ON24 INC. [ONTF] Filings

10-Q 1 ontf-20230331.htm 10-Q ontf-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _____

Commission File Number: 001-39965

ON24, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware			94-3292599
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
50 Beale Street, 8th Floor, San Francisco, CA			94105
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (415) 369-8000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

ONTF

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of May 4, 2023, the registrant had 45,864,254 shares of common stock outstanding.

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		Page
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		2

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	C ondensed Consolidated Balance Sheets	3
	C ondensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4	Controls and Procedures	30

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securitie s and Use of Proceeds	55
Item 3.	Defa ult Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5	Other Information	55
Item 6.	Exhibits	55

Signatures		55

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or this Report, contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally in, but not limited to, the sections titled “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts”, “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Forward-looking statements include, but are not limited to, statements about:

•our ability to grow our revenue;

•our ability to attract new customers and expand sales to existing customers.

•fluctuation in our performance, our history of net losses and any increases in our expenses;

•competition and technological development in our markets and any decline in demand for our solutions or generally in our markets;

•adverse general economic and market conditions and spending on sales and marketing technology;

•our ability to expand our sales and marketing capabilities and otherwise manage our growth;

•the impact of the resumption of in-person marketing activities on our customer growth rate;

•disruptions, interruptions, outages or other issues with our technology or our use of third-party services, data connectors and data centers;

•the impact of the security incident involving ransomware that we experienced or any other cybersecurity-related attack, significant data breach or disruption of the information technology systems or networks on which we rely;

•our sales cycle, our international presence and our timing of revenue recognition from our sales;

•interoperability with other devices, systems and applications;

•compliance with data privacy, import and export controls, customs, sanctions and other laws and regulations;

•intellectual property matters, including any infringements of third-party intellectual property rights by us or infringement of our intellectual property rights by third parties; and

•the market for, trading price of and other matters associated with our common stock.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in the section entitled “Risk Factors” and elsewhere in this Report. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Report. You should read this Report completely and with the understanding that our actual future results may be materially different from what we expect.

Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

ON24, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)


	March 31, 2023		December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	100,777	$	26,996
Marketable securities	214,908		301,125
Accounts receivable, net of allowances and reserves of $3,267 and $2,930 as of March 31, 2023 and December 31, 2022, respectively	33,451		43,757
Deferred contract acquisition costs, current	12,571		13,136
Prepaid expenses and other current assets	8,431		6,281
Total current assets	370,138		391,295
Property and equipment, net	5,957		7,212
Operating right-of-use assets	5,119		5,606
Intangible asset, net	1,711		1,979
Deferred contract acquisition costs, non-current	17,991		17,773
Other long-term assets	1,486		1,608
Total assets	$	402,402	$	425,473
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	3,187	$	4,611
Accrued and other current liabilities	17,322		18,465
Deferred revenue	81,166		83,453
Finance lease liabilities, current	1,245		1,554
Operating lease liabilities, current	2,644		2,648
Total current liabilities	105,564		110,731

Operating lease liabilities, non-current	4,389		5,040
Other long-term liabilities	1,513		1,741
Total liabilities	111,466		117,512
Commitments and contingencies (See Note 9)
Stockholders’ equity
Common stock, $0.0001 par value per share; 500,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 46,847,621 and 47,554,801 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	5		5
Additional paid-in capital	562,151		562,555
Accumulated deficit	(271,317)		(253,727)
Accumulated other comprehensive income (loss)	97		(872)
Total stockholders’ equity	290,936		307,961
Total liabilities and stockholders’ equity	$	402,402	$	425,473

See accompanying notes to condensed consolidated financial statements.

