ON24 INC. - Quarter Report: 2023 March (Form 10-Q)

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.

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Note 11. Other (Income) Expense, Net

Other (income) expense, net consisted of the following for the periods presented (in thousands):


	Three Months Ended March 31,
		2023		2022
Interest income		$	(958)	$	(380)
Amortization (accretion) on marketable securities		(1,826)		253
Foreign currency losses		265		326
Other		(53)		(22)
Other (income) expense, net		$	(2,572)	$	177

Note 12. Income Taxes

The Company’s provision for income taxes were as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Provision for income taxes	$	196	$	82

The Company’s provision for income taxes for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any. The Company updates its estimate of the annual effective tax rate and makes a year-to-date adjustment to the provision quarterly. Provision for income taxes for the three months ended March 31, 2023 increased $0.1 million, compared to the three months ended March 31, 2022. The change in provision for income taxes was primarily driven by the increased activity and tax rate in a foreign jurisdiction.

The Company regularly performs an assessment of the likelihood of realizing benefits of its deferred tax assets. As of March 31, 2023, the Company recorded a valuation allowance against its U.S. deferred tax assets based on available evidence. However, if there are favorable changes to actual operating results or to projections of future income, the Company may determine that it is more likely than not that such deferred tax assets may be realizable.

Utilization of net operating loss carryforwards, tax credits and other attributes may be subject to future annual limitations due to the ownership change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions.

Note 13. Net Loss Per Share

The following tables set forth the computation of basic and diluted net loss per share attributable to common stockholders for the periods presented (in thousands, except share and per share data):



	Three Months Ended March 31,
		2023		2022
Net loss		$	(17,590)	$	(15,479)




Net loss per share of common stock, basic and diluted		$	(0.37)	$	(0.32)
Weighted-average common stock outstanding, basic and diluted		47,304,983		47,631,813

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The following table sets forth the potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:


	Three Months Ended March 31,
		2023	2022
Stock options		7,523,406	8,643,616
Restricted stock units		4,851,711	3,855,788
Performance stock units		341,404	—
ESPP purchase rights		99,235	112,568
Total antidilutive securities		12,815,756	12,611,972

Note 14. Related Party Transactions

The Company incurred engineering and quality assurance costs from a third-party vendor in the three months ended March 31, 2023 and 2022. The chief executive officer of the third-party vendor is considered an immediate family member of the Company’s chief technology officer. The Company recorded $0.7 million in the three months ended March 31, 2023 and 2022 in research and development expense relating to this third-party vendor on the condensed consolidated statements of operations. As of March 31, 2023 and December 31, 2022, the Company recorded $0.5 million and $0.7 million, respectively, in accounts payable and accrued liabilities on the condensed consolidated balance sheets for the amount owed to this third-party vendor.

Note 15. Restructuring

In the third quarter of 2022, the Company initiated a strategic cost reduction plan to reduce its global headcount through voluntary and involuntary headcount reductions. As of March 31, 2023, this plan was substantially completed. In February 2023, in an effort to streamline its organization, the Company initiated a restructuring plan to reduce its cost structure through global headcount reductions and other charges.

In the three months ended March 31, 2023, the Company incurred restructuring costs totaling $3.1 million, primarily related to severance and one-time termination benefits. The Company expects to incur additional restructuring costs of $1.5 million to $2.3 million in the second quarter of 2023 and may incur additional costs in future periods for restructuring activities. In addition, related to our restructuring activities, the Company expects to incur a charge of $1.3 million to $1.5 million in the second quarter of 2023 for underutilized real estate.

The following table summarizes the restructuring costs under both plans in our condensed consolidated statements of operations for the periods presented (in thousands):


	Three Months Ended March 31, 2023
Cost of revenue
Subscription and other platform	$	785
Professional services	54
Total cost of revenue	839
Sales and marketing	1,211
Research and development	773
General and administrative	230
Total restructuring costs	$	3,053

The Company paid restructuring costs of $2.4 million during the first quarter of 2023. As of March 31, 2023, the restructuring liability was $0.9 million and is included in accrued and other current liabilities on the condensed consolidated balance sheets.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with the condensed consolidated financial statements and related notes included elsewhere in this Report. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in the section titled “Risk Factors” and in other parts of this Report.

