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Virtual events software company (NYSE:ONTF) reported Q3 CY2024 results beating Wall Street’s revenue expectations , but sales fell 7.4% year on year to $36.33 million. The company expects next quarter’s revenue to be around $35.9 million, close to analysts’ estimates. Its non-GAAP profit of $0.02 per share was also 3,177% above analysts’ consensus estimates.

Is now the time to buy ON24? Find out in our full research report.

ON24 (ONTF) Q3 CY2024 Highlights:

• Revenue: $36.33 million vs analyst estimates of $35.62 million (2% beat)

• Adjusted EPS: $0.02 vs analyst estimates of $0 ($0.02 beat)

• EBITDA: $228,000 vs analyst estimates of -$533,000 (143% beat)

• Revenue Guidance for Q4 CY2024 is $35.9 million at the midpoint, roughly in line with what analysts were expecting

• Adjusted EPS guidance for the full year is $0.09 at the midpoint, beating analyst estimates by 30.5%

• Gross Margin (GAAP): 74.3%, in line with the same quarter last year

• Operating Margin: -36.7%, in line with the same quarter last year

• EBITDA Margin: 0.6%, in line with the same quarter last year

• Free Cash Flow Margin: 0.4%, down from 2.4% in the previous quarter

• Billings: $33.95 million at quarter end, up 8.2% year on year

• Market Capitalization: $275.3 million

“Our third quarter results reflected an improved retention profile, operating expense discipline, and positive free cash flow,” said Sharat Sharan, co-founder and CEO of ON24.

Company Overview

Started in 1998 as a platform to broadcast press conferences, ON24’s (NYSE:ONTF) software helps organizations organize online webinars and other virtual events and convert prospects into customers.

Virtual Events Software

Online marketing and sales are expanding at a rapid pace. Compared to the offline advertising market, which has been affected by the Covid pandemic and is challenging to measure and improve, more organizations are expected to adopt data-driven digital engagement platforms to better engage their customers online.

Sales Growth

A company’s long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. ON24’s demand was weak over the last three years as its sales fell by 9.7% annually, a rough starting point for our analysis.

This quarter, ON24’s revenue fell 7.4% year on year to $36.33 million but beat Wall Street’s estimates by 2%. Management is currently guiding for a 8.7% year-on-year decline next quarter.

Looking further ahead, sell-side analysts expect revenue to decline 4.5% over the next 12 months. Although this projection is better than its three-year trend, it's tough to feel optimistic about a company facing demand difficulties.

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Billings

In addition to revenue, billings is a non-GAAP metric that sheds additional light on ON24’s business quality. Billings is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Over the last year, ON24’s billings averaged 5.2% year-on-year declines and fell to $33.95 million in the latest quarter. However, this alternate topline metric has outperformed its revenue, meaning the company collects cash upfront and then recognizes the revenue over the length of its contracts - a boost for its liquidity and future revenue prospects.

Customer Acquisition Efficiency

Customer acquisition cost (CAC) payback represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for marketing and sales investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

It’s relatively expensive for ON24 to acquire new customers as its CAC payback period checked in at 102.7 months this quarter. The company’s performance indicates that it operates in a competitive market and must continue investing to maintain its growth trajectory.

Key Takeaways from ON24’s Q3 Results

We were impressed by ON24’s optimistic EPS forecast for next quarter, which blew past analysts’ expectations. We were also excited its EBITDA outperformed Wall Street’s estimates. Zooming out, we think this was a good quarter with some key areas of upside. The market seemed to focus on the negatives, and the stock traded down 7.8% to $6 immediately after reporting.

Big picture, is ON24 a buy here and now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.