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ON24, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)




	Three Months Ended March 31,
		2023		2022
Revenue
Subscription and other platform		$	39,364	$	43,477
Professional services		3,699		5,015
Total revenue		43,063		48,492
Cost of revenue
Subscription and other platform		9,889		9,602
Professional services		3,317		3,342
Total cost of revenue		13,206		12,944
Gross profit		29,857		35,548
Operating expenses
Sales and marketing		24,417		29,193
Research and development		11,099		10,644
General and administrative		14,278		10,877
Total operating expenses		49,794		50,714
Loss from operations		(19,937)		(15,166)
Interest expense		29		54
Other (income) expense, net		(2,572)		177
Loss before provision for income taxes		(17,394)		(15,397)
Provision for income taxes		196		82
Net loss		(17,590)		(15,479)


Net loss per share:
Basic and diluted		$	(0.37)	$	(0.32)

Weighted-average shares used in computing net loss per share:
Basic and diluted		47,304,983		47,631,813

See accompanying notes to condensed consolidated financial statements.

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ON24, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)


	Three Months Ended March 31,
		2023		2022
Net loss		$	(17,590)	$	(15,479)
Other comprehensive income (loss)
Foreign currency translation adjustment, net of tax		(9)		21
Unrealized gain (loss) on available for sale debt securities, net of tax		978		(1,391)
Total other comprehensive income (loss)		969		(1,370)
Total comprehensive loss		$	(16,621)	$	(16,849)

See accompanying notes to condensed consolidated financial statements.

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ON24, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Common Stock			Additional paid-in capital		Accumulated Deficit		Accumulated other comprehensive income (loss)		Total stockholders' equity
	Shares	Amount
Balance as of December 31, 2022	47,554,801	$	5	$	562,555	$	(253,727)	$	(872)	$	307,961
Repurchase of common stock	(1,279,127)	—		(10,720)		—		—		(10,720)
Excise taxes on repurchase of common stock	—	—		(60)		—		—		(60)
Issuance of common stock upon exercise of stock options	107,851	—		255		—		—		255
Issuance of common stock upon release of restricted stock units	464,096	—		—		—		—		—
Stock-based compensation expense	—	—		10,121		—		—		10,121
Other comprehensive income	—	—		—		—		969		969
Net loss	—	—		—		(17,590)		—		(17,590)
Balance as of March 31, 2023	46,847,621	$	5	$	562,151	$	(271,317)	$	97	$	290,936


	Common Stock			Additional paid-in capital		Accumulated Deficit		Accumulated other comprehensive income (loss)		Total stockholders' equity
	Shares	Amount
Balance as of December 31, 2021	47,727,346	$	5	$	550,839	$	(195,519)	$	(235)	$	355,090
Repurchase of common stock	(964,895)	—		(14,293)		—		—		(14,293)
Issuance of common stock upon exercise of stock options	415,918	—		847		—		—		847
Issuance of common stock upon release of restricted stock units	230,477	—		—		—		—		—
Payment for employee tax withholding upon net share settlement on equity awards	—	—		(1,756)		—		—		(1,756)
Stock-based compensation expense	—	—		9,507		—		—		9,507
Other comprehensive loss	—	—		—		—		(1,370)		(1,370)
Net loss	—	—		—		(15,479)		—		(15,479)
Balance as of March 31, 2022	47,408,846	$	5	$	545,144	$	(210,998)	$	(1,605)	$	332,546

See accompanying notes to condensed consolidated financial statements.

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ON24, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(17,590)	$	(15,479)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,417		1,207
Stock-based compensation expense	10,121		9,507
Amortization of deferred contract acquisition costs	3,893		4,067
Provision for allowance for doubtful accounts and billing reserve	901		260
Non-cash lease expense	497		519

Other	(1,698)		254
Changes in operating assets and liabilities:
Accounts receivable	9,405		3,779
Deferred contract acquisition costs	(3,546)		(3,627)
Prepaid expenses and other assets	(2,069)		(3,555)
Accounts payable	(1,353)		1,742
Accrued liabilities	(1,089)		(752)
Deferred revenue	(2,287)		(4,098)

Other non-current liabilities	(769)		(594)
Net cash used in operating activities	(4,167)		(6,770)
Cash flows from investing activities:
Purchase of property and equipment	(178)		(984)

Purchase of marketable securities	(119,591)		(60,271)
Proceeds from maturities of marketable securities	199,210		14,708
Proceeds from sale of marketable securities	9,321		—
Net cash provided by (used in) investing activities	88,762		(46,547)
Cash flows from financing activities:
Proceeds from exercise of stock options	255		1,157

