To Baird's Global Consumer and Technology and Services Conference. I'm Rob Oliver. It's my pleasure to have the management of ON24 here, Sharat Sharan, who's the CEO, and Steve Vattuone, CFO. We're going to do a bit of an introductory presentation, Sharat, so we can kind of level set the room. Then we'll dig in with the fireside chat. Please don't hesitate if you have questions to send them to session5@rwbaird.com or just put your hand up, and we'll work them in and try to make this interactive. Sharat, appreciate you making the cross-country check to come see us. Thank you so much. I look forward to learning a little bit more about ON24. Thanks, Rob. Good afternoon, everybody, for being with me. As you know, as Rob said, Steve Vattuone, our CFO. Just a quick refresher, especially for people who do not know ON24. ON24 is, for B2B, a first-party customer engagement platform for sales and marketing. When we talk about first-party customer engagement, we are talking about we offer a suite of products: ON24 Webinar Experiences, Virtual Events, Multimedia Hubs that generate first-party data. It allows thousands of companies to deliver millions of experiences, use the data and insights to convert prospects into customers, and drive more revenue from their existing customers. I will talk about that. The reason we exist, we help these companies propel tangible ROI for these customers. We focus on five or six core verticals: tech, financial services, life sciences. I will talk about those. If you look at ServiceNow, we are the number two pipeline generating channel for ServiceNow. If you look at pharma, AbbVie, 200% increase in healthcare professional engagement using ON24. John Hancock, Vanguard, many more advisor meetings that they are generating. AAA, compared to the previous platform they used, 40% more sales based on the ON24 platform. Our customer list is a who's who. Like I said, we focus on six core verticals, four of the five largest software global companies: Salesforce, Microsoft, SAP, ServiceNow, NVIDIA are standardized on ON24. Manufacturing, three of the five largest manufacturing firms. Financial services, three of the five largest global asset management firms. Life sciences similarly: Lilly, Merck, Novo Nordisk, et cetera, are standardized on ON24. Professional services, and media and information technology. Again, our focus there is to help them drive business outcomes, propelling revenue growth for these companies. At a very high level, the ON24 platform is we go to market on a use case basis. That is the top part. Marketing engagement, how do we help companies, technology companies, drive more pipeline growth that drives revenue outcomes for them? How do they do live certification, even marketing, using our platform? On the life sciences and pharma side, what we call healthcare professional education, all these healthcare professionals need to be educated and certified. That is done globally on the ON24 platform. Financial services, advisor and client engagement, and partner engagement also for technology. In addition to our use cases, it is really our focus on first-party data and insights and integrating that with the sales and marketing ecosystem of our customers. Very important. Of course, I will talk about this more. AI is fundamentally changing marketing and sales, focused on personalization, AI-driven content creation and nurture, multilingual capabilities that drive global scale, and agentic AI-based agents. We call them ON24 IQ that we have launched. For many of you, when you talk about the secret sauce that ON24 has, this is the slide that basically talks about that a little bit. Let me explain. We provide probably one of the highest engagement platforms of all sales and marketing tools that companies use. That engagement platform delivers first-party data and insights that help customers learn about their prospects to convert them into customers. Now, what does that mean? This is a physical event. We're going to have good customer engagement. There's no data. When you do email marketing, it's click, seconds of engagement. Every ON24 live webinar experience and others has approximately 200 people who spend 50 minutes and interact with about 20 different data points. We have over 1 billion engagement minutes on our platform. The amount of engagement on a per experience basis and all the data that we are able to get them across multiple experiences, that really helps. Now, you're probably asking, "Okay, Sharat, so what is this data that you are getting?" Now, if you join a webinar experience with ON24 that our customers implement, there is basic stuff, right? Yeah, who are you? Where do you come from? You register. Is polls, surveys, Q&A, and other stuff. Then on top of that, you can book a meeting. You can register for a free trial. You can do live certification. Then you enhance these things. Every piece of content we can provide you, who's visited, how it is working, how it is converting, and of course, benchmarks. Only ON24 provides about 20-50 different data points on a per experience basis. Now, you add those across experiences. Some of our larger customers, they do 1,000, 2,000, 5,000 experiences. If you come and join even 50 of those experiences, that's a lot of data. AI, all of us have heard a lot of hype about AI, but AI is fundamentally changing marketing and sales, ladies and gentlemen. There are three core areas that we are focused on from the AI side, and we'll talk more in the Q&A about that. One, our focus on hyper-personalization of audiences. In one experience, you can have three different