10-Q: ON24 Reports Q2 2025 Loss Narrows Amid Revenue Decline

ON24, Inc. reported a narrower net loss for the second quarter and first half of 2025, driven by aggressive cost management, despite a continued decline in total revenue, customer count, and annual recurring revenue.

Summary

• Total revenue decreased by 5% to $35.3 million for the three months ended June 30, 2025, compared to $37.3 million in the same period of 2024.
• Net loss significantly narrowed to $7.3 million for Q2 2025, an improvement from a $11.2 million net loss in Q2 2024.
• For the first half of 2025, total revenue declined by 7% to $70.1 million, down from $75.1 million in the first half of 2024.
• Net loss for the first half of 2025 improved to $16.0 million, compared to a $21.9 million net loss in the first half of 2024.
• The company's customer count decreased to 1,566 as of June 30, 2025, down from 1,682 a year prior, primarily due to a net reduction in SMB customers.
• Annual Recurring Revenue (ARR) stood at $127.1 million as of June 30, 2025, a decrease from $133.7 million as of June 30, 2024, mainly due to customer churn and fewer new customer acquisitions.
• Gross margin improved slightly to 75% in Q2 2025 from 74% in Q2 2024, remaining consistent at 74% for the first half of both years.
• Operating expenses decreased across sales and marketing (-10%), research and development (-6%), and general and administrative (-22%) for Q2 2025, reflecting cost management and headcount reductions.
• Cash and cash equivalents increased to $37.7 million as of June 30, 2025, from $14.9 million at December 31, 2024.
• Net cash provided by operating activities increased to $6.0 million for the first half of 2025, up from $3.5 million in the same period of 2024.
• The company repurchased $4.3 million of common stock in Q2 2025 and $8.8 million in H1 2025 under its share repurchase programs, with $45.7 million remaining available under the 2025 Repurchase Program as of June 30, 2025.

Sentiment

Score: 4

Explanation: While the company successfully narrowed its net loss through aggressive cost management and increased cash from operations, the continued decline in revenue, customer count, and Annual Recurring Revenue (ARR) indicates a shrinking core business. The market for its Virtual Conference product is also declining. The positive impact of cost cutting is overshadowed by the negative trends in key growth metrics, suggesting underlying challenges in demand and customer acquisition, despite new product innovations.

Positives

• Net loss significantly narrowed for both the quarter and the six-month period, indicating improved profitability due to effective cost management.
• Gross margin slightly improved in Q2 2025, demonstrating efficiency in cost of revenue despite declining top-line.
• Operating expenses, including sales and marketing, research and development, and general and administrative, saw notable reductions, contributing to the improved net loss.
• Net cash provided by operating activities increased, reflecting better cash generation from core operations.
• The company maintains a strong cash and marketable securities position of $179.6 million, providing liquidity for at least the next 12 months.
• The approval of a new $50 million share repurchase program (2025 Repurchase Program) signals confidence in capital allocation and potential shareholder returns.
• Continued innovation with the launch of ON24 Lumina and ON24 IQ Intelligent agents, enhancing the platform's capabilities, particularly with AI-powered features.

Negatives

• Total revenue continued to decline for both the three and six months ended June 30, 2025, indicating ongoing challenges in top-line growth.
• Customer count decreased to 1,566, reflecting a net reduction, particularly in SMB customers.
• Annual Recurring Revenue (ARR) also declined, driven by customer churn and fewer new customer acquisitions.
• Professional services revenue experienced a significant decrease, as more customers opt for self-service and overall customer count declines.
• The company has de-emphasized its Virtual Conference product due to less demand, indicating a shift away from a previously significant offering.
• The decline in revenue and customer base suggests a shrinking core business, which could impact long-term growth prospects.