Overview

We provide 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. Our platform’s portfolio of interactive, personalized and content-rich digital experience products 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.

Similar to what has taken place in the B2C market, our platform for digital engagement empowers B2B companies with insights to better personalize their engagement. Large social media platforms have been successful at leveraging experiences and insights of consumers on their platforms to enable B2C companies to effectively understand their potential consumers. While these have been effective in the B2C market, B2B companies often lack deep insights about prospective customers to effectively understand and engage them.

Businesses today primarily use automated solutions, such as digital advertising and email, for marketing. While these automated solutions reach large numbers of prospective customers, they have generally failed to deepen customer engagement because they were designed with the simple purpose of pushing marketing messages in one direction—from the business to the prospective customer. For businesses to succeed, we believe their sales and marketing strategies must evolve from the era of automation to the era of engagement. Our platform provides an innovative way both to scale digital marketing and deepen prospective customer engagement. We believe our opportunity to help businesses convert digital engagement into revenue will continue to grow as industries modernize their sales and marketing processes.

We sell subscriptions to our platform’s experience products that are backed by analytics and our ecosystem of third-party integrations. Before 2013, we offered services and licensed software for managing webinars and virtual events primarily on a per event basis. In 2013, we transitioned to be a software-as-a-service company with the release of ON24 Elite as our self-service cloud-based subscription product. ON24 Virtual Conference, which we are now de-emphasizing, was also launched as a managed-service cloud-based subscription product. Substantially all of our customers subscribe to ON24 Elite, which is our Core Platform’s flagship product, and enables customers to seamlessly broadcast video-based content and drive real-time interactivity in a single immersive experience. We have since added 5 other experience products to our Core Platform.

In 2018, we launched two complementary experience products, ON24 Engagement Hub and ON24 Target, to provide our customers with a system for digital engagement, offering customers the ability to curate and disseminate rich, multimedia content experiences. In addition to our products, we also provide professional services such as experience management, monitoring and premium support services, which provide the opportunity for recurring revenue, as well as implementation and other services.

In 2021, we launched ON24 Breakouts, which expanded the functionality and interactivity of webinars built with ON24 Elite. For example, breakouts enable attendees and presenters to network with each other face-to-face, sales teams to connect immediately with prospects and subject matter experts to offer two-way communication to support customer education and training.

In 2021, we also launched ON24 Go Live, which provides a new self-service virtual event solution for companies to stand up live-streaming video events faster and easier. Organizations can build a complete end-to-end external or internal event ranging from roadshows, customer conferences, virtual pop-ups, town halls, and company meetings, using pre-built templates and an easy-to-use and engaging interface.

In 2022, we launched ON24 Forums that joins our portfolio of experience products and unifies engagement and data. ON24 Forums provides a new way to moderate interactive discussions and drive immediate action with audiences. For example, it enables audiences to participate in face-to-face, two-way video discussions.

In April 2022, we acquired Vibbio AS (Vibbio), a video software company in Norway. 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.

We deliver our platform products as cloud-based subscriptions that are easy to use and purpose-built for sales and marketing professionals. As of March 31, 2023, we had 1,916 customers.

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Our revenue for the first quarter of 2023 was $43.1 million compared to $48.5 million for the same period of 2022, representing a period-over-period decrease of 11%. We had a net loss of $17.6 million and $15.5 million for first quarter of 2023 and 2022, respectively.

COVID-19 Update

During the COVID-19 pandemic, digital became the primary way for people to connect, work, learn and be entertained, and for businesses to engage with customers. The imperative to optimize digital sales and marketing investments to drive revenue conversion became increasingly important as businesses accelerated digital transformation initiatives in response to the COVID-19 pandemic, resulting in increased usage of our subscription and other platforms, especially during the height of the COVID-19 pandemic in 2020 and early 2021.

