ON24(ONTF) - 2025 Q2 - Quarterly Report

Front Matter - Company Name: ON24, INC.[2] - Report Type: 10-Q Quarterly Report[1][2] - Report Quarter End Date: June 30, 2025[2] - Stock Ticker: ONTF (New York Stock Exchange)[4] - As of July 31, 2025, the number of common shares outstanding was 42,306,290[5] SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This report contains forward-looking statements based on management's beliefs and current information, primarily found in the "Risk Factors" and "Management's Discussion and Analysis" sections, which involve known and unknown risks and uncertainties that could cause actual results to differ materially from expectations, with no obligation to update these statements except as required by law - Forward-looking statements address the company's ability to grow revenue, performance fluctuations, attract new customers, market competition, macroeconomic conditions, cybersecurity risks, and intellectual property[13] - The report warns investors not to place undue reliance on these forward-looking statements, as actual future results may differ materially from expectations[11] PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section provides ON24's unaudited condensed consolidated financial statements as of June 30, 2025, including balance sheets, statements of operations, comprehensive loss, changes in stockholders' equity, and cash flows, along with related notes Condensed Consolidated Balance Sheets As of June 30, 2025, the company's total assets were $235.1 million, a decrease from $250.95 million at the end of 2024, with total liabilities decreasing from $91.54 million to $85.10 million, and stockholders' equity decreasing from $159.41 million to $150.02 million, while cash and cash equivalents significantly increased to $37.73 million Balance Sheet Key Data (in thousands of dollars) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $37,732 | $14,933 | | Total current assets | $214,868 | $228,330 | | Total assets | $235,116 | $250,953 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $82,128 | $88,199 | | Total liabilities | $85,099 | $91,541 | | Total stockholders' equity | $150,017 | $159,412 | Condensed Consolidated Statements of Operations The company's total revenue for Q2 and H1 2025 was $35.33 million and $70.07 million, respectively, both lower than the prior year's $37.35 million and $75.08 million, while net loss narrowed to $7.28 million in Q2 (vs. $11.18 million prior year) and $15.98 million in H1 (vs. $21.88 million prior year) Operating Performance Comparison (in thousands of dollars, except per share amounts) | Metric | 2025 Q2 | 2024 Q2 | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $35,333 | $37,349 | $70,066 | $75,076 | | Gross profit | $26,532 | $27,811 | $52,162 | $55,756 | | Operating loss | $(9,172) | $(13,059) | $(19,638) | $(25,533) | | Net loss | $(7,277) | $(11,175) | $(15,980) | $(21,878) | | Net loss per share (basic and diluted) | $(0.17) | $(0.27) | $(0.38) | $(0.53) | Condensed Consolidated Statements of Cash Flows In the first half of 2025, net cash provided by operating activities improved to $5.98 million from $3.53 million in the prior year, investing activities provided $24.73 million primarily due to reduced purchases and maturities of marketable securities, and financing activities used $8.10 million, mainly for stock repurchases Cash Flow Summary (for the six months ended June 30, in thousands of dollars) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $5,979 | $3,526 | | Net cash from investing activities | $24,733 | $(31,941) | | Net cash from financing activities | $(8,099) | $(9,114) | | Net increase (decrease) in cash and equivalents | $22,806 | $(37,726) | Notes to Condensed Consolidated Financial Statements (Unaudited) The notes detail the company's accounting policies, revenue recognition, contract balances, equity compensation, legal proceedings, and restructuring activities, highlighting total remaining performance obligations of $131.2 million as of June 30, 2025, a $50 million stock repurchase program approved by the board, and workforce reductions for cost structure optimization - As of June 30, 2025, the company's total remaining performance obligations (RPO) amounted to $131.2 million, with 72% expected to be recognized as revenue within the next 12 months[40] - In May 2025, the Board of Directors approved a $50 million stock repurchase program, with $45.7 million remaining available for future repurchases as of June 30, 2025[67][69] - In the first half of 2025, the company continued workforce reductions to lower its cost structure, incurring $1.506 million in restructuring costs, primarily for severance and one-time termination benefits[87] - The company faces a securities class action lawsuit regarding its IPO, which was dismissed by the trial court but appealed by the plaintiffs, with the company believing the allegations lack merit but unable to reasonably estimate potential losses[62] Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's business overview, performance drivers, key business metrics, and operating results, noting a 7% year-over-year revenue decline to $70.07 million in the first half of 2025 but a narrowed net loss, with key metrics showing declining customer count and Annual Recurring Revenue (ARR), as the company addresses challenges through cost management, product innovation (e.g., AI-driven ACE and ON24 IQ), and prudent expense control Overview and Key Factors The company provides a cloud-based intelligent engagement platform for