10-Q: OneStream Reports Strong Revenue Growth Amid Widening Losses

OneStream, Inc. reported a 25% increase in total revenue for the first half of 2025, driven by subscription growth, but saw a significant rise in net losses due to increased operating expenses, particularly equity-based compensation.

Summary

• Total revenue for the six months ended June 30, 2025, increased by 25% to $283.9 million, up from $227.8 million in the prior year period.
• Subscription revenue grew by 30% to $258.7 million for the six months ended June 30, 2025, compared to $198.8 million in the same period of 2024, primarily driven by new customer acquisitions and expanded platform use.
• Net loss attributable to OneStream, Inc. significantly increased to $42.4 million for the six months ended June 30, 2025, compared to $12.8 million for the same period in 2024.
• Loss from operations widened to $72.1 million for the six months ended June 30, 2025, from $17.0 million in the prior year period.
• Total operating expenses surged by 53% to $266.0 million for the six months ended June 30, 2025, largely due to a substantial increase in equity-based compensation expense.
• Equity-based compensation expense totaled $69.3 million for the six months ended June 30, 2025, a significant rise from $3.8 million in the comparable 2024 period.
• The company's customer base grew by 14% year-over-year, reaching 1,695 customers as of June 30, 2025.
• Net cash provided by operating activities increased to $65.9 million for the six months ended June 30, 2025, up from $33.7 million in the prior year.
• Free cash flow was $65.2 million for the six months ended June 30, 2025, compared to $32.6 million for the same period in 2024.
• Cash and cash equivalents stood at $652.1 million as of June 30, 2025.
• Remaining performance obligations aggregated $1,171.5 million as of June 30, 2025, with approximately 40% expected to be recognized as revenue in the next 12 months.
• The company acquired three partner-developed solutions for $3.7 million during the second quarter of 2025 to enhance its platform.

Sentiment

Score: 4

Explanation: While OneStream, Inc. demonstrates strong subscription revenue growth and positive cash flow from operations, the substantial increase in net operating losses and net losses, primarily driven by significantly higher equity-based compensation expenses, indicates a worsening profitability trend. The unrecorded but estimated $193.5 million TRA liability also presents a future financial obligation. The company's strong market position in financial performance management software and its focus on AI-enabled solutions are positive long-term indicators. However, the current financial performance, particularly the widening losses, suggests a 'Hold' recommendation as investors should monitor the company's ability to manage its expenses, especially equity-based compensation, and its path to sustainable profitability, while acknowledging the long-term growth potential in its market.

Positives

• Strong subscription revenue growth of 30% for both the three and six months ended June 30, 2025, indicating successful customer acquisition and expansion.
• Customer base expanded by 14% year-over-year, reaching 1,695 customers, demonstrating continued market penetration.
• Significant increase in net cash provided by operating activities to $65.9 million and positive free cash flow of $65.2 million for the first half of 2025.
• Maintained a healthy cash and cash equivalents balance of $652.1 million, providing strong liquidity.
• The company's continued shift to a SaaS-based model is progressing, with SaaS contracts accounting for the majority of total revenue and over 90% of new customer contracts since 2023.
• Strategic acquisition of three partner-developed solutions aims to enhance platform features and drive further product adoption.
• The company has a strong ecosystem of go-to-market and implementation partners, including global strategic consulting firms like Accenture, IBM, KPMG, and PwC, which contribute to growth.
• Achieved FedRAMP High Authorization, enabling sales to U.S. federal agencies.
• Maintains an undrawn $150.0 million revolving credit facility and is compliant with all financial covenants.