We may not experience in future periods the same level of accelerated growth we experienced in 2020, and to a lesser extent in 2021. For example, our revenue decreased 11% in the first quarter of 2023 compared to the same period in 2022. Our revenue growth rate also declined in 2022 compared to 2021. We may continue to face declines in our revenue in future periods as our customers and their users may increasingly opt for in-person marketing activities in a way that decreases usage of our platform. For additional details, see the section titled “Risk Factors.”

Key Factors Affecting Our Performance

Cost Management

We executed a number of cost control measures in the latter part of 2022 to reduce our cost structure and lower our net loss, including voluntary and involuntary headcount reductions as well as reductions in spending with various vendors. We have continued to reduce our global full-time employee workforce through voluntary and involuntary headcount reductions in 2023.

Acquiring New Customers

We are focused on growing the number of customers that use our platform. We define a customer as a unique organization, including its subsidiaries and affiliates, that has entered into an agreement for paid access to our platform. A single customer may have multiple agreements with us for separate divisions, subsidiaries or affiliates. Our operating results and growth prospects will depend in part on our ability to attract new customers. While we believe we have a significant market opportunity that our platform addresses, it is difficult to predict customer adoption rates or the future growth rate and size of the market for our platform. We will need to continue to invest in our sales and marketing functions over time in order to address this opportunity by hiring, developing and retaining talented sales personnel who are able to achieve desired productivity levels in a reasonable period of time while we actively manage costs given the current macro-economic environment.

We believe our market is still relatively underpenetrated and, as a result, we see significant opportunity to market our solutions globally. We intend to pursue new customers through specialized and aligned sales teams focused on Enterprise customers, which includes companies with more than 2,000 employees, and Commercial customers, which includes companies with less than 2,000 employees, which we further divide into Mid-Market companies with 200-1,999 employees, and small and midsize, or SMB, companies with 1-199 employees.

Retention and Expansion of ON24 Across Existing Customers

We believe we can achieve growth in our business by retaining and further penetrating our existing customer base with the addition of new users and new products, and through upsell and cross sell. Our multi-dimensional land and expand model drives onboarding and allows us to acquire customers via free trials, live demos and continuous engagement with an efficient sales and marketing investment. As we continue to drive more actionable revenue generating marketing insights, we believe that we have a significant opportunity to further increase sales among existing customers across different functional and geographic departments within each respective organization. Our ability to pursue this opportunity will require us to retain our customers, scale our sales and marketing organization and otherwise increase our operating expenses, and we may not be successful on the timetable we anticipate, or at all, for any number of reasons, which may cause our results to vary from period to period.

Innovation and Expansion of Our Platform

We plan to continually develop new products that enhance the functionality of our platform, improve our user experiences and drive customer engagement in order to further capitalize on new opportunities. We intend to sell these new solutions to both existing and new customers, to drive an increase in revenue as the breadth and depth of our solutions and use cases expands. We also intend to continue investing in our platform and related infrastructure over time to improve capacity, security and scalability. These development efforts will require significant investments, some of which may be episodic or otherwise cause our expenses to vary from period to period.

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International Expansion

We believe the expansion of real-time, revenue-generating marketing intelligence in international markets is a significant opportunity. For the first quarter of 2023 and 2022, approximately 23% and 25% of our revenue came from outside the United States, respectively. We believe there is a compelling opportunity to continue to elevate expansion opportunities for our solutions internationally, both in countries where we currently operate and countries where we do not yet sell subscriptions to our solutions. Expanding our international operations will require considerable management attention and other resources and may present challenges associated with complying with local expectations, customs, laws and regulations, and geopolitical disputes (including the Ukraine-Russia war), which may impact our ability to sell subscriptions to our solutions and otherwise cause our results to vary from period to period.

Key Business Metrics

We review the following key business metrics to measure our performance, identify trends, formulate financial projections and make strategic decisions. Our methods for calculating these metrics may differ from similarly titled metrics at other companies, which may hinder comparability with other companies. The following table sets forth our number of customers, our annual recurring revenue (ARR) and our customers contributing at least $100,000 in ARR ($100k Customers) as of the dates indicated:


	March 31, 2023		December 31, 2022		March 31, 2022
Customers	1,916		1,990		2,145
ARR(1) (in thousands)	$	155,584	$	159,570	$	167,657
$100k Customers	333		345		367

(1)ARR for Core Platform excluding Virtual Conference product as of March 31, 2023, December 31, 2022, and March 31, 2022 was $149,242, $152,554 and $155,535, respectively.