Payment of tax withholding obligations related to net share settlements on equity awards	—		(1,756)
Payment for repurchase of common stock	(10,720)		(13,074)
Repayment of equipment loans	(71)		(66)
Repayment of finance lease obligations	(411)		(417)
Net cash used in financing activities	(10,947)		(14,156)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	130		27
Net increase (decrease) in cash, cash equivalents and restricted cash	73,778		(67,446)
Cash, cash equivalents and restricted cash, beginning of period	27,169		165,043
Cash, cash equivalents and restricted cash, end of period	$	100,947	$	97,597
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets:
Cash and cash equivalents	$	100,777	$	97,500
Restricted cash included in other assets, non-current	$	170	$	97
Total cash, cash equivalent, and restricted cash	$	100,947	$	97,597
Supplemental disclosures of cash flow information:
Cash paid for taxes, net of refunds	$	99	$	31
Cash paid for interest	$	21	$	46

See accompanying notes to condensed consolidated financial statements.

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ON24, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Description of Business and Significant Accounting Policies

Description of Business

ON24, Inc. and its subsidiaries (together, ON24 or the Company) provides a leading, cloud-based platform for digital engagement that delivers insights for revenue growth through interactive webinar experiences, virtual event experiences and multimedia content experiences. The Company’s platform offers a portfolio of interactive, personalized and content-rich digital experience products that creates and captures actionable, real-time data at scale from millions of professionals every month to provide businesses with buying signals and behavioral insights to efficiently convert prospects into customers. The Company was incorporated in the state of Delaware in January 1998 as NewsDirect, Inc. and in December 1998 changed its name to ON24, Inc. The Company is headquartered in San Francisco, California.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of ON24 Inc. and its subsidiaries and have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting. Certain information and note disclosures included in the Company’s annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2022. In the opinion of management, the condensed consolidated financial statements reflect all adjustments that are normal and recurring in nature and necessary for fair financial statement presentation. All intercompany transactions and balances have been eliminated in consolidation. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include, but are not limited to, the estimated expected benefit period for deferred contract acquisition costs, the determination of standalone selling price for the Company’s performance obligations, the allowance for doubtful accounts and billing reserve, the useful lives of long-lived assets, the assumptions used to measure stock-based compensation, the valuation of deferred income tax assets and uncertain tax positions. Actual results could differ from those estimates.

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022.There have been no significant changes to these policies during the three months ended March 31, 2023

Recently Adopted Accounting Standards

In June 2016, FASB issued ASU No. 2016-13, Financial Instruments Topic 326: Credit Losses Measurement of Credit Losses on Financial Instruments, as amended, which requires an entity to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts utilizing a new impairment model known as the current expected credit loss (CECL) model. This new standard also requires credit losses related to available for sale debt securities to be recorded as an allowance through net income rather than by reducing the carrying amount under the other-than-temporary-impairment model. The Company adopted ASU No. 2016-13 on January 1, 2023 and the impact of the adoption was not material to the Company’s condensed consolidated financial statements and related disclosures.

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Note 2. Revenue

Disaggregation of Revenue

The following table depicts the disaggregation of revenue by geographic region based on the shipping address of customers (in thousands):



	Three Months Ended March 31,
		2023		2022
United States		$	33,332	$	36,549
EMEA		6,864		8,147
Other		2,867		3,796
Total revenue		$	43,063	$	48,492

No individual foreign country contributed more than 10% of revenue for the three months ended March 31, 2023 and 2022.

No single customer accounted for 10% or more of the total revenue during the three months ended March 31, 2023 and 2022. Additionally, no single customer accounted for 10% or more of accounts receivable as of March 31, 2023 and December 31, 2022.

Contract Balances

Accounts receivable: The Company records accounts receivable when the Company has a contractual right to consideration. In some arrangements, a right to consideration for the Company’s performance under the customer contract may occur before invoicing to the customer, resulting in an unbilled receivable. As of March 31, 2023 and December 31, 2022, unbilled receivables were included within accounts receivable, net of allowance for doubtful accounts and billing reserves on the condensed consolidated balance sheets and were not material.