Risks

• Inability to increase revenue in future periods, following recent declines, due to reduced customer budgets, increased in-person marketing, and competitive dynamics.
• Significant fluctuations in quarterly results, making future performance difficult to predict.
• Failure to attract new customers or retain and expand usage among existing customers, impacting subscription revenue and cash flows.
• Intense competition from various companies offering meeting tools, webinar software, virtual event software, and marketing automation, some with larger customer bases and greater resources.
• Adverse general economic, political, and market conditions, including inflation and tightening budgets, leading to reduced spending on sales and marketing technology.
• Decline in demand for live engagement technologies or the company's solutions in general.
• Continued history of net losses and potential for increased expenses, hindering profitability.
• Failure to effectively develop and expand marketing and sales capabilities, including recruiting and retaining qualified personnel.
• Issues with the use of AI in the platform, such as flawed algorithms, insufficient data, copyrighted content, or regulatory actions, leading to reputational harm or liability.
• Heavy reliance on third-party providers for computing, storage, processing, and application integration services, exposing the company to service interruptions, increased costs, or providers becoming competitors.
• Cybersecurity-related attacks, significant data breaches, or disruptions of information technology systems, leading to unauthorized access, data loss, regulatory actions, and reputational damage.
• Service interruptions, delays, or outages from hosting facilities, impairing solution delivery and functionality.
• Inability to respond to rapid technological changes, extend the platform, or develop new features that meet customer demands.
• Long and unpredictable sales cycles with Enterprise customers, making revenue recognition difficult to predict.
• Adverse impact from market behavior as COVID-19 has subsided, leading to reduced demand for virtual events as in-person marketing resumes.
• Increased business and economic risks from significant international operations, including compliance with local laws, geopolitical disputes (e.g., Ukraine-Russia war, Israel-Gaza conflict), and currency exchange rate fluctuations.
• Revenue recognition over subscription terms means increases or decreases in new sales are not immediately reflected in results.
• Real or perceived material defects or errors in the platform, leading to negative publicity, data security issues, or legal liability.
• Dependence on the interoperability of the platform across devices, operating systems, and third-party applications not controlled by the company.
• Failure to maintain, enhance, and effectively promote the brand, especially with the increasing use of AI-powered search engines and chatbots.
• Inaccurate estimates of market opportunity and forecasts of market growth.
• Loss of Chief Executive Officer or other members of the senior management team.
• Failure to successfully plan for future growth, straining management, operational, and financial resources.
• Failure to maintain an effective system of disclosure controls and internal control over financial reporting.
• Failure to offer high-quality customer support.
• Disruption by catastrophic events, such as natural disasters or cyberattacks.
• Actual or perceived failure to comply with evolving privacy laws (e.g., GDPR, CCPA, ePrivacy Regulation), leading to increased regulatory burdens, fines, or litigation.
• Subject to export and import controls, customs, sanctions, embargo, and anti-boycott laws and regulations.
• Use of open source software in the platform, potentially leading to litigation or requirements to disclose proprietary source code.
• Allegations or determinations that the company's technology infringes the intellectual property rights of others.
• Failure to protect intellectual property rights and proprietary information.
• Adverse effects from changes in accounting principles generally accepted in the United States.
• Risks associated with acquiring other companies, products, and technologies, including integration difficulties and dilution of stockholder value.
• Need for additional capital, which may not be available on favorable terms or at all.
• Restrictive covenants in the revolving credit facility that could limit operations.
• Potential for increased indebtedness, which could adversely affect the business.
• Limitations on the ability to use net operating loss carryforwards and certain other tax attributes.
• Potential liabilities on past sales for taxes, surcharges, and fees.
• Exposure to greater than anticipated tax liabilities.
• Share repurchases may not enhance long-term stockholder value, may increase stock price volatility, and will diminish cash reserves.
• No plans to pay cash dividends in the foreseeable future.
• Volatility or steep decline in the trading price of common stock.
• Concentration of stock ownership, limiting other stockholders' influence.
• Substantial future sales of shares by existing stockholders could depress the market price.
• Provisions in organizational documents and regulatory rules that may delay or prevent acquisition by a third party.
• Exclusive forum provisions in the Certificate of Incorporation may discourage lawsuits against directors and officers.
• Decline in common stock market price and trading volume if securities or industry analysts publish unfavorable research or if operating results do not meet expectations.
• Actions of activist stockholders could impact business strategies and financial results.
• Ongoing costs and management demands associated with being a public company.
• Reduced disclosure requirements as an emerging growth company may make common stock less attractive to investors.