Number of Customers

Increasing awareness of our platform and its broad range of capabilities has enabled us to substantially expand our customer base over the years. We define a customer as a unique organization, including its subsidiaries and affiliates, that has entered into an agreement for paid access to our platform. We serve customers of all sizes, ranging from small businesses to global Fortune 100 organizations across a diverse set of industries, including technology, financial services, healthcare, industrial and manufacturing, professional services and B2B information services companies. We had a diverse customer base of 1,916 customers as of March 31, 2023. Our net customers decreased by 74 in the first quarter of 2023 compared to the fourth quarter of 2022, primarily due to fewer new customer acquisitions and higher customer churn, the majority of which was in our SMB customer base. While we believe the change in our net customer numbers reflect 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.

Annual Recurring Revenue

We believe that ARR is a key metric to measure our business because it is driven by our ability to acquire new subscription customers and to maintain and expand our relationship with existing subscription customers. ARR is calculated as the sum of the annualized value of our subscription contracts as of the measurement date, including existing customers with expired contracts that we expect to be renewed. Our ARR amounts exclude professional services, overages from subscription customers and Legacy revenue. As of March 31, 2023, December 31, 2022 and March 31, 2022, our ARR was $155.6 million, $159.6 million and $167.7 million, respectively, and our ARR for Core Platform, which excludes Virtual Conference product, was $149.2 million, $152.6 million and $155.5 million, respectively. The decrease in ARR in from December 31, 2022 was primarily due to rationalizing of contractual entitlements and customer churn, offset in part by new customer contracts and contract expansions within existing customers. Our ARR also reflects a decrease in demand for our Virtual Conference product, primarily due to the return of large-scale, in-person events.

Customers Contributing $100,000 or More to ARR

As of March 31, 2023, December 31, 2022 and March 31, 2022, we had 333, 345 and 367 $100k Customers, respectively, demonstrating our penetration of larger organizations. The decrease in ARR contribution from the $100k customers from December 31, 2022 and March 31, 2022 was primarily driven by fewer new customer acquisitions in the period as well as lower value contract renewals as some customers adjusted to the macro-economic environment.

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Results of Operations

We manage and operate as one reportable segment. The discussion below summarizes our results of operations for the periods presented, which we derived from the condensed consolidated financial statements included elsewhere in this Report.

The following tables set forth selected condensed consolidated statements of operations data for each of the periods presented:


	Three Months Ended March 31,
		2023		2022

		(in thousands)
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(1)(4)		9,889		9,602
Professional services (1)(4)		3,317		3,342
Total cost of revenue		13,206		12,944
Gross profit		29,857		35,548
Operating expenses:
Sales and marketing(1)(4)		24,417		29,193
Research and development(1)(2)(4)		11,099		10,644
General and administrative(1)(3)(4)		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)

(1)Includes stock-based compensation as follows:


	Three Months Ended March 31,
		2023		2022

		(in thousands)
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

(2)Research and development expense for the three months ended March 31, 2023 includes amortization of acquired intangible asset of $142 thousand.

(3)General and administrative expense for the three months ended March 31, 2023 includes professional advisory expenses associated with activism defense and related costs of $2,446 thousand.

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(4)The results of operations for the three months ended March 31, 2023 include restructuring costs, which primarily represent severance and related expense due to restructuring activities as follows. See Note 15 for additional information.



