform. our with profitability on

our beginning which Platform the in includes at Engagement announced of we mentioned Intelligent availability general AI-powered the January of ACE. ONXX call, As the

in key more less, personalization scale. enables with enterprises a X with AI-driven to platform differentiated do ways.One, our at Now solution

made the Because or developed issue experiences business, on-demand scale for we a have personalization turn is XX% industry's reach to We content. capability of which our experiences without and for personalization.Two, from an ability standard features live experience, delivering and these over the believe experience, audience are customers our means messages personalized turned what capability available unique targeted into content our or the go-to-market are across that within install to seeing partner the be important of webinar enterprise globe. segments on hundreds highly prospect, segments for segments facilitates whether business-critical customer, such their only can most Since have their first different we digital derivative base. the traction to This that teams, experience. built to losing same a customers we

One that content the types of digital and execute a high-performing aspects the marketing different most today videos to sales of and needed costly of time-consuming are and campaign. is creating

AI With than a others. for event our long-form possible into least their to videos, our Our with. a many click snackable times assets it presentations platform's turn of and customers e-books, simple button, X makes new they started generate generative as promotional at can copy, customers

traction beyond our day, content. the thousands of try nurturing XX% marketing early forcing nurture unlocks have our the We nurtures. continuous close to life adopters, engagement their people intelligent resources is this X% used interactions pipeline by the have engagement past there of beyond event to time, revenue delivery pieces engagement AI-powered early produce an Today, same sales significant over engagement enterprises Since platform the tested expedite go-to-market nurtures acquire AI for or of new condense helping extending written to through At continuous of adopters to our of interactions. platform of as the interactions, our gap of customers and individual, faster, we in saving the our our by its and get success capabilities new pressure number customers. their them In its are Over expedite as ACE. of drive to get videos platform's our to some our results X we and a results.Three, the on continuous the personalized about content, year, teams the automated and expand to live beginning their used and and live and saw of fueling personalize and using to increase increasing QX, content, optimistic capabilities. way takes customers for much teams a and it believe of the event.Based customers months, our

and growth our earlier, reached stated color, are as booked ARR quarter ACE we percentage in healthy pipeline give during As demand.To the a few a AI-powered QX mark, the here to of a wins some of ARR double-digit see QX. AI-powered continue from ACE

us audiences. Using AI-powered short-form pipeline, across accelerate develop and generation gives market positions company enterprise hundreds develop with I'll and employees. large first edge corporate and AI-powered marketing over already automatically in and our global channels mature globe to They to and removing After helping educate our party highlight a ACE, needs. The to and and America, personalize AI-powered data priority, throughout platform, and market their for party on solutions.By our deliver teams market.The a our North go-to-market was organization their ACE, believe team across video gathered efficiency looking increase in their EMEA customers marketing platform localize strong of would that's to improving consolidate giving long-form our leads focus. and their while in can we is their them be first next stack go-to-market employees. for are and lead Having consistent of faced win increase with them resource-strapped our execution their marketing multi-billion-dollar of specific AI-powered seeing been interactions ACE and X,XXX and their tech data APAC cycle, the way standardize to more engagement.Moving deals. using pipeline their streamlined better next in generates. teams our to go on specific first engagement BXB content innovation them tailor with This the of company We their take foundation wanted gives a their then next them from help based software efficiency to of greater millions point streams our way conversion resources, we for campaigns able this focused prospects, the produce experiences to across sales came actions field with AI results and sales enterprise their that competitive believe millions efficiently webinars reduction this team over laser X,XXX ONXX able offering, is results.As software a will to U.S. uniquely a the team for from continue adding nurture win cloud ACE platform to a

enterprise QX average strong ARR core per our Our was focus. enterprise demonstrating metrics. performance across our customer business reached key a The high, customer record

landed industries including or Additionally, and digital strong QX, percentage our on focused remains of percentage customer enterprise execution in record multi-year insurance. increased still transformation, X the early of customers enterprise and life in our on emphasis ARR metrics with that the at products, asset and of using sciences in management primarily financial addition stages are the levels.In again, services, agreements go-to-market to customers more the

over business of grown to now our a ARR diversify digital critical, X/X to X quarter years.Overall, our to last close above-mentioned able XX% core been over cases. total transformation the these having few mission we've comes our of verticals fact, in business In just almost a years from with from use