experiences. If you're a financial services, life science, or technology, you can have different experiences. The other thing is, I've got about 100,000-200,000 live experiences on my platform every year. We are able to take those experiences and provide you a lot more derivative content. You can get logs, takeaways, key moment videos, everything from those particular live webinar experiences that you create. It's almost like a campaign in a box. Finally, we're also doing a lot of work on multilingual capability. If you're a large tech company and you want to do a campaign in 20 different languages with one click of a button, all the content that you create, you can run these major campaigns. AI is fundamentally changing marketing and sales and driving business outcomes. This is my final slide. I've talked about how our customers, thousands of customers, deliver millions of experiences to engage with their prospects at scale. We take Allen as one of those prospects that one of our customers is engaging with at scale. We take all the first-party data and insights about Allen. Supposing he's a very highly engaged person and he answers a poll that says he's going to buy a product in the next 180 days, all those signals in real time that we are integrated in the sales and marketing ecosystem of our customers, that information in real time comes through the sales and marketing ecosystem to the salesperson to follow up right away. That's the closed-loop process that ON24 provides our customers. With that, we'll take questions. Great. Great. Thanks, Sharat. Appreciate it. Clearly, you mentioned companies that I cover, ServiceNow, Salesforce, others, where you guys are routinely one of the top sources of lead gen. Talk about how lead generation has changed kind of post-COVID. We were moving into more of a digital lead gen area. There was an explosion in demand. You guys have come through that kind of period of where the renewal cohorts were challenging. Now you are emerging into a new gen AI kind of driven lead gen environment. Talk about how that's changed and what you're seeing in the market. Let's back up. Rob, as you know, the last couple of years have been challenging from a marketing budget point of view. Since ON24 went public, we had to deal with some of the post-pandemic normalization. As we got done by that, interest rates went up, and that started impacting our customers because 80% of our revenue is coming from marketing budgets. What we generally saw is that marketing budgets reduced by about 30%-40%. That created some headwinds for our business. That being said, if you look at Q1, we delivered good enterprise new business performance. We delivered the best gross retention in the last four years. Also, AI-powered ACE has become a very important growth factor for us. We did see some softening towards the end of Q1, Rob, in the international and the commercial business. Overall, as I talk to the customers, I mean, the customer conversation, customers are enthusiastic. They're really looking to start investing in revenue growth. We are beginning to see that in win-backs. One of the most exciting things, ladies and gentlemen, in Q1 was we saw the largest number of customer win-backs, people who may have gone in the last two, three years to cheaper tools, cheaper collaboration tools. It was good for them to come back. Now, as I look at right now, what our customers are focused on, they are focused on revenue-generating activities. They're focused on every CMO that I know is focused on, "I've got limited cost. How do I generate more pipeline? Every pharmaceutical company is focused on, "How do I engage with healthcare professionals?" All companies on the financial services side are focused on, "How do I drive, as I'm distributing new product, how do I continue to increase my assets under management?" What ON24 provides these customers is this first-party engagement platform that delivers first-party data to learn more and more about these prospects. We do that on a cost-effective basis. On top of that, Rob, AI is fundamentally changing marketing and sales. It's driving more ROI-based outcomes. It's doing that cost-effectively because people don't have much resources. It provides massive scale. That's what many of our customers, like ServiceNow, the SAP, are investing in. The good news there is lower teams as a percentage of our customers are investing in our AI-based products. We have a lot of room to run. Already, lower teams of people are buying it. About a third of our customers are using it. That's what we're seeing. Got it. Just to quickly add on to what Sharat was saying, we've been through two-plus years of post-pandemic normalization, tight marketing budgets. We saw in the marketing primarily. The good news is, from what we're seeing in the business, that's in the rearview mirror. We're seeing a lot of stabilization in our business. In fact, in 2024, our gross retention was up by mid-single digits from 2023. In Q1, it was actually the best in-period gross retention that we've seen in the past four years. We are definitely seeing stabilization in the business. Some of the challenges are getting into the rearview mirror at this point. We expect to see improved ARR performance during 2025. A couple of other things I'm just going to add in. We were adjusted EBITDA profitable in 2024. We expect to be so again in 2025. We are free cash flow positive for the past five quarters. We expect to be free cash flow positive in 2025, possibly excluding some restructuring or other pro forma activities. We just announced a $50 