	Three Months Ended March 31, 2023

	(in thousands)
Cost of revenue
Subscription and other platform	$	785
Professional services	54
Total cost of revenue	839
Sales and marketing	1,211
Research and development	773
General and administrative	230
Total cost of revenue	$	3,053

Comparison of the Three Months Ended March 31, 2023 and 2022

Revenue



	Three Months Ended March 31,
	2023		As a % of Total Revenue	2022		As a % of Total Revenue	$ Change		% Change

	(in thousands, except percentages)
Subscription and other platform	$	39,364	91%	$	43,477	90%	$	(4,113)	(9)%
Professional services	3,699		9%	5,015		10%	(1,316)		(26)%
Total revenue	$	43,063	100%	$	48,492	100%	$	(5,429)	(11)%


	Three Months Ended March 31,
	2023		As a % of Total Revenue	2022		As a % of Total Revenue	$ Change		% Change

	(in thousands, except percentages)
Core Platform
Subscription and other platform	$	37,811	88%	$	40,070	83%	$	(2,259)	(6)%
Professional services	3,395		8%	4,437		9%	(1,042)		(23)%
Total core platform revenue	41,206		96%	44,507		92%	(3,301)		(7)%
Virtual Conference
Subscription and other platform	1,553		4%	3,407		7%	(1,854)		(54)%
Professional service	304		1%	578		1%	(274)		(47)%
Total virtual conference revenue	1,857		4%	3,985		8%	(2,128)		(53)%
Total revenue	$	43,063	100%	$	48,492	100%	$	(5,429)	(11)%

Total revenue decreased $5.4 million, or 11%, in the first quarter of 2023 compared to the same period of 2022. Revenue excluding virtual conference product decreased $3.3 million, or 7%, compared to the same period of 2022. With the return of large-scale, in-person events, we are seeing less demand for our Virtual Conference product and we are deemphasizing this product.

Subscription and other platform revenue decreased $4.1 million in the first quarter of 2023, compared to the same period of 2022. Subscription and other platform revenue excluding our Virtual Conference product decreased $2.3 million compared to the same period of 2022, primarily due to fewer new customer contracts and contract expansions from existing customers during the period as well as higher customer churn from existing customers,

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Professional services revenue decreased $1.3 million in the first quarter of 2023 compared to the same period of 2022. Professional services revenue excluding Virtual Conference product decreased $1.0 million compared to the same period of 2022, primarily due to more customers electing to be “self-service” and utilize less services in the current macro-economic environment. The decline in professional services revenue as a percentage of total revenue was primarily due to more of our customers electing to be “self-service” and not utilize our professional services offerings.

Cost of Revenue and Gross Margin


	Three Months Ended March 31,
	2023			As a % of Total Revenue	2022			As a % of Total Revenue	$ Change		% Change

	(in thousands, except percentages)
Subscription and other platform	$	9,889		23%	$	9,602		20%	$	287	3%
Professional services	3,317			8%	3,342			7%	(25)		(1)%
Total cost of revenue	$	13,206		31%	$	12,944		27%	$	262	2%
Gross profit	$	29,857		69%	$	35,548		73%	$	(5,691)	(16)%
Gross margin	69		%		73		%

Cost of Revenue

Cost of revenue for the first quarter of 2023 remained flat compared to the same period of 2022, primarily reflecting the result of our active cost management.

Gross Margin

Gross margin for the first quarter of 2023 was 69% compared to 73% for the same period of 2022. The decrease was primarily attributable to an increase in total cost of revenue, which increased 2%, compared to total revenue, which decreased 11%. While we made cost reductions across our business starting in the second half of 2022, we continued to invest in our cloud infrastructure capabilities.

We expect gross margin to decrease modestly in 2023 compared to 2022 due to diseconomies of scale from the recent decline in revenue. We also continue to increase our utilization of the public cloud for our newer product offerings while we actively manage costs given the current macro-economic environment.

Operating Expenses

Sales and Marketing


	Three Months Ended March 31,
	2023		As a % of Total Revenue	2022		As a % of Total Revenue	$ Change		% Change

	(in thousands, except percentages)
Sales and marketing	$	24,417	57%	$	29,193	60%	$	(4,776)	(16)%

Sales and marketing expense decreased $4.8 million, or 16%, in the first quarter of 2023 compared to the same period of 2022, primarily attributable to a decrease in personnel-related expenses of $3.1 million due to headcount reduction related to our restructuring activities that began in the second half of 2022. The remainder of the decrease was primarily driven by our active cost management given the current macro-economic environment. The decrease in sales and marketing expense as a percentage of total revenue was primarily driven by our cost control measures to reduce our cost structure.