color example, to scale professional pharma organizations services a develop globe.Similarly, strategy as For their significant education large firms automating to with positions brands platform process healthcare their for our as we greater and directly the and and a new to to and our leads new few resiliency education business professionals more in time We digital and company's growth.To business medical companies engage more compliance, across brokers focus, supports insurance highlight that enable teams enterprise that through for in scale their me let continuing the believe reach resources management QX. commercial services use you platform well our vertical, and work diversification helping programs their business engaging their agents, on this save enabling asset digital, take and drive advisors, while the give financial investors professional growth. members, to and pipeline.And gives our us wins generating commercial

we fund trillions manages largest employees. world's that First, administrators, company the of has over assets a of landed and hedge one XX,XXX

generate and sales development organization digital their help certification would them needed professional matured purpose-built they leads that team. a strategy, and As marketing business scale their for this platform

of $X at important Given to largest they deal first-party customer data than revenue to private and United more that Kingdom, their institutional in providing scale.Next, in our use and with hospital we the a one over billion investor insights the providers high-touch, employees. focus, personalized with won was experience deliver X,XXX could to

direct a compliance. engage and supporting local cities to As way the outreach operates requires a while hospital cost-effective patient decentralized a seeking network, more the marketing us that company across They in came go-to country. strategy patients data-driven to

experience.And of across on our adjusted hospitals non-GAAP achieved and and update QX, row. fourth better platform we Now, and In profitability. the momentum each a enriching and patient targets, finally, their quarter profitability execution education in from a their year EBITDA positive for for patient our efficient EPS will insights centralize streamlining delivering more our positive continued an last

year target QX in break-even signs profitability our top of for ONXX. for be to XXXX a of by break-even expect We to line to improvement and stability when with first and start our in pivotal a We committed EBITDA encouraged EBITDA a and of whole. XXXX.To remain beat base, targets install quarter the was and our conclude, compared solid achieving retention mid-single-digit are both continued the XXXX we see QX as a to

go-to-market to seeing We flow. successfully margin massive is we meeting improvement continue mission-critical targets, and our to executing to healthy double-digit with growth a targets and a have reach longer-term, on organization ONXX that revenue maintaining an our market factors customers we pipeline. digital streamlined attacking BXB that is cash we our and and confidence efficiently like are are leverage platform focusing long-term AI-powered early call enabling companies our are in give gross and and and profitability traction to driving a are I'd grow launched set the double-digit engagement over more our In while stage with understand profile we ACE the a And their strategic prospects.These opportunity transformation priorities building me signs EBITDA turn our healthy engage margins.With execution customers digital Steve. revenue, are growth newly initiatives.Additionally, on that, by for ONXX's to the of of

Steve Vattuone

the ARR I going the performance.Revenue to total into de-emphasized includes of X% the the outlook revenue to full other wanted and in period.Moving platform subscription $XX.X platform represented X% be total measure and revenue Platform, We X% year-over-year. and product, revenue XXXX, we'll KPIs end in that good which the Ending ARR last was ARR. the the quarter Overages to our $XX.X Core conference $X.X second million from XXXX afternoon, of revenue and virtual year-ago our best Core quarter, Core excludes as $XXX.X Total and million.Total services numbers, start will focus, core expectations was XXXX million, for everyone for contracts our of to services and of our was QX quarter first from a view on remind revenue $XX.X the million. compared QX first year-over-year, and of representing to Platform to get our professional conference million, professional business, on in our Sharat, as XXXX, the our the metrics as year million, have of it the earnings our decrease ARR we XX% I the Total discuss quarters, then in the $X.X from product. was approximately on I'm as was represents you, QX. with period a of subscription of including Thank overages. decrease provided XXXX.Before our results, prior approximately of such a we decrease everyone. in virtual Platform revenue related value call. representing with compared annualized XX% totaled all and line to at services of revenue