million share repurchase program last month. At the end of Q1, we had $181 million of cash and investments on our balance sheet, no debt. We are generating positive free cash flow. We believe the shares are undervalued at the moment. Since the shares are cheap, we are taking this opportunity to buy back some of our own shares. I just wanted to add that in as well, in addition to the comments that Sharat made about what we are seeing in the business. Yeah. No, very helpful, Steve. And stuff I was certainly going to touch on as well. On the gross retention side, noted, it's been a positive indicator for you guys. Is this health of the installed base? Is it things you guys are doing to influence it as well? Maybe talk a little bit about the combination. Yeah. It's a combination of all the above. Let me start with the renewal cohorts. As we talked about, we went through a couple of years of tight marketing budgets, post-pandemic normalization. That's in the rearview mirror. Now, a lot of our large cohorts and our large renewals, they've already gone through at least a couple of renewal periods during this time period. They've had two opportunities to kind of right-size their contracts. We're not really seeing any downsells. We didn't see any in Q1 that were concerning, big downsells. We're not expecting to see any in the latter part of this year as well that are concerning. That gives me a lot of encouragement. As I said, in Q1, our gross retention was the highest it has been in four years. Last year, we saw a mid-single digit improvement in gross retention. We expect to see more improvement in 2025. Now, why is this happening? There are a handful of reasons. One, we have more of our ARR in multi-year agreements than we have ever had. At the end of 2024, 51% of our ARR was in multi-year agreements. We do not disclose that quarterly, but I can tell you it went up from that number in Q1. In fact, it hit an all-time high. That is really good. We are seeing our largest customers make longer-term commitments to our platform. The other is we have exciting new products to sell. Sharat talked about AI-powered ACE. We've still got a lot of room to run there. That is really helping to elevate our conversations within the marketing departments that we sell into. The other is we are seeing better general execution from our customer success and renewals teams. Given these items, we're seeing a lot of stabilization in the business. We expect that our gross retention in 2025 to increase from where it was in 2024 further and build on the gains that we've made. Got it. Helpful. Let me pivot back on the product side, and then we'll come back with some financials at the close. You mentioned Sharat, ON24 IQ. You guys were really early with AI-powered ACE. At the time you guys rolled it out, we were watching our coverage list to see how people would react to this new generative AI world. You guys really took offense on it early. I think it's starting to pay off for you guys. I would just be curious if you can share with us what sort of adoption metrics or how you're seeing that AI-powered ACE adoption within your installed base, and then whether it's also contributing to new wins. I wanted to ask about how you guys have either retrofitted or added in the agentic element. Yeah. A few things that you asked about the AI, yes, we launched that early last year. Lower teams as a percentage of our customers have bought our AI capabilities. About a third of those customers are using it. That is exciting. We have enough room to run. Rob, it started on the technology kind of vertical where we expect these people to start. The interesting thing that we are beginning to see is financial services, asset management, professional services, even life sciences is beginning to start using what we are taking to market. Like I said in my other remarks, AI is going to fundamentally change marketing and sales. I mean, there is urgent ROI that people are getting. When I take all the content that they create on my platform and I give them a campaign and a box that they can take and create all this derivative content and videos and continue the nurture with those people, earlier they had to start and create all those assets from scratch. Now they are at 80%. They are able to do more with less. They are able to do hyper-personalization and targeting of individual segments. Now with the launch of ON24 IQ, which is our AI agents, we are automating all the repetitive tasks that people had to do. If you are creating a live webinar experience, click, click, click, you decide what your audience is, what do you want to do, you will be able to get a live webinar experience. Next click, you are able to get all the additional content that you can deploy on various campaigns. That's important. The other thing that I'm very excited about on what we are bringing to market is the ability to take all the content, all the webinars and others, and deploy them in multiple languages. It's no longer about English. You can deploy them in 20-25 languages with a click of a button. Imagine you're one of those companies, SAP, ServiceNow, and others. One, they are able to get all this content. Then they're able to deploy all that content in multiple languages and deploy that on a global basis. The other thing that you all also need to understand, our foundation, our key strengths are our first-party data. We are taking a lot more of our strengths on first-party data and adding AI-driven insights on top. That's the fifth pillar of what we are doing. NetRet, AI is going to be transformative for our