Contract assets: The Company records a contract asset when the Company has satisfied a performance obligation but does not yet have an unconditional right to consideration. Contract assets are included in prepaid expenses and other current assets in the condensed consolidated balance sheets and were not material as of March 31, 2023 and December 31, 2022.

Contract liabilities: The Company defers its revenue when the Company has the right to invoice in advance of performance under a customer contract. The current portion of deferred revenue balances is recognized during the following 12-month period and the remaining portion is recorded as noncurrent, which is included in other long-term liabilities on the condensed consolidated balance sheet. The amount of revenue recognized in the three months ended March 31, 2023 that was included in deferred revenue at the beginning of the period was $35.0 million.

Remaining Performance Obligations

The terms of the Company’s subscription agreements are primarily annual and, to a lesser extent, multi-year. The Company may bill for the full term in advance or on an annual, quarterly or monthly basis, depending on the terms of the agreement. As of March 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $142.3 million, which consists of both billed consideration in the amount of $81.9 million and unbilled consideration in the amount of $60.4 million that the Company expects to recognize as revenue. As of March 31, 2023, the Company expects to recognize 79% of its remaining performance obligations as revenue over the subsequent 12 months and the remainder thereafter.

Costs to Obtain a Contract

The Company capitalizes sales commissions and associated payroll taxes paid to internal sales personnel and third-party referral fees that are incremental costs resulting from obtaining a contract with a customer. These costs are recorded as deferred contract acquisition costs on the condensed consolidated balance sheets. The Company determines whether costs should be deferred based on its sales compensation plans and if the commissions are incremental and would not have occurred absent the customer contract.

Sales commissions paid upon the initial acquisition of a customer contract are amortized over an estimated period of benefit of five years as the Company specifically anticipates renewals of customer contracts and commissions paid on renewal contracts are not commensurate with commissions paid on new customer contracts. Sales commissions paid upon renewal of customer contracts are amortized over the contractual renewal term. Amortization is recognized on a straight-line basis commensurate with the pattern of revenue recognition. Sales commissions paid related to professional services are amortized over the expected service period. The Company determines the period of benefit for commissions

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paid for the acquisition of the initial customer contract by taking into consideration the initial estimated customer life and the technological life of its platform and related significant features. Amortization of deferred contract acquisition costs was $3.9 million and $4.1 million for the three months ended March 31, 2023 and 2022, respectively, and is included in sales and marketing expense in the condensed consolidated statements of operations.

The Company periodically reviews these deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit. The Company had no impairment losses relating to deferred contract acquisition costs during the periods presented.

Note 3. Marketable Securities

Marketable securities consisted of the following as of the periods presented (in thousands):



	March 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

Marketable Securities
U.S. Treasury securities	$	135,410	$	86	$	(76)	$	135,420
U.S. Agency securities	37,605		72		(5)		37,672
Certificates of deposit	17,353		—		(67)		17,286
Corporate debt securities	6,213		1		(31)		6,183
Commercial paper	18,357		2		(12)		18,347
Total marketable securities	$	214,938	$	161	$	(191)	$	214,908


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

Marketable Securities
U.S. Treasury securities	$	219,895	$	10	$	(801)	$	219,104
U.S. Agency securities	19,247		19		(2)		19,264
Certificates of deposit	26,624		4		(119)		26,509
Corporate debt securities	13,934		—		(86)		13,848
Commercial paper	22,433		10		(43)		22,400
Total marketable securities	$	302,133	$	43	$	(1,051)	$	301,125

The Company’s marketable securities have been classified as available for sale. All available for sale debt securities are available for use in current operations. Accordingly, they have been classified as current.