Future Outlook

The company anticipates continued cost management efforts, expecting additional restructuring costs in Q3 2025. Sales and marketing expenses are projected to decrease in absolute dollars for the full year 2025, while research and development expenses are expected to fluctuate as investments focus on platform development and AI capabilities. General and administrative expenses are also expected to decrease moderately. The company believes existing cash, cash equivalents, and marketable securities will be sufficient for at least the next 12 months, but acknowledges potential needs for additional financing for strategic transactions or if growth factors do not materialize as expected.

Management Comments

• We continue to see less demand for our Virtual Conference product and we have deemphasized this product.
• The change in our net customer numbers reflects the current budget pressures in marketing departments in some organizations.
• Our platform is designed with a long-term view toward our customer relationships and to grow with customers as their needs expand.
• The decrease in ARR from the first quarter of 2025 was primarily due to customer churn and fewer new customers acquired during the period, offset in part by increased contract expansions among existing customers.
• The increase in $100k Customers from March 31, 2025 was primarily driven by improved customer retention and contract expansions among existing customers.
• We expect gross margin for the full year of 2025 to be relatively consistent with 2024.
• We expect our sales and marketing expense for the full year of 2025 to decrease in absolute dollars compared to 2024 as we continue to tighten our sales and marketing spend given the current macro-economic environment while supporting demand for our digital experiences and our next generation intelligent engagement platform.
• We expect our research and development expense for the full year of 2025 to fluctuate in absolute dollars compared to 2024 as we focus on further developing our platform and infrastructure while we actively manage costs given the current macro-economic environment.
• We expect our general and administrative expense for the full year of 2025 to decrease moderately in absolute dollars compared to 2024 as we continue to actively manage costs given the current macro-economic environment.
• We expect to incur additional restructuring costs of $0.1 million to $0.4 million in the third quarter of 2025 related to our ongoing cost reduction efforts and may incur additional costs in future periods for restructuring activities.
• We believe our existing cash, cash equivalents and marketable securities will be sufficient to meet our needs for at least the next 12 months.
• We may in the future enter into strategic transactions, such as additional share repurchases or arrangements to acquire or invest in complementary businesses, products, services and technologies, and we may need to seek additional equity or debt financing.
• If we are unable to raise additional capital when desired, our business, results of operations and financial condition could be materially and adversely affected.

Industry Context

ON24 operates in the competitive B2B intelligent engagement platform market, aiming to provide deeper insights for sales and marketing compared to traditional methods like digital advertising and email. The company is adapting to a post-COVID-19 environment where in-person marketing activities have resumed, impacting demand for virtual conference products. It faces competition from established players like Zoom, Microsoft, and Adobe, and is investing in AI-powered capabilities (ACE, Lumina, IQ) to differentiate its offerings and capitalize on the growing market for converting digital engagement into revenue. The industry is characterized by rapid technological change and intense competition, with a focus on data-driven personalization.

Comparison to Industry Standards

• ON24's revenue decline contrasts with the general growth trends seen in some segments of the broader digital engagement and marketing technology market, where demand for data-driven solutions is increasing.
• Competitors such as Zoom, LogMeIn, Microsoft, Cisco, Cvent, Adobe, RingCentral, and Kaltura offer various web-based meeting, webinar, and marketing software products, many at lower prices and with greater resources, posing significant competitive pressure.
• While many competitors do not offer the same depth of real-time engagement features and actionable data gathering as ON24, their larger resources could enable them to introduce similar products in the future.
• The company's de-emphasis of its Virtual Conference product aligns with a broader industry shift back towards hybrid or in-person events post-pandemic, indicating a necessary adaptation to market demand.
• ON24's investment in AI-powered features like ACE, Lumina, and IQ is consistent with industry trends focusing on leveraging artificial intelligence for enhanced personalization, content creation, and analytics in marketing and sales.