is cohort XXXX our the customers QX continued marketing and average percentage our Enterprise million of to customer. largest saw less continued per year-over-year continued per level install with of under in virtual to average improving ARR total discussed, see remained QX to the commitments contribution XXXX, ARR, QX ARR, The consistent just when we X/X from end and XXXX, of customers our be The to of in more core approximately XXXX.Turning million XXXX. commitment the with our product, to now their total this at from the continued non-GAAP were Sharat prior the quarter in customer make flat is was and we to budgets platform.The continued record ARR. that compared customers and X at continue increase conference about increased ARR pressure.Total end than sequentially focus, was stabilization forward. and last expense ARR also QX.In profitability, retention Customers Total including the enterprise we out and at to in $XXX.X XXX quarter. commitments of to purchasing to the to at which be products increased the as both $XXX.X saw as ever QX trend also our cautious base QX.Before point X,XXX customer of approximately highest in the making their contribution quarter logo discussing with customer or of as new our customer of $XXX,XXX-plus demonstrates levels our in QX customers. As represent signs more contracts count with than ARR gross multi-year metrics. results continues a gross our longer-term in our $XX,XXX our $XX,XXX XX% will to QX, to largest of retention into whole. $XXX,XXX from compared in of of over over and for customers contributor churn to The Customers contributing QX like would I strength prior ARR turning platform, number the of be from our the going to items also end percentage I was customers throughout QX,

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

results, with release.Gross consistent along results, GAAP GAAP QX of Our within earnings be XX%, in a XXXX. non-GAAP QX our between financial and margin can reconciliation found with was

XX% reduction cost million This year. XX% expense gross to million streamline operations.Now, to same Our the XX% $XX.X total QX to our turning operating and $XX.X was have taken the actions in compared last to expenses. quarter. we QX Sales last period margins of in marketing reflect year represents revenue and compared in last

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

$XXX.X expense provided XXXX achieved quarter as an positive decreased fourth margin, our QX related early in EBITDA adjusted we AI-powered efficient This and year X% the balance last in continued compares While on we quarter adjustments period $X the of to QX. XXXX, we $X.XX our to operating our shares includes to our continue of ended with million, G&A prior higher slightly to We a our in product negative prior was the commitment QX in ACE XX% in and last have solution $X.X costs result, that per and reduce EPS drive our launched same along adjusted consecutive compared which million early in the new generation This pleased in platform, $X.X have sheet compared flow. and We ONXX was a approximately total million took to was in XXXX our XX% absolute levels, and annual loss provided with targets In million platform. investing securities. QX year. more as in same beyond.Operating $X.X diluted quarter. am period QX, $X.X to last and actions efficiency for margin for innovation.G&A operating we from of G&A bottom-line marketable as spending costs, a our We Intelligent Platform, cash, last G&A million to are demonstrating costs have Engagement spending the revenue, report audit. year. that to in expenses dollars our to on I of seasonally certain exceeded our performance. next innovation and will compared in generation the made we such to profitability next year.Moving represents to This the of continued up product in streamlined a operating EBITDA approximately EPS that last or income and structure share, million per XX.X in call. outstanding.Turning $X.X based we basic us XX% earnings XX.X loss million XXXX share, the equivalents, profitability. million or Net outstanding. cost the loss a and to positive QX profitability negative and with and diluted made QX marks non-GAAP the $X.XX non-GAAP shares in throughout improvements and The or using operational cash of million, cash the year, net QX

our am XXXX, to comprised metrics, $XXX cash announce turning program shareholders to return that in Before flow announced capital I million approximately million pleased a of QX the in to dividend we which $XX March paid special of fully returned share program, a million started of year.As a we XXXX. reminder, February $XX million through XXXX, repurchase repurchase prior share February late in program and under this in our we $XX XXXX, completed was

of completion approximately shareholders. $XXX to the million now these returned have With X we programs,

year $X.X million used until compared remain to $X.X QX QX. share compared million QX QX to program. in cash, flow repurchase year. in March provided last announced investments XXXX. $XXX million continues at QX XXXX, repurchase operations was million of in strong.Turning program year. utilized for under in $X.X have this year. date, sheet Cash And or $XX million was we With just in cash Free this last of in of not the to any end and metrics of X $X.X under amounts by This new also positive cash negative to cash March flow program runs our a We balance operations million our of for QX to

efforts, this.Before guidance, out I pleased and million As related into our a costs cash to reminder, to QX from have structuring paid the related progress move in install to we the to are base we want stabilize we AI-powered traction initial substantial that ACE. QX seeing flow $X.X we made the our are in and reiterate I includes with

take includes QX as larger for the of customers, addition, our visibility marketing However, despite net we what strong we remainder to and in modeling QX top-line deterioration backdrop to QX base have financial no we of revenue, incremental continue the including growth are level to sequential improved.In the Platform renewal second we uncertain continue the an has into guidance, approach made that half in environment, controlling we some QX our in the of mentioned, macro conservatism assuming so services, we expectations for Sharat XXXX.Turning new Overall, expect return ARR. Core budgets we expect will range of to can factoring not ARR and prudent control, macro revenue, our total and progress XXXX, remains a $XX million. our includes represent approximately services million, product, the million for $XX.X Professional $XX conference is million $XX.X to virtual to X% the revenue. of to expected which of range in total to