Negatives

• Net loss attributable to OneStream, Inc. significantly increased to $42.4 million for the six months ended June 30, 2025, from $12.8 million in the prior year.
• Loss from operations widened substantially to $72.1 million for the six months ended June 30, 2025, compared to $17.0 million in the same period of 2024.
• Gross margin slightly decreased to 68% for the six months ended June 30, 2025, from 69% in the prior year, primarily due to increased equity-based compensation expense and sales mix.
• Total operating expenses increased by 53% for the six months ended June 30, 2025, largely driven by a significant rise in equity-based compensation expense.
• License revenue decreased by 26% for the six months ended June 30, 2025, reflecting the ongoing shift away from license-based models.
• Professional services and other revenue slightly decreased by 2% for the six months ended June 30, 2025, partially due to leveraging partners for implementation services.
• Professional services and other gross loss increased to $8.7 million for the six months ended June 30, 2025, from $5.5 million in the prior year.
• An estimated total unrecorded Tax Receivable Agreement (TRA) liability of $193.5 million could result from past exchanges and redemptions, representing a substantial future obligation not yet recognized on the balance sheet.

Risks

• Rapid growth may not be sustainable or indicative of future growth, and the company may struggle to attract new customers or retain existing ones.
• Failure to effectively manage operations to support rapid growth could strain managerial, administrative, and financial resources.
• The company has a history of operating losses and may not achieve or sustain profitability in the future, as costs are expected to continue increasing.
• Intense competition in the market could lead to loss of market share, lower sales, and reduced margins.
• If the industry does not develop as anticipated or if potential customers do not adopt the platform, sales growth could slow or cease.
• Serious errors or defects in the platform or applications could lead to revenue loss, harm to reputation, and product liability claims.
• Business substantially depends on customer renewals and expansion of platform use; failure to renew or expand could adversely affect financial condition.
• Sales cycles can be long and unpredictable, particularly with large enterprises, requiring considerable time and expense without guaranteed sales.
• Revenue growth depends on successful strategic relationships with third-party partners; inability to establish or maintain these could be detrimental.
• Revenue recognition from SaaS subscriptions over terms means increases or decreases in new sales may not be immediately reflected in operating results.
• Changes in the pricing model could harm business, operating results, and financial condition.
• Quarterly results might fluctuate, and failure to meet analyst/investor expectations could cause stock price decline.
• Long-term success depends on international expansion, which is susceptible to risks associated with foreign operations, including currency fluctuations and regulatory complexities.
• Security control breaches or unauthorized access to customer data could lead to loss of customers, reputational harm, and significant liabilities.
• Evolving privacy, data protection, and cybersecurity regulations may limit platform use and adoption, increasing compliance costs.
• The company's principal asset is its interest in OneStream Software LLC, and it depends on its operating results, cash flows, and distributions.
• The company will be required to pay TRA Members for certain tax benefits, and these payments are expected to be substantial and could be accelerated.
• The organizational structure, including the TRA, confers benefits upon TRA Members (including KKR) that do not benefit Class A common stockholders to the same extent.
• Concentrated voting control with Class C and Class D common stock holders (KKR and co-founder/CEO) limits other stockholders' ability to influence corporate matters.
• KKR controls the company, and its interests may conflict with those of OneStream, Inc. or Class A common stockholders.
• The certificate of incorporation renounces corporate opportunities identified by KKR or its affiliates, potentially diverting attractive opportunities away from the company.
• Unfavorable macroeconomic conditions could adversely affect business, operating results, financial condition, and growth prospects.
• The company may need additional capital, and there is no certainty that financing will be available on favorable terms or at all, potentially leading to dilution.
• Acquisitions or investments in other businesses could divert management's attention, result in dilution, and disrupt operations.
• Legal proceedings, regulatory disputes, and government investigations could incur significant expenses and divert management's attention.
• Indemnification obligations and limitations of director and officer liability insurance may have a material adverse effect.
• Governmental export and import controls could impair the ability to compete internationally and subject the company to liability.
• Non-compliance with the U.S. Foreign Corruption Practices Act (FCPA) and similar anti-corruption laws could lead to criminal or civil liability.
• Exposure to foreign currency exchange rate fluctuations could impact financial results.
• The requirements of being a public company might strain resources, divert management's attention, and affect the ability to attract and retain executive management and qualified board members.
• The company may be required to collect taxes in jurisdictions where it has not historically done so, leading to substantial tax assessments.
• International operations subject the company to potentially adverse tax consequences, including transfer pricing disputes and global minimum tax rules (OECD Pillar Two).
• The disparity between U.S. corporate tax rates and non-corporate members' tax rates might complicate capital structure maintenance.
• The stock price might be volatile or decline regardless of operating performance.
• Substantial future sales of Class A common stock, or the perception of such sales, could cause the market price to decline.
• If securities or industry analysts do not publish research or downgrade the stock, the stock price and trading volume could decline.
• The company does not intend to pay dividends to Class A common stockholders for the foreseeable future.
• As an emerging growth company, the decision to comply only with reduced reporting requirements could make Class A common stock less attractive to investors.
• Anti-takeover provisions in governing documents could make an acquisition difficult and limit stockholders' ability to influence management.
• Bylaws designate Delaware courts as the exclusive forum for substantially all disputes, potentially limiting stockholders' choice of judicial forum.

