Virtual events software company (NYSE:ONTF) reported Q4 CY2024 results beating Wall Street’s revenue expectations, but sales fell by 6.8% year on year to $36.68 million. The company expects next quarter’s revenue to be around $34.25 million, close to analysts’ estimates. Its non-GAAP profit of $0.06 per share was significantly above analysts’ consensus estimates.
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ON24 (ONTF) Q4 CY2024 Highlights:
- Revenue: $36.68 million vs analyst estimates of $35.79 million (6.8% year-on-year decline, 2.5% beat)
- Adjusted EPS: $0.06 vs analyst estimates of $0.02 (significant beat)
- Adjusted Operating Income: -$358,000 vs analyst estimates of -$1.04 million (-1% margin, relatively in line)
- Management’s revenue guidance for the upcoming financial year 2025 is $140.1 million at the midpoint, in line with analyst expectations and implying -5.4% growth (vs -9.4% in FY2024)
- Adjusted EPS guidance for the upcoming financial year 2025 is $0.04 at the midpoint, missing analyst estimates by 58.6%
- Operating Margin: -32.1%, down from -31.1% in the same quarter last year
- Free Cash Flow Margin: 1.2%, similar to the previous quarter
- Billings: $39.74 million at quarter end, down 15.6% year on year
- Market Capitalization: $253.7 million
“Our fourth quarter results marked the end of a year in which we improved our retention rates, executed on our product innovation roadmap, consistently exceeded our profitability targets, and laid the foundation for a return to growth,” said Sharat Sharan, co-founder and CEO of ON24.
Company Overview
Started in 1998 as a platform to broadcast press conferences, ON24’s (NYSE:ONTF) software helps organizations organize online webinars and other virtual events and convert prospects into customers.
Virtual Events Software
Online marketing and sales are expanding at a rapid pace. Compared to the offline advertising market, which has been affected by the Covid pandemic and is challenging to measure and improve, more organizations are expected to adopt data-driven digital engagement platforms to better engage their customers online.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. ON24 struggled to consistently generate demand over the last three years as its sales dropped at a 10.1% annual rate. This was below our standards and is a sign of poor business quality.
This quarter, ON24’s revenue fell by 6.8% year on year to $36.68 million but beat Wall Street’s estimates by 2.5%. Company management is currently guiding for a 9.2% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to decline by 5.5% over the next 12 months. While this projection is better than its three-year trend, it's tough to feel optimistic about a company facing demand difficulties.
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Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
ON24’s billings came in at $39.74 million in Q4, and it averaged 8.1% year-on-year declines over the last four quarters. This performance mirrored its total sales and shows the company faced challenges in acquiring and retaining customers. It also suggests there may be increasing competition or market saturation. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
ON24’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a highly competitive environment where there is little differentiation between ON24’s products and its peers.
Key Takeaways from ON24’s Q4 Results
We were impressed by how significantly ON24 blew past analysts’ EBITDA expectations this quarter. We were also glad next year’s revenue guidance was robust. On the other hand, its full-year EPS guidance missed significantly and its EPS guidance for next quarter also fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock remained flat at $6.08 immediately after reporting.
So do we think ON24 is an attractive buy at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.