sales and marketing, with recent performance influenced by cost management, new customer acquisition, existing customer retention and expansion, platform innovation (especially AI capabilities), and international expansion, having launched new products like ON24 Lumina and ON24 IQ to enhance competitiveness - The company focuses on reducing net loss through cost management and continued workforce reductions in the first half of 2025[108] - The company plans to drive growth through continuous product innovation, including the launch of AI-driven ACE, the Lumina design system, and ON24 IQ intelligent agents[103][104][105][112] - As of June 30, 2025, the company had 1,566 customers[106] Key Business Metrics As of June 30, 2025, the company's total customer count was 1,566 and Annual Recurring Revenue (ARR) was $127.1 million, both declining from prior periods, with the customer count decrease primarily due to a net reduction in small and medium-sized business (SMB) customers, and ARR decline attributed to customer churn and reduced new customer acquisition Key Business Metrics Trends (amounts in thousands of dollars) | Metric | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Customer count | 1,566 | 1,645 | 1,682 | | Annual Recurring Revenue (ARR) | $127,135 | $129,659 | $133,702 | | Core Platform ARR | $125,084 | $127,341 | $131,032 | | Customers contributing over $100K ARR | 304 | 305 | 319 | - The decline in customer count is primarily due to a net reduction in SMB customers, reflecting marketing budget pressures in some organizations[115] Results of Operations Total revenue for the first half of 2025 decreased 7% year-over-year to $70.07 million, mainly due to reduced subscription and platform revenue, while gross margin remained stable at 74%, and all operating expenses (sales & marketing, R&D, G&A) decreased year-over-year due to lower personnel-related costs and stock-based compensation, leading to a narrowed operating and net loss - Total revenue decreased 7% in the first half of 2025, primarily due to a reduction in subscription revenue driven by fewer customers and lower ARR[123][124] - Sales and marketing expenses decreased 10% year-over-year in the first half of 2025, mainly due to reduced personnel-related costs from restructuring activities[130] - Research and development expenses decreased 8% year-over-year in the first half of 2025, primarily due to lower stock-based compensation expense[132] - General and administrative expenses decreased 18% year-over-year in the first half of 2025, primarily due to a $3.6 million reduction in stock-based compensation expense[136] Liquidity and Capital Resources As of June 30, 2025, the company held $179.6 million in cash, cash equivalents, and marketable securities, deeming its existing liquidity sufficient to meet needs for at least the next 12 months, having initiated a $50 million stock repurchase program in May 2025, and generating $6 million in net cash flow from operating activities in the first half, an improvement from the prior year - As of June 30, 2025, the company held $179.6 million in cash, cash equivalents, and marketable securities[141] - In the first half of 2025, the company spent $8.8 million on stock repurchases, with $43.2 million remaining available under the new $50 million repurchase program as of August 8, 2025[142] - The company's revolving credit facility with Comerica Bank was amended in August 2024, reducing the limit from $50 million to $25 million, and remained unused as of the reporting period end[154] Item 3 Quantitative and Qualitative Disclosures about Market Risk The company's market risks primarily stem from foreign currency exchange rates and interest rate fluctuations, with limited foreign exchange exposure due to most revenue being USD-denominated, and interest rate risk mainly impacting its investment portfolio, which is managed by investing in high-quality, highly liquid securities, with a sensitivity analysis provided for interest rate changes on marketable securities' fair value - The company's market risks have not significantly changed since the 2024 annual report, primarily consisting of foreign exchange and interest rate risks[159] Interest Rate Risk Sensitivity Analysis (as of June 30, 2025, in thousands of dollars) | Parallel Shift in Interest Rates | Assumed Fair Value | | :--- | :--- | | -150 BPS | $143,213 | | -100 BPS | $142,751 | | -50 BPS | $142,290 | | Current Fair Value | $141,828 | | +50 BPS | $141,366 | | +100 BPS | $140,905 | | +150 BPS | $140,443 | Item 4 Controls and Procedures Management, including the Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of disclosure controls and procedures as of June 30, 2025, concluding they were effective at a reasonable assurance level, with no significant changes in internal control over financial reporting during the quarter - The company's CEO and CFO concluded that the disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[164] - There were no material changes to the company's internal control over financial reporting during the three months ended June 30, 2025[165] PART II OTHER INFORMATION Item 1. Legal Proceedings The company, its officers, and IPO underwriters are defendants in a securities class action lawsuit concerning its IPO, alleging material misstatements or omissions in the registration statement and prospectus, which was dismissed by the district court in March 2024 but appealed by the plaintiffs, with the company believing the allegations are without merit - The company is facing a securities class