We expect our sales and marketing expense to decrease in absolute dollars in 2023 as we continue to support demand for our digital experiences while tightening our sales and marketing spend given the current macro-economic environment.

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Research and Development


	Three Months Ended March 31,
	2023		As a % of Total Revenue	2022		As a % of Total Revenue	$ Change		% Change

	(in thousands, except percentages)
Research and development	$	11,099	26%	$	10,644	22%	$	455	4%

Research and development expense for the first quarter of 2023 remained relatively flat compared to the same period of 2022, primarily due to our active cost management and headcount reduction related to our restructuring activities that began in the second half of 2022. We have been applying a disciplined approach to focus our investments on research and development areas that offer the greatest opportunities as we expand our platform and bring new products to the market.

We expect our research and development expense to decrease moderately in absolute dollars in 2023 as we focus on further developing our platform and infrastructure while we actively manage costs given the current macro-economic environment.

General and Administrative


	Three Months Ended March 31,
	2023		As a % of Total Revenue	2022		As a % of Total Revenue	$ Change		% Change

	(in thousands, except percentages)
General and administrative	$	14,278	33%	$	10,877	22%	$	3,401	31%

General and administrative expense increased $3.4 million, or 31%, in the first quarter of 2023 compared to the same period of 2022, primarily attributable to an increase in professional advisory expenses associated with activism defense of $2.4 million and the increase in stock-based compensation expense of $1.3 million, offset in part by the decrease in other overhead costs due to active cost management.

We expect our general and administrative expense to decrease in absolute dollars in 2023 as certain advisory expenses are not expected to be recurring and as we actively manage costs given the current macro-economic environment.

Interest Expense


	Three Months Ended March 31,
	2023		As a % of Total Revenue	2022		As a % of Total Revenue	$ Change		% Change

	(in thousands, except percentages)
Interest expense	$	29	—%	$	54	—%	$	(25)	(46%)

Interest expense for the first quarter of 2023 remained relatively flat in absolute dollars compared to the same period of 2022,

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Other (Income) Expense, Net


	Three Months Ended March 31,
	2023		As a % of Total Revenue	2022		As a % of Total Revenue	$ Change		% Change

	(in thousands, except percentages)
Other (income) expense, net	$	(2,572)	(6)%	$	177	—%	$	2,749	1553%

The change in other (income) expense, net for the first quarter of 2023 compared to the same period of 2022 was primarily driven by the increase in investment income. See Note 11 for additional information.

Provision for Income Taxes


	Three Months Ended March 31,
	2023		As a % of Total Revenue	2022		As a % of Total Revenue	$ Change		% Change

	(in thousands, except percentages)
Provision for income taxes	$	196	—%	$	82	—%	$	114	(139%)

The change in provision for income taxes for the first quarter of 2023 compared to the same period of 2022 was primarily driven by the increased activity and tax rate in a foreign jurisdiction.

Liquidity and Capital Resources

As of March 31, 2023, we had cash, cash equivalents and marketable securities of $315.7 million. Our investments generally consist of money market mutual funds, certificates of deposit, U.S. Treasury securities, U.S. Agency securities and debt securities, all of which are available for use in our current operations. Our liquidity requirements arise primarily from our working capital needs, capital expenditures and debt service requirements. We have historically funded our liquidity requirements through sales of convertible preferred stock, cash generated from our operations, borrowings and availability under our revolving credit facility, and most recently through our IPO in February 2021.

In the first quarter of 2023, our board of directors authorized a $125.0 million capital return program which replaced the prior share repurchase program. 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 $50.0 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. As previously announced, we expect the remaining $75.0 million of capital return to be effected through a combination of an ASR program and/or open market purchases with the possibility of an additional special dividend if this $75.0 million threshold is not reached by March 2024. We expect to complete this program in the next twelve months. We spent a total of $10.7 million in the first quarter of 2023 and $9.9 million in the second quarter of 2023 through May 8 on share repurchases (including commissions).