Marketable securities that have been in a continuous unrealized loss position consisted of the following as of the periods presented (in thousands):


	March 31, 2023
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
U.S. Treasury securities	$	27,244	$	(55)	$	978	$	(21)	$	28,222	$	(76)
U.S. Agency securities	3,195		(5)		—		—		3,195		(5)
Certificates of deposit	15,686		(67)		—		—		15,686		(67)
Corporate debt securities	339		(2)		3,876		(29)		4,215		(31)
Commercial paper	13,364		(12)		—		—		13,364		(12)

Total	$	59,828	$	(141)	$	4,854	$	(50)	$	64,682	$	(191)

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	December 31, 2022
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
U.S. Treasury securities	$	116,161	$	(151)	$	77,173	$	(650)	$	193,334	$	(801)
U.S. Agency securities	3,197		(2)		—		—		3,197		(2)
Certificates of deposit	22,402		(119)		—		—		22,402		(119)
Corporate debt securities	4,253		(13)		8,345		(73)		12,598		(86)
Commercial paper	12,853		(43)		—		—		12,853		(43)
Total	$	158,866	$	(328)	$	85,518	$	(723)	$	244,384	$	(1,051)

The Company periodically evaluates whether any security has experienced credit-related declines in fair value. The Company did not recognize any credit loss related to its available for sales debt securities during the three months ended March 31, 2023 or 2022.

The amount of realized gains or losses from marketable securities that were reclassified out from accumulated other comprehensive loss to other (income) expense, net was based on specific identification and such amount was immaterial in the three months ended March 31, 2023. The Company had no realized gains or losses from marketable securities that were reclassified out of accumulated other comprehensive income (loss) in the three months ended March 31, 2022.

The following summarizes the remaining contractual maturities of the Company’s marketable securities as of March 31, 2023 (in thousands):


	Fair Value
One year or less	$	214,908
Over one year through five years	—
Total marketable securities	$	214,908

Note 4. Fair Value Measurement

The following tables summarize the Company’s financial instruments recorded at fair value on a recurring basis by level within the fair value hierarchy as of the periods presented (in thousands):


	March 31, 2023
	Level 1		Level 2		Level 3		Total
Cash and cash equivalent
Cash equivalents - money market mutual funds	$	98,617	$	—	$	—	$	98,617

Marketable Securities
U.S. Treasury securities	—		135,420		—		135,420
U.S. Agency securities	—		37,672		—		37,672
Certificates of deposit	—		17,286		—		17,286
Corporate debt securities	—		6,183		—		6,183
Commercial paper	—		18,347		—		18,347

Total cash equivalents and marketable securities	$	98,617	$	214,908	$	—	$	313,525

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	December 31, 2022
	Level 1		Level 2		Level 3		Total
Cash and cash equivalent
Cash equivalents - money market mutual funds	$	5,608	$	—	$	—	$	5,608
Marketable Securities
U.S. Treasury securities	—		219,104		—		219,104
U.S. Agency securities	—		19,264		—		19,264
Certificates of deposit	—		26,509		—		26,509
Corporate debt securities	—		13,848		—		13,848
Commercial paper	—		22,400		—		22,400
Total cash equivalents and marketable securities	$	5,608	$	301,125	$	—	$	306,733

As of March 31, 2023 and December 31, 2022, the Company classified its cash equivalents within level 1 of the fair value hierarchy because they are valued using quoted market prices. The Company classified its marketable securities within level 2 of the fair value hierarchy because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security, which may not be actively traded.

Note 5. Balance Sheets Components

Property and Equipment, Net

Property and equipment, net consisted of the following as of the periods presented (in thousands):


	March 31, 2023		December 31, 2022
Computer, equipment and software(1)	$	31,111	$	31,243
Furniture and fixtures	1,076		1,071
Leasehold improvements	3,608		3,606
Property and equipment, gross	35,795		35,920
Less: Accumulated depreciation and amortization(2)	(29,838)		(28,708)
Property and equipment, net	$	5,957	$	7,212

(1)Includes assets recorded under finance leases of $4.9 million and $5.3 million as of March 31, 2023 and December 31, 2022, respectively.

(2)Includes amount for assets recorded under finance leases of $4.0 million as of March 31, 2023 and December 31, 2022, respectively.

Depreciation and amortization expense for property and equipment was $1.3 million and $1.2 million for the three months ended March 31, 2023 and 2022, respectively.