$X.X per million, loss million shares margins share in $X.X based share, per mid-XXs to $X.XX net diluted income gross share outstanding. and to on expect We operating the non-GAAP $X.XX non-GAAP range of to be in million the in XX.X QX.We per a of expect

which million end We expect is QX non-GAAP to restructuring our by to of provided expect a excluded QX to efforts, Core X% expect break-even million above.We QX, we our the cost in to at QX. related in ARR the be $X.X and amounts sequentially EBITDA QX from in reduction charge of to ongoing compared decline $X.X X% Platform to

approximately In by expected de-emphasized our $X.X QX to QX. conference is reduce to million virtual product in addition, ARR from compared

our our We end $X.X of QX.Now, to turn the expect me product to at guidance. conference virtual be annual let million from approximately ARR

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

to loss to services approximately We expect total of revenue.We revenue operating is million. to expected $X.X be in net a margins expect to $XXX million million income non-GAAP XX%. share $X.XX per per consistent of to represent gross the X% million diluted outstanding.We which using was shares non-GAAP the expect range range of per $X.XX of share to be Professional $X.X $XXX XXXX, approximately total XX.X with in million and share

balanced of to approach signs return excited full-year summary, of ONXX starting and about diversify us and are of growth.In clear our amortization growth amounts for improvement while XXXX.Restructuring traction continue provided stabilization AI-powered This acquired to and cost to invest business. also to non-GAAP of ARR early excluded in recent from between reflects the our discipline we expect intangibles signs customer base to with launch allowing Intelligent break-even EBITDA the above. to retention with signs a see We to be and Platform, the charges of continue ACE which guidance contribute to are we is showing maintaining Engagement

margins products to while and customer strong feedback expect and our to progresses.On these received have grow front, improvements initiatives profitability flow, continue incremental driving with that, continue and open with our as double-digit goal achieve top-line product we to have investments new deliver gross in questions. cash spending innovation while double-digit our Sharat on the the call-up spending we in a future.With on the We to targets be EBITDA continued growth for for to the long-term deployment in year margins will on and pipeline will balancing and customer disciplined I

Operator

from with Your [Operator comes first Instructions] Scott Berg question Needham.

Scott Berg

here. a have couple I

second the the seem Sharat, bit a more in returning of statement to cycle, growth with to little this year. be Let's half you churn start the with comfortable ARR

think second when in get of the with how couple citability relative to X as last I you But it ARR half, I 'XX at ask grow your, in deals. year ago, mentioned is that of the actually And This I a quarter, seem quarter happen. I to in grow look you to, you visibility or as guide hoping quite guess, that. quarter, and didn't well, large convinced ARR And were ARR? second that you the conservatism confidence in it high

understand time versus expectation. different -- to what prior just trying your that what might be So this

Sharat Sharan

QX ARR, we first ARR, our in delivered on ARR line with Scott, let's, on expectations. performance Yes,

ARR. we a in growth double-digit reached as uplift as are that. last percentage couple of incremental seeing improvement years, from mark percentage And retention our a I seeing that steady in but mid-single ACE ARR improved in think stability And a in with improved second we gross base and by install we've the downsells improved had mean, I are a digits. for AI-powered included row. QX of new bookings challenges know you some year-over-year our downsells quarter growth in growth an

still So it, ACE, on as from we think that for sciences. QX, the transformation seeing in and we it progress We we are AI-powered we where focus mission-critical business also we delivered -- when prudent in a to these to go-to-market the uncertain are said traction we QX we talked environment second about half. our digital case due continuing quarter.Now, includes life our are early retention. larger And expectations in being the But and you operating renewals And what is due budgets ARR are in about with customer pharma on so coming use are is making incrementally and cases believe QX. on in in are constrained, an we use QX. stabilize, marketing

were we all, of in First almost there last year. QX

ARR. close So very positive to are we

digital And in both focus install stabilization We gross make second transformation are and downsell. retention, we churn we mission-critical for cases seeing base. XXXX, the And half use on growth to half make business. progress we our expect in ARR continued believe Based new in in of AI-powered Two, progress of to driver that, sequential return on a three, second of will on still that be expect continue we days. the we XXXX. expect to will to