companies. It is transformative and a tremendous growth engine for our business. It also helps our competitive position as we execute in the marketplace. Got it. OK. Great. Thanks. I'll just throw it out there because I was at the Atlassian user conference last month. They just decided to give their generative AI platform away for free, Rovo, as part of their bundled package solutions. Their rationale there is that they're going to sort of remove the friction and then recoup that on the back end. Obviously, that comes with some risk. Just curious, given how aggressive you guys were in the market, how much automation potential there is here, and the relatively modest adoption of whether you guys would consider something like that or how you're thinking about the pricing. At some level, at some stage, we'll have to take a look at the pricing. The way we have approached it right now is we have two Tiers of AI capabilities. Some is provided to everybody to use for free. That's what I talked about. A third of our customers are using AI within the platform. For things that we believe are adding additional revenue or reducing their cost, that's what we charge for. That's the low teens of customers that are paying for us. As we evolve this, we will continue to look at it. Right now, we are just bringing so much more AI-based innovation into the marketplace, the multilingual capabilities, the additional AI-driven insights. We are doing a combination of those, Rob, at this stage. We do believe that for the capabilities we are taking to market that our customers are willing to pay. We expect about a 10%-15% uplift on those contracts based on AI. It also, by the way, just on the other side, helps us on the downsell side. Sometimes that was an issue in the past. Sometimes our customers are reducing some of the from a particular product. I think with AI-powered ACE, that helps us across all the various capabilities. Got it. OK. Great. Thanks. One from the audience. Thank you. What are you guys exactly doing in the health care space? Can you talk a little bit about your offering there? Yeah. So all of you have seen, you see ads that go to consumers on TV of the various drugs that companies do. When these pharmaceutical companies have to reach and educate, when they're coming out with a drug, they have these health care professionals, other doctors, and others that need to be educated. They have a panel of doctors and other health care professionals that get educated. That message has to be taken out to much larger audiences of health care professionals. Historically, many of these things were done in modern steakhouses or physical events. With the improvement in data intractability, with compliance and regulatory concerns, health care professional engagement, training, certification is being done more digitally. In health care, as they talk about omnichannel engagement. Our solutions in the pharma category, we deploy it on a global basis. These customers deploy health care professional engagement on a global basis in 40-50 different markets. That's what our solutions are used. Great. Great. Thanks. Steve, let me pivot back to you. On the ARR side, so we talked about gross retention. I mean, core ARR trends have started to improve generally, although you guys last quarter did call out a little bit of weakness in the second half on the core side. Maybe what was it that you guys saw either in the market or that sort of changed your view there? Let me take that. Let me take that question, Rob. Look, we cannot control the macro. Like I said, we had a good quarter and the things I described. Towards the latter part, we did see some softening in the commercial business and our international business. Recognizing the volatility in the markets, we had to add a little more risk to our projections for 2025. That is what we did. That being said, I am really excited about what I am seeing in the business and some of the changes that we are making in our business. We have guided that we expect sequential ARR improvement this year. We would love to get it to positive. We have currently guided that we expect to see sequential ARR improvement this year. There are four or five things that we are doing in the business that get me really, really excited and enthusiastic. I think Steve talked about gross retention. Q1 was the best in the last four years. Some of you who have followed us know that was a challenge. We expect that to improve over the course of the year. Second, the changes that we made to our go-to-market engine. We brought in a new CMO in the last couple of months. We also brought in a new head of North America sales towards the end of last year. He delivered the best new business enterprise quarter in Q1. I'm very encouraged about what we are doing. AI-powered ACE continues to be a very important growth vector. Like I said, there's room to run there. We are excited also to see win-backs from boomerang customers. Q1 was the largest ARR in number of customers that came back to ON24 that may have gone away because of cost considerations and others. Really, really excited about those things. On top of that, as Steve said, we are running a 77% gross margin business. We have made five quarters pre-cash flow positive. We've got a strong balance sheet. Encouraged by where we are positioned on ON24. We believe we are ready to inflect. It sounds like the change, though, was like that there was some incremental pressure in the marketing departments relative to some of you guys. It's hard to deal with. Outside of your control stuff. 