ONTF Q1 Earnings Call: AI-Powered Product Push and Share Repurchase Amid Top-Line Pressures

Virtual events software company (NYSE:ONTF) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, but sales fell by 7.9% year on year to $34.73 million. On the other hand, next quarter’s revenue guidance of $34.8 million was less impressive, coming in 0.7% below analysts’ estimates. Its non-GAAP loss of $0.01 per share was $0.01 above analysts’ consensus estimates.

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StockStory’s Take

ON24’s first quarter results reflect a combination of ongoing macroeconomic caution and early traction from its pivot to enterprise customers and AI-driven solutions. CEO Sharat Sharan highlighted that ON24’s enterprise-focused go-to-market strategy produced its best new business quarter in five periods, aided by improved customer retention and win-backs from former clients. The company also pointed to adoption of its AI-powered ACE (Analytics and Content Engine) product as a key driver, with management noting a "low-teens percentage" of customers now paying for AI-powered features. Cost control measures, including reductions in sales, marketing, and general administrative expenses, contributed to improved operating margins despite year-on-year revenue declines. Management acknowledged challenges in the commercial and international segments, attributing some softness to broader macro uncertainty late in the quarter.

Looking forward, ON24’s updated guidance reflects increased caution due to heightened economic uncertainty, particularly in the second half of the year. CFO Steve Vattuone explained that the company decided to adopt a more conservative revenue outlook, citing limited visibility and a wider range of potential macro outcomes. Sharan emphasized that continued investment in AI product innovation and further refinement of the enterprise sales motion are central to ON24’s strategy, stating, “AI is fundamentally changing sales and marketing, and our customers trust us to help bring their engagement strategies into the AI-era.” Management is also focused on expanding within regulated verticals like financial services and life sciences, where higher retention rates are observed. The company reiterated its commitment to achieving positive adjusted EBITDA and free cash flow for the year, while closely monitoring customer adoption of new AI features and overall retention trends.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to enterprise-focused execution, AI product adoption, and operational discipline, while also noting pockets of weakness in commercial and international segments due to macro uncertainty.

• Enterprise go-to-market strategy: ON24’s renewed focus on large enterprise customers led to its strongest new business logo performance in five quarters, according to CEO Sharat Sharan. The company also saw the highest number of customer win-backs (former clients returning) during the period, as organizations sought to consolidate digital engagement platforms.

• AI-powered product traction: The rollout of AI-enabled features, particularly the ACE (Analytics and Content Engine) suite, has begun to drive adoption. Management stated that about 30% of customers are using AI capabilities, with a low-teens percentage paying for these solutions, suggesting early but meaningful monetization.

• Improved customer retention: Gross retention rates reached their highest level in four years, with management attributing improvements to enhanced customer engagement and expanded use cases in regulated verticals such as financial services and life sciences.

• Cost structure realignment: ON24 reduced sales, marketing, and administrative spending in absolute terms, aiding margin improvement. The company’s ongoing restructuring efforts and focus on operational efficiency were highlighted as key to sustaining positive cash flow despite revenue headwinds.

• Commercial and international softness: Management acknowledged that economic uncertainty led to some late-quarter weakness, particularly in commercial and international customer groups, prompting incremental conservatism in near-term guidance and a sharper focus on enterprise accounts.

Drivers of Future Performance

ON24’s outlook is driven by continued investment in AI innovation, enterprise customer expansion, and cautious navigation of economic headwinds.

• AI-driven product roadmap: Management is prioritizing rapid deployment of new AI-powered features—including ON24 IQ intelligent agents and enhanced personalization—to deepen customer value and pursue upsell opportunities. These initiatives are designed to improve efficiency for clients and create new revenue streams from existing accounts.

• Enterprise segment expansion: The company aims to increase penetration in regulated industries such as financial services and life sciences, where retention and multi-year contract adoption are higher. New marketing leadership and a solutions-based go-to-market approach are expected to strengthen ON24’s position in this segment and drive longer-term growth.

• Macroeconomic risk and guidance conservatism: ON24’s revised outlook reflects a more cautious stance on revenue due to persistent macro uncertainty, particularly in commercial and international markets. Management signaled that visibility remains limited, leading to a focus on operational discipline and positive cash flow as near-term priorities.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) adoption rates of new AI-powered features and the pace of upsell to existing customers, (2) further expansion within regulated verticals such as financial services and life sciences, and (3) progress in stabilizing and growing the $100,000-plus ARR customer cohort. Ongoing operational efficiency and execution on the new marketing strategy will also be important signposts.

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