In the third quarter of 2022, we initiated a strategic cost reduction plan that included voluntary and involuntary headcount reductions. As of March 31, 2023, this plan is substantially completed. In February 2023, in an effort to streamline its organization, the Company initiated a restructuring plan to reduce its cost structure through global headcount reductions and other charges. As of March 31, 2023, our full-time headcount decreased by approximately 22% from June 30, 2022. Additionally, we incurred aggregate restructuring costs of $3.1 million in the first quarters of 2023, primarily related to severance and one-time termination benefits. We expect to incur additional restructuring costs of $1.5 million to $2.3 million in the second quarter of 2023 related to such activities and may incur additional costs in future periods for restructuring activities. In addition, related to our restructuring activities, we expect to incur a charge of $1.3 million to $1.5 million for underutilized real estate.

Our principal uses of cash in recent periods have been to fund our operations, invest in research and development, purchase investments and to a lesser extent share repurchases and strategic transactions.

We believe our existing cash, cash equivalents and marketable securities will be sufficient to meet our needs for at least the next 12 months. Our future capital requirements will depend on many factors including our revenue growth rate, subscription renewal activity, billing frequency, the timing and extent of spending to support further sales and marketing and research and development efforts and the timing and extent of additional capital expenditures to invest in existing office spaces. We may in the future enter into arrangements to acquire or invest in complementary businesses, products, services and technologies, and we may need to seek additional equity or debt financing. In the event that additional financing is needed from outside sources, we may not be able to raise the necessary capital or raise the capital on terms

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acceptable to us or at all. If we are unable to raise additional capital when desired, our business, results of operations and financial condition could be materially and adversely affected.

The following table summarizes our cash flows for the periods presented (in thousands):


	Three Months Ended March 31,
	2023		2022
Net cash used in operating activities	$	(4,167)	$	(6,770)
Net cash provided by (used in) investing activities	$	88,762	$	(46,547)
Net cash used in financing activities	$	(10,947)	$	(14,156)

Operating Activities

Our largest source of operating cash is cash collections from our customers for subscriptions to use our platform. Our primary uses of cash from operating activities are from personnel-related expenditures, costs related to hosting our platform and marketing expenses. Our cash flow from operating activities will continue to be influenced principally by the extent to which we increase spending on our business and our working capital requirements.

Net cash used in operating activities is primarily impacted by our net loss adjusted for certain non-cash items such as stock-based compensation, depreciation and amortization, amortization of deferred contract acquisition costs, as well as the effect of changes in operating assets and liabilities. Our cash flows from operating activities used net cash of $4.2 million for the first quarter of 2023 compared to $6.8 million for the same period of 2022, resulting in a decrease of cash outflow of $2.6 million. The decrease was primarily attributable to the $5.4 million favorable changes in operating assets and liabilities between the periods, partially reduced by $2.1 million increase in net loss and $0.7 million decrease in non-cash expenses. In addition, we made total restructuring related payments of $2.4 million in the first quarter of 2023. See Note 15 for additional information.

The total non-cash adjustments for the first quarter of 2023 was $15.1 million compared to $15.8 million for the same period of 2022, reflecting a $0.7 million unfavorable change of non-cash adjustment.

Working capital used cash of $1.7 million for the first quarter of 2023 compared to $7.1 million for the same period of 2022, a decrease of cash outflow of $5.4 million. The favorable change in working capital in the comparative periods were impacted by, among other items, the timing of vendor payments and prepayments, timing of cash receipts from customers, and increased business activities.

Investing Activities

Net cash provided by investing activities for the first quarter of 2023 was $88.8 million compared to used cash of $46.5 million for the first quarter of 2022. The favorable change was primarily driven by an increase in proceeds from maturities and sales of marketable securities of $193.8 million, partially offset by an increase in purchases of marketable securities of $59.3 million.

Our most significant capital expenditures have been investments in our equipment to support ongoing operations. We expect our capital investment to continue in the future.

Financing Activities

Net cash used in financing activities for the first quarter of 2023 was $10.9 million compared to $14.2 million for the same period of 2022. The decrease in cash outflow was primarily driven by the $2.4 million decreased spending on our share repurchases and $1.8 million decrease in tax withholding payment on equity awards, partially offset by decreased cash inflow due primarily to a $0.9 million decrease in proceeds from exercise of stock options.