Future Outlook

The company anticipates continued investment in scaling operations domestically and internationally, growing its workforce, and introducing new and enhanced core solutions and applications, including AI-enabled solutions. It expects revenue from SaaS contracts to contribute an increasing portion of total revenue over time and aims to invest efficiently while remaining focused on positive cash flow. The company will continue to monitor legislative and regulatory developments, including the impact of the One Big Beautiful Bill Act (OBBBA) and OECD Pillar Two rules, on its tax position. It expects to be deemed a large accelerated filer by December 31, 2025, which will require auditor attestation on internal control over financial reporting.

Management Comments

• We are modernizing and redefining the Office of the CFO through the Digital Finance Cloud, our AI-enabled and extensible software platform.
• Our business model centers on maximizing the lifetime value of a customer relationship.
• We believe that our market opportunity is large, and we will continue to invest significantly in scaling across organizational functions to grow our operations, both domestically and internationally.
• Our continued growth will depend, in part, on our ability to grow a productive workforce across all departments of our organization to support our expanding operations, and, in part, on our ability to successfully introduce new and enhanced core solutions and applications on our platform.
• We therefore intend to continue to invest efficiently in growing our business to take advantage of our expansive market opportunity, while remaining focused on positive cash flow.
• Our goal is 100% customer success and it drives everything we do.

Industry Context

OneStream operates in the rapidly evolving financial performance management (FPM) software industry, focusing on unifying core financial functions and operational data through its AI-enabled Digital Finance Cloud. The industry is characterized by intense competition from legacy players like Oracle and SAP, as well as point solution providers such as Anaplan and Workday. OneStream's strategy of transitioning to a SaaS-based model and leveraging a strong partner ecosystem aligns with broader industry trends towards cloud adoption and collaborative solution delivery. The increasing focus on AI-enabled solutions for the Office of the CFO reflects a key technological trend in the financial software sector, aiming to provide more comprehensive, dynamic, and predictive views for corporate leaders.

Comparison to Industry Standards

• OneStream's 25% total revenue growth and 30% subscription revenue growth for the first half of 2025 are strong indicators, potentially outpacing some legacy FPM providers like Oracle and SAP, which may have slower growth rates due to their mature product portfolios and larger installed bases.
• The shift to a SaaS-based model, with over 90% of new customers on SaaS contracts since 2023, aligns with industry best practices and the broader trend of cloud adoption seen across the software sector, similar to companies like Workday and Anaplan that primarily offer cloud-native solutions.
• The significant increase in net losses and operating expenses, particularly equity-based compensation, suggests a growth-at-all-costs strategy, which is common among high-growth SaaS companies in their early public stages, but may be higher than more established, profitable peers.
• The company's customer growth of 14% year-over-year is competitive within the enterprise software space, indicating successful market penetration against both large incumbents and niche competitors.
• OneStream's emphasis on a strong partner ecosystem, including global systems integrators like Accenture, IBM, KPMG, and PwC, is a common and effective strategy for enterprise software companies to scale implementations and reach a wider customer base, mirroring approaches used by major cloud platforms.