action lawsuit regarding its IPO, alleging material misstatements in its prospectus[166] - Although the trial court dismissed the lawsuit in March 2024, the plaintiffs have appealed, and the litigation remains ongoing[166] Item 1A. Risk Factors This section details significant risks associated with investing in the company's common stock, including business and industry risks (e.g., revenue decline, intense competition, macroeconomic impacts, technological changes, cybersecurity threats), legal and compliance risks (e.g., privacy laws, export controls, intellectual property disputes), and risks related to stock ownership (e.g., price volatility, equity concentration, anti-takeover provisions) Risks Related to Our Business and Our Industry The company faces multiple business and industry risks, including recent revenue declines and uncertain future growth, intense market competition, adverse macroeconomic conditions potentially reducing customer marketing spend, reliance on and risks associated with new technologies like AI, and threats from cybersecurity attacks and data breaches, in addition to dependence on third-party infrastructure where service interruptions or performance issues could harm the business - The company's revenue has declined in recent years, and future growth is uncertain due to factors like reduced customer budgets and increased market competition[171] - Market competition is intense, with competitors including Zoom, Microsoft, and Cisco, who may offer lower-priced or broader products[179] - Cybersecurity attacks and data breaches pose significant risks, potentially leading to regulatory actions, litigation, and reputational damage, as exemplified by a ransomware incident in June 2021[192] - The company's increasing use of artificial intelligence (AI) in its platform introduces new risks such as data errors, infringement, and algorithmic flaws[188] Risks Related to Legal, Regulatory, and Intellectual Property The company faces risks from a complex global legal and regulatory environment, including challenges in complying with evolving privacy laws (e.g., GDPR and CCPA) that may restrict data processing and marketing activities, adherence to US and other countries' export controls and sanctions laws, and significant risks from intellectual property infringement claims and difficulties in protecting its own intellectual property - The company's operations are subject to strict and evolving global data privacy laws, such as GDPR and CCPA, with non-compliance potentially leading to substantial fines and business restrictions[233][239] - As an international company, its business is restricted by US and other countries' export controls, economic sanctions, and anti-corruption laws like the FCPA, with violations leading to severe consequences[246][257] - The company may face intellectual property infringement lawsuits from third parties or encounter difficulties in protecting its own patents, trademarks, and trade secrets, which could harm its brand and competitiveness[264][268] Risks Related to Ownership of Our Common Stock Investing in the company's common stock carries multiple risks, including that stock repurchase programs may not enhance long-term shareholder value and consume cash, share price can fluctuate significantly due to market factors, performance changes, and analyst ratings, high equity concentration may limit retail shareholder influence, and anti-takeover provisions in the company's charter may deter potential changes in control - Stock repurchase programs, such as the $50 million plan approved in May 2025, consume cash reserves and may increase stock price volatility, not necessarily enhancing long-term shareholder value[286] - As of February 28, 2025, the company's executive officers, directors, and 5% or greater shareholders collectively controlled approximately 55% of the shares, indicating high equity concentration[290] - The company's certificate of incorporation and Delaware law (e.g., Section 203) contain anti-takeover provisions that could delay or prevent third-party acquisitions, limiting shareholders' opportunities to receive a premium[292][295] - The company reached an agreement with activist investor Indaba Capital Management L.P. to avoid a proxy contest at the 2026 annual meeting of stockholders[304] Item 2 Unregistered Sales of Equity Securities and Use of Proceeds This section provides details on the company's stock repurchase activities during the second quarter of 2025, disclosing the number of common shares repurchased, the average price per share, and the maximum amount remaining available for future repurchases under publicly announced plans Q2 2025 Stock Repurchase Summary | Period | Total Shares Repurchased | Average Price Per Share | Remaining Amount Under Plan | | :--- | :--- | :--- | :--- | | May 2025 | 387,261 | $5.45 | $47.9 million | | June 2025 | 406,685 | $5.50 | $45.7 million | | Total | 793,946 | $5.48 | $45.7 million | - Repurchase activities were conducted under the $50 million 2025 repurchase program authorized by the Board of Directors in May 2025[313] Item 5. Other Information This section discloses that the company's Chief Executive Officer, Sharat Sharan, adopted a Rule 10b5-1 trading plan on May 14, 2025, which provides for the sale of a portion of net shares acquired upon option exercise and RSU/PSU vesting, subject to certain limitations, through February 28, 2026 - Company CEO Sharat Sharan adopted a Rule 10b5-1 trading plan on May 14, 2025, for the sale of shares acquired through equity awards[316]