Management Changes

Corporate Governance

Legal Proceedings

• The company, its CEO, CFO, certain current and former board members, and IPO underwriters are defendants in a consolidated putative class action, In re ON24, Inc. Securities Litigation, filed in November 2021 in the U.S. District Court for the Northern District of California.
• The complaint alleges that the IPO registration statement and prospectus contained untrue statements or omitted material facts about ON24's growth and customer base, seeking damages and attorneys' fees.
• Defendants' motion to dismiss was granted with leave to amend in July 2023; an amended complaint was filed in September 2023.
• The district court granted the defendants' motion to dismiss with prejudice in March 2024.
• The plaintiff has filed a notice of appeal, and the appeal is currently ongoing.
• The company believes the allegations are without merit and is unable to reasonably estimate a possible loss or range of loss at this early stage, thus no accrual has been recorded.

Related Party Transactions

• The company incurred engineering and quality assurance costs from a third-party vendor whose chief executive officer is an immediate family member of ON24's chief technology officer.
• Costs incurred were $0.7 million for Q2 2025 and $1.4 million for H1 2025 (compared to $0.7 million and $1.3 million for the same periods in 2024), recorded in research and development expense.
• As of June 30, 2025, $0.7 million was owed to this vendor, recorded in accounts payable and accrued liability.

Stakeholder Impact

• Shareholders: Impacted by declining revenue and customer base, but also by improved net loss and ongoing share repurchase programs. Potential for dilution if future capital raises involve equity issuance. Stock price volatility is a risk.
• Employees: Affected by ongoing workforce reductions as part of cost management efforts, which could impact morale and retention of key talent.
• Customers: Experience new AI-powered features and platform enhancements, but also face the company's de-emphasis of the Virtual Conference product. Decreased customer count, particularly SMBs, suggests some customers are not renewing or are churning.
• Creditors: The company's liquidity position remains strong with sufficient cash and marketable securities, and it has not drawn down on its revolving credit facility, indicating a stable position for creditors.
• Suppliers/Vendors: Impacted by cost management efforts and potential changes in spending, though a related-party vendor continues to receive payments for services.

Next Steps

• Incur additional restructuring costs of $0.1 million to $0.4 million in the third quarter of 2025 related to ongoing cost reduction efforts.
• Continue to invest in research and development, particularly in generative AI capabilities like ACE and ON24 IQ.
• Focus on attracting new customers across Enterprise, Commercial, Mid-Market, and SMB segments.
• Strive to expand usage and upsell new products to existing customers.
• Monitor developments in federal and state tax legislation (e.g., OBBB Act) and record any resulting tax impacts in Q3 2025.
• Potentially seek additional equity or debt financing for strategic transactions or to meet future capital requirements.

Key Dates

Recommendation

While ON24 has demonstrated effective cost management, leading to a narrower net loss and improved cash flow from operations, the persistent decline in revenue, customer count, and Annual Recurring Revenue (ARR) signals fundamental challenges in its core business growth. The de-emphasis of the Virtual Conference product and general market pressures on marketing budgets are significant headwinds. The ongoing share repurchase program provides some support for the stock price and returns capital to shareholders. However, without a clear path to revenue and customer base expansion, the long-term growth outlook remains uncertain. The company's investments in AI and new product features offer potential for future stabilization, but their impact on reversing current trends is yet to be seen. A 'hold' recommendation is appropriate for investors to monitor if the cost efficiencies and new product introductions can translate into renewed top-line growth and customer acquisition, or if the current negative trends persist, warranting a re-evaluation.

Keywords

Cloud-based engagement platform, Intelligent engagement, Digital marketing, Sales technology, Marketing technology, Webinar software, Virtual events, AI-powered analytics, Generative AI, SaaS, Customer engagement, B2B solutions, Corporate governance, Share repurchase, SEC filing, 10-Q