Scott Berg

Steve forward of think the going about kind about model maybe you're wanted here. how thinking to

are better? You've a given clearly in to get know set reach going EBIT business. still up Or costs overall in can you you lot have constrained it a growth model there But those long-term not of quite are a with taken the a and lot for the model. question revenue I've budgets understand possibility to adjusted can lately from I scenario targets had the out investors we're trying to what's where of where year where the still the and in marketing if is a It's require or the X that profitable mid-teens on growth at be challenge positive, to model the is, next same is still but ARR just tight a macro for may we're in budgets. minimal time. market come and the

Steve Vattuone

I X questions were, there. think, there Scott,

So go first profitability. the first, let me which and is ahead one take about

profitability achieve and EPS So did for quarters a we X EBITDA first, in adjusted profitability row.

moved this gross the QX delivered XXXX also the profitable positive XX% quarter. in year now year. this to past of we've improved we model from operating to margins in QX, in flow. We've our So and XX% operating cash company more a And over addition, past free

we're maintaining have organization to a more So and committed that. we streamlined now

to to we We're are cost a XXXX, XXXX.Now, for continuing break-even. delivering especially EBITDA, on We year balanced better and remaining in EBITDA guiding or taking around the business, the break-even approach. in disciplined are invest in AI, while

to currently, Long-term structure operating the course, question, XX% expense XX% it there for margins over grow? your where of more want do of working is in goal other needed as margins. we'll, the So need to get past. time.Now, We're but we company we gross gross get about invest to it, to the is done Our as and for we've to XX% margins. adjust to long-term is

We optimizing balancing forward, evaluate and but to based but the growth, we'll We're a those top-line profitability. will top-line, continue going to be investments return to we're be going really also that. making always are on

investments bringing making the on and market financial AI-powered case it Sharat that and and use Some some services discussed continuing pharma Regulated looking ACE. to we're are We're there. we're to of are in investments at develop making making or it.

by on in and selected also other We in seeing cost being be some sales investments to are are our there. while categories that disciplined going and on investments driven making productivity we're certain focused

Operator

Your next Oliver with from Baird. question comes Rob

Robert Oliver

demo sort when From had you as maybe to what know the half I are early. ACE. I the you a Sharat, it's guys question, Obviously, is echoing component the mentioned, ARR in grow you seeing pipeline second a early able did on comfort event. impressive uplift well? being that guess, of that still comfort Scott's question I adopters there? of you AI-powered the really gives And that

Sharat Sharan

second me The take let So first. is the absolutely. answer one

to that expect ramp tailwinds the during contribution AI-powered ACE XXXX. of and provide for year We the course into the

back first AI-powered utilization. the just on And modules. go to X question remind ACE me let people, to includes So

scale First using at is audience segmentation. personalization

long-form content using content. nurture enhanced to from third, takeaways audience like blogs, content. long-form And Second video is webinar deliver ability derivative e-books, key moment from videos

the streams it the the give bookings while AI-powered of percentage to the year, team generated over far from and from tailored point XX% wins its content pipeline of short-form our them automatically the received optimistic quarter at ACE security it as capabilities. a the customers now across utilization of And beginning of one of companies ACE the have space. the you growth and since of in launch, the thus uses after marketing In used and early of a events AI makes video technology specific is example ACE largest me of first their webinars of or AI-powered produce tested virtual channels reached identity future offering.From launched January. we Their early, in I'll view, our end long-form audiences. this So mark about AI-powered delivers double-digit the for ARR.

overall, So start. good

bullish learning as are XXXX. the and We progresses and year from it the ramp about into we are

Robert Oliver

Steve, rest you the just to And the as gave then, detail of the follow-up cost a as remarks the year. prepared in of of last various a around lot for in you kind question, for response well operations your

identity be about of if Or just that in problem like curious to AI-powered it impact think as that should around lot On to [ the well? company ] implications, get, ACE, specifically indiscernible your a good we margin factored would customers is also a have how and to like, that large we management around particularly gross potential consideration margins?