The following table presents the property and equipment, net of depreciation and amortization, by geographic region as of the periods presented (in thousands):


	March 31, 2023		December 31, 2022
United States	$	5,310	$	6,449
EMEA	608		722
Other	39		41
Total property and equipment, net	$	5,957	$	7,212

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Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following as of the periods presented (in thousands):


	March 31, 2023		December 31, 2022
Accrued compensation and benefits	$	6,138	$	5,390
Accrued bonus and commissions	3,964		6,814
Other	7,220		6,261
Accrued and other current liabilities	$	17,322	$	18,465

Note 6. Business Combination

In April 2022, the Company acquired Vibbio AS (Vibbio), a privately-held cloud video software company in Norway, for approximately $3.0 million in cash. The integration of Vibbio’s video capabilities across the ON24 platform is intended to allow customers to produce video content that creates more engagement, generates first-party data, and drives further personalization.

The purchase consideration was primarily allocated to developed technology intangible asset with an estimated fair value of $2.7 million at the acquisition date, which was valued using the cost to recreate method. The fair value of the remaining acquired tangible net assets was immaterial. The goodwill that was recorded represents the excess of the purchase consideration over the assets acquired and liabilities assumed relating to the acquisition and is immaterial.

The Company has not separately presented pro forma results reflecting the acquisition of Vibbio as the impacts were not material to the condensed consolidated financial statements.

Note 7. Intangible Assets

The Company’s acquired intangible asset subject to amortization as of the periods presented was as follows (in thousands):


	March 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Developed technology	$	2,700	$	(575)	$	2,125
Effect of foreign currency translation	(434)		20		(414)
Total	$	2,266	$	(555)	$	1,711


	December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Developed technology	$	2,700	$	(434)	$	2,266
Effect of foreign currency translation	(276)		(11)		(287)
Total	$	2,424	$	(445)	$	1,979

The intangible asset is amortized on a straight-line basis over its useful life of 4 years. As of March 31, 2023, the intangible asset had a remaining amortization period of 3.0 years.

The amortization expense was $0.1 million for the three months ended March 31, 2023 and was included in research and development in the condensed consolidated statements of operations as the acquired technology will be used to enhance our existing product capabilities. The Company had no intangible assets as of March 31, 2022.

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The estimated future amortization expense for the intangible asset is as follows (in thousands):


Remaining 2023	$	426
2024	568
2025	567
2026	150
Total	$	1,711

Note 8. Credit Facility

In September 2021, the Company amended its revolving line of credit with a financial institution effective August 2021, which increased the Company's borrowing capacity to a maximum of $50.0 million with a letter of credit sublimit of $4.0 million and a credit card sublimit of $1.0 million. The amendment allows the Company to borrow up to $50.0 million if the Company maintains at least $100.0 million on deposit at the institution. If such deposit is less than $100.0 million, the Company may borrow up to the lesser of $50.0 million or an amount determined by the Company's trailing five months of recurring revenue, annualized renewal rate and annualized monthly churn rate, as defined by the agreement. As of March 31, 2023, the Company had not drawn down on its line of credit and has a borrowing capacity of $50.0 million. The terms of the agreement permit voluntary prepayment without premium or penalty. The revolving credit facility matures in August 2024 and is secured by substantially all of the Company’s assets. The outstanding principal balance on the revolving line of credit, if any, is due at maturity. The Company is required to pay quarterly in arrears a commitment fee of 0.15% per annum on the undrawn portion available under the revolving line of credit. As of March 31, 2023, the Company had an outstanding standby letter of credit of $1.2 million as a guarantee for a leased space.

Interest on the revolving credit facility is payable monthly in arrears at a rate equal to the lender’s prime referenced rate as defined in the agreement. The prime referenced rate was 8.00% as of March 31, 2023 and 3.50% as of March 31, 2022.

The revolving credit facility is subject to certain restrictions and financial covenants, including the requirement of maintaining a minimum debt to EBITDA ratio when the Company’s current portion of the total borrowing exceeds $5.0 million and the Company fails to maintain $100.0 million in deposits. In addition, the revolving line of credit agreement restricts the Company from paying dividends without prior approval from the financing institution. The Company was not subject to the financial covenants as of March 31, 2023.