30%-40% reduction in marketing department budgets, right? You're right. We did not see win-backs at that time. That is very encouraging, yes. Yeah. OK. Perfect. And then, yeah, to that point, Sharat, I mean, you guys called out the win-backs, which I think is important because we did see, particularly post-COVID, a lot of innovators in the space trying to come at you guys. And we also always had somewhat of a skeptical or jaundiced eye. And so maybe you've got these win-backs. But how has the competitive landscape changed at all today relative to kind of where we were? As I showed you in the slides, our focus in going to market, we are not a communication tool or collaboration tool. Our focus is how do we help you propel business outcomes forward. At enterprise scale, nobody does what we do from demand generation and partner engagement for technology companies, for health care professional engagement, for life sciences and pharma, for broker and member enrollment for financial services, live professional certification. Those are the areas that we focus on. I think you were right. Our competitors fall into two core categories. One is the collaboration tools, the good enough tools. The Zooms and the Teams and those folks, they're not a purpose-built marketing and sales plan. They provide very limited data. They sell to IT. I'll give you an example of one of the large enterprise health tech companies that have gone to a collaboration tool in the last couple of years. They came back in Q1. Why did they come back? Because they were trying to scale their pipeline generation. They couldn't do that with the collaboration tool that they had. They didn't have the buying signals, the engagement tools, the first-party data, and the content that the ON24 product provides. Now we are in the world of AI. AI is fundamentally changing scale. AI is fundamentally changing how people are doing massive content generation, massive engagement, and multilingual capabilities and other stuff. That is going to further enhance our competitive position. A lot of the point solutions that came up during the pandemic, most of them have gone away, Rob, because they've not been able to keep up. We are excited with where we are. We're excited about, from a post-normalization point of view, where we are. I think our competitive position could never have been stronger. Got it. Steve, we talked earlier about a lot of the progress you guys have made on the margin side, capital allocation. I wanted to just talk about profitability. 2024 was the first full year of profitability since the onset of COVID. And you've taken a lot of costs out of the business. And you guys have really rationalized things there. How do we think about margins relative to growth and those trade-offs going forward? And are there still levers that can be pulled? And what's your focus internally? First off, as Sharat mentioned, our goal is to get the company back to top-line growth. We are going to do that in a manner that is EBITDA-profitable while we are doing it. In fact, we are EBITDA, adjusted EBITDA-profitable in 2024. We said we would be adjusted EBITDA-profitable again in 2025. We have maintained our margins and gross margins in the high 70s. We were free cash flow positive for the past five quarters. We said we expect to be free cash flow positive again in 2025, possibly excluding some pro forma restructuring and other items. We are happy with the work we have done and the progress we have made on profitability. In terms of the top line, as we work to get that back to growth, as that improves, I would expect profitability to improve over time. Now, our long-term target margin, target operating model has gross margins of 78%-80%. We're actually just about there now. On the bottom line, we have operating margins of 20%. We're working to get there over time. As we return to growth, I would expect to see us make further progress there. Great. Thanks. Any other questions from the audience? Appreciate the interactive nature. Yeah. from the audience? Appreciate the interactive nature. Yeah. from the audience? Appreciate the interactive nature. Yeah. Thanks. How do you guys work to reach more of the total addressable market? How do you kind of tailor or set up your AI products to be flexible to the bigger customers at the enterprise level and then also some of the sub-markets as well? As we look at expanding our TAM, I think that was the first question. If you think about the TAM, it's about pipeline, driving pipeline. That's a huge TAM. If you look at health care professional engagement, we are focused on solving big problems where first-party data and first-party engagement is very important. We continue to look at what other use cases that we can bring in where we are solving that kind of problem. That's an important thing. Now, coming back to your second question about AI and how we are splitting between enterprise scale and others. For example, as we're bringing in more capabilities related to multilingual capability, smaller companies probably don't care much about that. We have packages for enterprise customers that really help solve their problems. We have also packages on AI for our commercial customers. They may be more interested in the AI-driven content and nurture as opposed to the larger ones that are interested in personalization and segmentation. They're interested in multilingual capability. They're interested in AI content and nurture. We have different packages for that. Thank you. Great. Sharat, Steve, thank you guys very much. We really appreciate it. Thank you. Yeah. Thanks. Yeah. Thanks.