Debt Obligations

Revolving Credit Facility

In September 2021, we amended our revolving credit facility with Comerica Bank with an effective date of August 31, 2021, which increases our 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 us to borrow up to $50.0 million if we maintain at least $100.0 million on deposit with Comerica Bank. If such deposit is less than $100.0 million, we may borrow up to the lesser of $50.0 million or an amount determined by our trailing five months of recurring revenue, annualized renewal rate and annualized monthly churn rate. 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 our assets. We are required to pay a quarterly commitment fee of 0.15% per annum on the undrawn portion available under the revolving line of credit.

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Outstanding principal amounts on the revolving credit facility incur interest at a rate equal to Comerica Bank’s prime referenced rate, as defined in the loan agreement. The referenced prime rate was 8.00% as of March 31, 2023 and 3.50% as of March 31, 2022.

As of March 31, 2023, we had not drawn down on our line of credit under the revolving credit facility.

In April 2023, we further amended our 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.

Commitments and Contractual Obligations

The following table summarizes our non-cancelable contractual obligations as of March 31, 2023 (in thousands):


	Payments Due By Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Operating lease obligations	$	7,392	$	2,158	$	5,100	$	134	$	—
Finance lease obligations	1,268		1,188		80		—		—
Equipment loans	237		165		72		—		—
Other (1)	3,130		2,136		994		—		—
Total	$	12,027	$	5,647	$	6,246	$	134	$	—

(1)Amounts primarily represent our commitment under various software license and co-location facilities and services agreements. See Note 9 to condensed consolidated financial statements for additional information.

Critical Accounting Policies and Estimates

There has been no significant change during this quarter to our critical accounting policies and estimates as discussed in our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There has been no material change in our exposure to market risks from that discussed in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2022.

Interest Rate Risk

Our exposure to changes in interest rates relates primarily to our investment portfolio. Changes in U.S. interest rates affect the interest earned on our cash, cash equivalents and investments and the fair value of those investments.

Our cash equivalents primarily consist of money market mutual funds, which are not significantly exposed to interest rate risk. Our marketable securities are subject to interest rate risk because these securities primarily include a fixed interest rate. As a result, the market values of these securities are affected by changes in prevailing interest rates. We attempt to limit our exposure to interest rate risk and credit risk by investing our investment portfolio in instruments that meet the minimum credit quality, liquidity, diversification and other requirements of our investment policy. Our marketable securities consist of liquid, investment-grade securities. We do not enter into investments for trading or speculative purposes.

The following table presents the hypothetical fair values of our marketable securities assuming immediate parallel shifts in the yield curve of 50 basis points (BPS), 100 BPS and 150 BPS as of March 31, 2023 (in thousands):


	(150 BPS)		(100 BPS)		(50 BPS)		Fair Value as of March 31, 2023	50 BPS		100 BPS		150 BPS
Marketable securities	$	216,329	$	215,855	$	215,382	$214,908	$	214,436	$	213,963	$	213,489

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of March 31, 2023. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2023, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three months ended March 31, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We, our Chief Executive Officer, our Chief Financial Officer, certain current and former members of our board of directors, and the underwriters that participated in our initial public offering (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, our common stock issued in connection with our IPO. The complaint alleges that our registration statement and prospectus contained untrue statements of material fact and/or omitted material facts about ON24’s growth and customer base. The 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. We believe that the allegations in the consolidated complaint are without merit.

From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. Except as set forth in the prior paragraph, we are not presently a party to any legal proceedings that we believe, if determined adversely to us, would have a material adverse effect on our business, financial condition, operating results, or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this report, including our condensed consolidated financial statements and related notes, as well as in our other filings with the SEC, in evaluating our business and before investing in our common stock. The occurrence of any of the events or developments described below could materially and adversely affect our business, financial condition, results of operations, and growth prospects. In such an event, the market price of our common stock could decline, and our stockholders may lose all or part of their investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

Summary of Risk Factors

Our business is subject to a number of risks and uncertainties, including those risks discussed at-length below. You should read these risks before you invest in our common stock.

•our ability to grow our revenue;

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