Corporate Governance

Legal Proceedings

• The company is not presently a party to any litigation the outcome of which, if determined adversely, would individually or taken together have a material adverse effect on its business, operating results, cash flows, or financial condition.
• The company is involved in various legal proceedings arising from the normal course of business from time to time.
• The results of any current or future litigation cannot be predicted with certainty, and litigation can have an adverse impact due to defense and settlement costs, diversion of management resources, and other factors.

Related Party Transactions

• Prior to the acquisition of DataSense LLC in the second quarter of 2024, OneStream was party to consulting and software development services agreements with DataSense.
• Thomas Shea, the company's co-founder, chairman, CEO, and president, is the father of Andrew Shea, who was the chief executive officer and an equity holder in DataSense until its acquisition.
• The company paid $0.8 million and $1.9 million during the three and six months ended June 30, 2024, respectively, under these agreements, which were included in research and development expenses.
• During the six months ended June 30, 2025, 302,791 LLC Units and corresponding shares of Class C common stock held by DataSense Holdings LLC vested.
• As of June 30, 2025, 706,511 LLC Units and corresponding shares of Class C common stock issued to DataSense Holdings remained unvested, with total unrecognized equity-based compensation expense of $6.6 million.

Stakeholder Impact

• **Shareholders (Class A):** Face potential dilution from future equity sales, have limited influence on corporate matters due to concentrated voting control by Class C/D holders (KKR and CEO), and are not expected to receive dividends in the foreseeable future. They benefit from the company's strong revenue growth and positive cash flow from operations but are exposed to widening losses and the substantial unrecorded TRA liability.
• **Employees:** Benefit from equity-based compensation, which significantly increased, but the company faces intense competition for talent and must continue to attract and retain highly qualified personnel to support growth.
• **Customers:** Benefit from platform enhancements, new AI-enabled solutions, and a strong customer support and partner network. They are exposed to risks of platform errors, service disruptions, and potential changes in pricing models.
• **Partners:** The company relies heavily on its ecosystem of go-to-market and implementation partners, indicating continued investment and collaboration opportunities for these stakeholders.
• **Creditors:** The company maintains an undrawn revolving credit facility and is compliant with financial covenants, suggesting a stable position for its creditors.

Next Steps

• Continue significant investment in scaling across organizational functions, both domestically and internationally.
• Focus on growing a productive workforce across all departments to support expanding operations.
• Successfully introduce new and enhanced core solutions and applications on the Digital Finance Cloud platform.
• Invest efficiently in business growth while maintaining a focus on positive cash flow.
• Expand the partnership ecosystem and enhance education and training for existing partners.
• Continue research and development efforts to further develop the platform, including AI-enabled solutions.
• Monitor legislative and regulatory developments, such as OECD Pillar Two and the One Big Beautiful Bill Act (OBBBA), for potential impacts on tax position.
• Prepare for compliance with auditor attestation requirements on internal control over financial reporting (Section 404(b) of Sarbanes-Oxley Act) as a large accelerated filer by December 31, 2025.

Key Dates

Recommendation

While OneStream demonstrates robust subscription revenue growth and strong operational cash flow, the significant increase in net operating losses and net losses, primarily driven by substantially higher equity-based compensation expenses, indicates a worsening profitability trend. The unrecorded but estimated $193.5 million Tax Receivable Agreement (TRA) liability also represents a considerable future financial obligation. The company's strong market position in financial performance management software and its focus on AI-enabled solutions are positive long-term indicators. However, the current financial performance, particularly the widening losses, suggests a 'Hold' recommendation as investors should monitor the company's ability to manage its expenses, especially equity-based compensation, and its path to sustainable profitability, while acknowledging the long-term growth potential in its market.

Keywords

Financial Performance Management, SaaS, Cloud Software, Digital Finance Cloud, Corporate Performance Management, Financial Reporting, Financial Planning, AI-enabled Solutions, SEC Filing, 10-Q, Software-as-a-Service, Enterprise Software, Financial Technology, Corporate Governance, Risk Management