Steve Vattuone

quick already. our Yes, recap margins. margins it on And just guidance a is factored in on

from reflects taken. year in XX% QX, were really that X cost we've our in that's management approach margins ago. gross And QX Our disciplined up to XX% and that

we XXXX, margins, is in our margins were with to gross continue expect our which to XX%. consistent For the XXXX which full year be mid-XXs,

Operator

comes with D.J. from Canaccord. Your next Hynes question

Unknown Analyst

is D.J. Ryan [ This for ] on

kind appetite of AI I of has been some guess, seeing go-to-market kind feel just been I aren't platform any ACE being softer So industries? building for the lesser this some more reluctant terms your along industry I know motion, here change. of regulated in industries the up curious, that and regulated we've as you've to than, been but maybe I'm far just digitization like of

Sharat Sharan

and early larger that's in they like [ are adopters enterprises for the think, good I others. currently the what things in little ACE related tend like compliance-oriented which days. even interestingly, work technology, trying we very to question. Ryan that, are markets clearly, Yes, are everybody's do AI we a a that It's to seeing, AI-powered see budgets but to these ], tight, And are that -- more the have generally

industries. And that is more the some in even acute of regulated

we thing are literally some we X than one is at them because So looking doing I are of think others. and one that and thing your thought are process there is right.The modules different simpler we have

adoption. So that's where seeing more are we

do we to are And of we what allowing does at people and more said, a That things easier to and being some to engagement end example, points. more and and understand overall, doing are takeaways, content the regulated getting and as content, that data do have cycle kind the day, for really probably more that creating little. the For taking hoops those there of like a e-books through. require industry long-form there derivative are are people jump in regulation. sales much like we with delay is compliance don't and are But little things less

longer some even So take may it customers it's cases. though a a victory for in our little

Unknown Analyst

a QX, just have guess that, And customers obviously you to I piggyback renewing. big off of couple

Or for waiting that? ACE go-to-market like cycles push your you platform, with normal strategy of actively just So into on customers are the kind upselling you for to base? the install renewal

Sharat Sharan

No.

and both are levels that of We existing to customers the ACE is existing Clearly selling look different higher at new the customers. at maturity. AI-powered customers when to maturity of you

like are seeing related to different modules, and existing X at again, scale. a lot AI-powered personalization our customers So things more stage this uptake from are ACE. there And we

gravitate people derivative content. like seeing towards lot are that, a things We

looking the way that's at So it. are we

Operator

Instructions] next [Operator question Your JPMorgan. comes Herman Noah from with

Noah Herman

by this plus for X customer count, the was quarter. only So good ARR that $XXX,XXX to declined see it sequentially that

the sequentially to clip I the time, year, a it same the at higher period XX. same during compared But same customer think [ decreased ] about total count by last year. the period last declined by

the alleviate, just of be smaller to churn, some doing you're your seeing for, customer that what So anything down really of with helpful. sort there to get a you're trying customers maybe just and sense maybe would market

Sharat Sharan

Yes, it. take me Noah, let

uncertainty, by Our focus companies our -- market, a strategic been of even one and main customers approximately customers, customers, is ARR a plus overall for a are which but outlined large Yes, logo up softer time seeing that as has flat in lot And our especially it's you disproportionately decreased by which as renewal is, more was proxy employees. the for X look our pressures, focus as down of that greater had can budget number customers $XXX,XXX coming I've you that driven a and really this XX, right our on they're so at in seasonally now, quarter. on smallest top large priorities. count the the said, we X,XXX quarter. macro our than this primarily

$X address we environment. that. a $XX,XXX being are said, that market customers, I is cohort, the feeling of how really to mean, That looking to group at ARR is Now, this pinch in this

Noah Herman

can profile? about third improve And some good maybe of I have forward, you EBITDA quarter. see cash should essentially break-even pull flow for the profitability straight levers It the you positive, how free think then, was the we and guess turn to your other going to

can do surprise that ] there, be helpful. anything maybe So the upside just would would you [

Steve Vattuone

to continue always balance to the mentioned to I structure, off, profitability we're need adjustments we at if working always as to have. we're we that's and going And as future, the look desire return make to to with growth, growth. look our earlier, look certainly And at we'll cost always We'll return Well, first in our to to that. goal.

Operator

back are any to questions management turn remarks. call in to further the queue. At time, this further I'd there for no like over

Sharat Sharan

really joining. for appreciate I all you time. your Thank

Looking to speaking forward next you time. to

Operator

XXXX wonderful Thank and for a you rest day. call. of attending, ONXX today's quarter your This first have concludes earnings

ON24 (ONTF) 7 May 242024 Q1 Earnings call transcript