In April 2023, the Company further amended its revolving line of credit to allow for certain transactions including payment of dividends and share repurchases from open market purchases or through an accelerated share repurchase program, subject to certain terms and conditions.

Note 9. Commitment and Contingencies

Purchase Obligations

The Company has non-cancelable purchase commitments of $3.1 million as of March 31, 2023, primarily related to software license fees and co-location facilities and services, of which $2.1 million is expected to be paid in 2023 and $1.0 million in 2024.

Contingencies

The Company has agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines, and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by the Company, arising out of that person’s services as the Company’s director or officer or that person’s services provided to any other company or enterprise at the Company’s request. The Company maintains director and officer insurance coverage that may enable the Company to recover a portion of any future amounts paid.

FASB ASC 450-20, Contingencies, sets forth the rules for accounting for uncertain tax positions for taxes not based on income. When a loss contingency exists, the likelihood of the incurrence of the liability can range from probable to remote. The Company believes it is reasonably possible that a loss will result from the sales and use tax assessments in the range of zero to $0.4 million. The Company has not recorded an accrual as of March 31, 2023 and December 31, 2022.

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Legal Proceedings

The Company, its Chief Executive Officer, its Chief Financial Officer, certain current and former members of its Board of Directors and the underwriters that participated in the Company’s IPO are named as defendants in a consolidated putative class action, captioned In re ON24, Inc. Securities Litigation, 4:21-cv-08578-YGR (filed in November 2021), that is currently pending in the United States District Court for the Northern District of California. The consolidated complaint purports to assert claims under Sections 11 and 15 of the Securities Act of 1933 on behalf of all persons and entities that purchased, or otherwise acquired, the Company’s common stock issued in connection with the Company’s IPO. The complaint alleges that the Company’s registration statement and prospectus contained untrue statements of material fact and/or omitted material facts about ON24’s growth and customer base. Plaintiff seeks, among other things, an award of damages and attorneys’ fees and costs. Defendants filed a motion to dismiss the complaint in May 2022, which is currently pending. The Company believes the allegations in the consolidated complaint are without merit. The Company is unable to reasonably estimate a possible loss or range of possible loss, if any, arising from this matter at this early stage. Accordingly, no accrued litigation expense has been recorded in the accompanying condensed consolidated financial statements.

In the ordinary course of business, the Company may be subject from time to time to various proceedings, lawsuits, disputes or claims. Although the Company cannot predict with assurance the outcome of any litigation, the Company does not believe there are currently any actions, other than those described in the prior paragraph, that if resolved unfavorably, would have a material impact on its financial condition, results of operations or cash flows.

Note 10. Stockholders’ Equity and Equity Incentive Plan

Preferred Stock

The Company’s amended and restated certificate of incorporation authorized the issuance of 10,000,000 shares of undesignated preferred stock with a par value of $0.0001 per share.

Common Stock

The Company’s amended and restated certificate of incorporation authorized the issuance of 500,000,000 shares of common stock, $0.0001 par value per share. Holders of common stock are entitled to one vote per share.

Common Stock Reserved for Future Issuance

As of March 31, 2023, the Company had the following shares of common stock reserved for future issuance under its equity incentive plan and employee share purchase plan:


Stock options outstanding			7,523,406
Restricted stock outstanding			5,193,115
Remaining shares available for future grant under 2021 Equity Incentive Plan(1)			7,186,550
Remaining shares available for future issuance under ESPP(2)			1,977,559
Total shares of common stock reserved as of March 31, 2023			21,880,630

(1)Includes the automatic annual increase of 2,377,740 additional shares under 2021 Equity Incentive Plan on January 1, 2023.

(2)Includes the automatic annual increase of 475,548 additional shares under ESPP on January 1, 2023.

