ON24, Inc. (NYSE:ONTF) Q3 2023 Earnings Call Transcript

We are giving early access to select existing customers this quarter, and it will be available for new customers in Q1. And for now, we are confident that ACE will be a tailwind to ARR growth as it will pave the way for greater expansion with our installed base and a few new business acquisitions.

Unidentified Analyst: It’s very helpful and thank you very much for taking the questions.

Operator: Thank you. Our next question comes from Noah Herman with JPMorgan. Please state your question.

Noah Herman: Hey. Congrats on a solid quarter. So, thanks for taking the questions. I know maybe last quarter, you talked about simplifying some of the pricing and packaging and gearing that towards more specific use cases, helping to reduce go-to-market costs and streamline internal efficiency. So, curious to get an update on that and what has the feedback been from – maybe from customers. And I just have a quick follow-up.

Sharat Sharan: No, that is exactly right. I think one of the things on the regulated industries and the go-to-market, we are in the process of finalizing our packages and streamlining those packages, and AI-powered ACE is a key part of that. So, that – with that, we will be able to talk to you more about that in the next earnings call. What we have done so far is in certain categories, like especially in the pharma and life sciences where we have pretty much created a separate unit, we have created better packages that are more aligned to that particular segment, but a little more on pricing and packaging in the next earnings call because that will also include pricing of our AI-powered ACE and market feedback from our customers.

Noah Herman: Got it. And for my second question, I noticed that the total customer – the delta this quarter compared to last, it did downtick, but it sharply improved relative to last quarter, I think, down about 22 versus last quarter down about 90. Just curious to kind of get a sense of what you are – maybe you are seeing now that it’s almost mid-November through the quarter and just how to kind of think about some of the customer acquisition dynamics going forward, that would be really helpful. Thanks.

Sharat Sharan: Yes, one, we had better new logo new business performance in Q3 compared to Q2 and even though Q3 is a seasonally softer quarter. And as we have talked about previously, our focus – our main focus is 100,000-plus ARR customers, which decreased by 6 as some customers renewed at lower dollar thresholds. Now, this was the best performance over this year. We did experience a sequential decrease in customer count of 22. This was also the best performance over this year. And I am not happy with that, and I am focused on getting these numbers positive. And our smallest customers as before were the largest contributor to logo churn. So, I think as we look into Q4, we are seeing that the team is doing a better job in terms of churn.

I think the area where we see a little larger churn has been in the lower segment, the lower ARR segment. And again, we are very much focused on reducing that in that particular segment, too. But on the larger segment, it’s generally more of down-sells at the time of renewal that we are dealing with. So, I am encouraged and happy that our Q3 performance was the best, but still not happy that it is negative, and we are working on it.

Operator: [Operator Instructions] Our next question comes from Michael Rackers with Needham & Company. Please state your question.

Michael Rackers: Hi everyone. This is Michael on for Scott today. Thanks for taking my question. I was just curious about kind of the normalized growth environment. You mentioned getting back to a double-digit top line growth number once again. Could you kind of talk about the ramp to get there and maybe what the mix looks like in terms of new logo acquisition, and AI adoption and then cross-selling additional products to existing customers? Thanks.