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Grant Activities

Stock Options

A summary of stock option activity and related information is as follows:



	Options Outstanding
	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Balance as of December 31, 2022	7,756,680	$	6.96
Granted	—	—
Exercised	(107,851)	2.37			$	674
Cancelled and forfeited	(125,423)	17.30
Balance as of March 31, 2023	7,523,406	$	6.85	5.51	$	34,111
Vested and exercisable	6,172,635	$	5.40	5.08	$	31,864

Restricted Stock Units

A summary of RSU activity and related information is as follows:



	RSUs Outstanding
	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested balance as of December 31, 2022	5,134,934	$	14.37
Granted	649,666	9.14
Vested	(478,356)	16.22
Cancelled and forfeited	(454,533)	14.91
Unvested balance as of March 31, 2023	4,851,711	$	13.43

The total fair value of RSUs vested in the three months ended March 31, 2023 and 2022 was $7.8 million and $5.5 million, respectively.

Restricted Stock Unit with Performance Conditions (PSUs)

In 2022, the Company’s board of directors granted 341,404 market performance-based restricted stock units to an executive officer with a grant date fair value of $4.2 million. The PSUs vest following three annual performance periods beginning from 2023, each in an amount equal to one-third of the target number of PSUs multiplied by a percentage determined by comparing the Company’s total stockholder return to a benchmark index during the performance period. The actual payout can range from 0% to 200% of the shares granted under this award, with the maximum earned PSUs capped at 125% for first two performance periods. The maximum payout for the entire award is capped at 200% of the granted shares. These PSUs additionally are subject to continued service by the award holder through the end of each performance period. As of March 31, 2023, none of these PSUs have vested.

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Stock-Based Compensation

The stock-based compensation expense by line item in the condensed consolidated statements of operations is summarized as follows (in thousands):



	Three Months Ended March 31,
		2023		2022
Cost of revenue
Subscription and other platform		$	785	$	868
Professional services		152		174
Total cost of revenue		937		1,042
Sales and marketing		3,057		3,692
Research and development		2,021		1,981
General and administrative		4,106		2,792
Total stock-based compensation expense		$	10,121	$	9,507

The following table presents the unrecognized stock-based compensation expense and weighted-average recognition periods as of March 31, 2023 (in thousands, except years):


	Stock Option		Restricted Stock		ESPP
Unrecognized stock-based compensation expense	$	21,093	$	61,752	$	51
Weighted-average amortization period	1.66 years		2.58 years		0.12 years

Repurchase of Common Stock

In March 2023, the Company’s board of directors authorized a new $125.0 million capital return program, $75.0 million of which is expected to be effected through the combination of an accelerated stock repurchase program and/or open market purchases. The Company may pay an additional special dividend if this $75.0 million threshold is not reached by March 2024. This capital return program replaced the prior $50.0 million share repurchase program.

The following table presents certain information regarding shares repurchased during the periods presented:


	Three Months Ended March 31,
	2023		2022
Number of shares repurchased	1,279,127		964,895
Average price per share, including commissions	$	8.38	$	14.81
Total repurchase costs, including commissions (in millions)	$	10.7	$	14.3

As of March 31, 2023, the Company had $69.0 million available for future share buybacks under the repurchase program.

The Company repurchased an additional 1,129,369 shares of common stock at an average per share price of $8.76 (including commissions) from April 1, 2023 through May 8, 2023. As of May 8, 2023, the Company has $59.1 million remaining for future share buyback under the repurchase program. The Company expects its repurchase program to be completed in the first quarter of 2024.

Dividends

Pursuant to the capital return program, on May 8, 2023, our board of directors declared a one-time special cash dividend of $1.09 per share (approximately $50 million in the aggregate), to all common stockholders of record as of the close of business on May 22, 2023, payable on or about June 15, 2023.

ON24 INC. [ONTF] Filings
10-Q	[2023-05-10]
10-K	[2023-03-15]
10-Q	[2022-11-14]
10-Q	[2022-08-11]
10-Q	[2022-05-12]
10-K	[2022-03-14]
10-Q	[2021-11-12]
10-Q	[2021-08-12]
10-Q	[2021-05-13]
10-K	[2021-03-30]
S-1	[2021-01-08]