Prospectus Summary
PROSPECTUS SUMMARY This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and the related notes included elsewhere in this prospectus before making an investment decision. Unless the context otherwise requires, the terms “ON24,” “we,” “us” and “our” refer to ON24, Inc. together with its consolidated subsidiaries.Our Mission
Our mission is to transform the way businesses drive revenue and customer engagement through data-rich digital experiences.
Overview
We provide a leading, cloud-based digital experience platform that enables businesses to convert customer engagement into revenue 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 business-to-consumer, or B2C, market, our digital experience platform empowers business-to-business, or 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. As a result, marketing at scale has become synonymous with spam, which we define as any unsolicited or automated marketing emails, advertisements, phone calls or text messages, and is often ignored by prospective customers and can even undermine the customer relationship. At the same time, prospective customers prefer to do their own research by accessing digital marketing resources before consulting with a salesperson to make a purchasing decision.
For businesses to succeed, we believe their sales and marketing strategies must evolve from the era of automation to the era of engagement. We are strategically positioned to help businesses and their sales and marketing organizations make this transition. 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, which has been accelerated by the COVID-19 pandemic.
Through our leading digital experience platform, we powered more than 159,000 interactive, live digital experiences from January 1, 2020 through September 30, 2020, engaging an average of 4 million prospective customers and business professionals monthly between January 1, 2020 and September 30, 2020, an increase of 174% year-over-year. Our platform facilitated a monthly average of 12 million prospective customer interactions in the same time period, representing an annual run rate of 2.45 billion engagement minutes for an increase of 167% year-over-year. As our customers create more ON24 content-rich experiences, they gather more data directly from prospective customers, which we refer to as first-person data, to help them create a multiplier effect that strengthens their ability to convert prospective customers and generate revenue.
As of September 30, 2020, we had over 1,900 customers in more than 40 countries, including three of the five largest global technology companies, four of the five largest U.S. banks, three of the five largest global healthcare companies and three of the five largest global industrial and manufacturing companies, in each case measured by 2019 revenue. No single customer contributed more than 5% of our total revenue for the year ended December 31, 2019 or for the nine months ended September 30, 2020. We have a highly engaged and loyal customer base that has allowed us to grow our revenue with them over time and achieve a dollar-based net retention rate, or NRR, of 147% as of September 30, 2020. Our NRR was 107% and 108% as of December 31, 2018 and December 31, 2019, respectively.
Our revenue was $82.6 million and $89.1 million for 2018 and 2019, respectively, and $65.2 million and $103.7 million for the nine months ended September 30, 2019 and 2020, respectively. We had a net loss of $17.6 million and $17.5 million for 2018 and 2019, respectively. For the nine months ended September 30, 2019 and 2020, we had a net loss of $14.1 million and net income of $11.2 million, respectively. Net cash used in operating activities was $8.6 million and $11.4 million for 2018 and 2019, respectively. Net cash used in operating activities was $7.1 million for the nine months ended September 30, 2019 and net cash provided by operating activities was $26.8 million for the nine months ended September 30, 2020.
Industry Trends
B2B sales and marketing has shifted away from traditional approaches, such as “cold-calling,” “snail mail,” industry networking events and in-office visits, to more scalable, digital-based approaches. According to Gartner, by 2025, 80% of B2B sales interactions between suppliers and buyers are expected to occur in digital channels. As they transition to digital-based approaches, businesses are struggling to achieve deep levels of personalized engagement and interactivity. The imperative to optimize digital sales and marketing investments to drive revenue conversion has become more important as businesses accelerate digital transformation initiatives in response to the COVID-19 pandemic. The following key trends are impacting sales and marketing strategies today:
The new norms of digital transformation and targeting self-educating prospective customers have accelerated the need for cloud platforms that deliver personalized and interactive customer engagement at scale to drive revenue.
Limitations of Traditional Approaches to Customer Engagement at Scale
Businesses have struggled to adapt their marketing strategies for the era of digital engagement where interactions with prospective customers happen online. Traditional marketing tactics and general-purpose communication platforms:
In addition, in-person events, such as business conferences, are resource intensive and exist in a discrete moment in time, limiting return on investment.
Our Platform and Key Differentiators
Our leading, cloud-based digital experience platform enables businesses to convert customer engagement into revenue through interactive webinar experiences, virtual event experiences and multimedia content experiences that are backed by analytics and an ecosystem of third-party integrations. We believe the key differentiators of our platform are:
Our Competitive Strengths
We believe that our competitive strengths include:
Our Market Opportunity
Businesses continue to invest significantly in various digital marketing strategies and technologies, which account for almost 80% of marketing budgets according to a Gartner survey. Further, according to that same survey, Chief Marketing Officers, or CMOs, are expected to allocate approximately 26% of their total budget to marketing technologies, and 68% of CMOs expect their investments in marketing technology to increase going forward. According to Grand View Research, the global digital marketing software industry is expected to reach approximately $152 billion in 2027. We estimate that the current total addressable market, or TAM, for our solutions is approximately $42 billion worldwide annually. For more information regarding how we calculate our TAM, see “Business—Our Market Opportunity.”
Our Growth Strategy
We intend to drive the growth of our business and the adoption of our solutions by executing the following strategies:
Risk Factors
Investing in our common stock involves risks, which are discussed more fully under “Risk Factors.” You should carefully consider all the information in this prospectus, including under “Risk Factors,” before making an investment decision. These risks include, but are not limited to, risks relating to:
Implications of Being an Emerging Growth Company
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of relief from certain reporting requirements and other burdens that are otherwise applicable generally to public companies. These provisions include:
In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We intend to avail ourselves of this exemption from new or revised accounting standards, and accordingly, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies or that have opted out of using such extended transition period, which may make comparison of our financial statements with those of other public companies more difficult. We may take advantage of these reporting exemptions until we no longer qualify as an emerging growth company or, with respect to adoption of certain new or revised accounting standards, until we irrevocably elect to opt out of using the extended transition period.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the closing of this offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; and (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We may choose to take advantage of some but not all of these reduced reporting burdens.
Corporate Information
ON24, Inc. was incorporated as a Delaware corporation on January 8, 1998 under the name “NewsDirect, Inc.” Our principal executive offices are located at 50 Beale Street, 8th Floor, San Francisco, California 94105, and our telephone number is (415) 369-8000. Our website address is www.on24.com. Information contained on, or that can be accessed through, our website is not part of and is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus.
We own various U.S. federal trademarks and unregistered trademarks, including our company name, logo and solution names and other trade or service marks. All other trademarks or trade names referred to in this prospectus are the property of their respective owners. Solely for convenience, the trademarks and trade names in this prospectus are referred to without the symbols ® and ™, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
The Offering
The total number of shares of our common stock that will be outstanding after this offering includes 10,742,141 shares of common stock and 27,227,466 shares of preferred stock (which will convert into shares of our common stock on a one-for-one basis) outstanding as of September 30, 2020 and excludes:
Our 2021 Plan and ESPP provide for annual automatic increases in the number of shares reserved thereunder. See the section titled “Executive Compensation—Equity Incentive Plans” for additional information.
Unless otherwise indicated, this prospectus assumes or gives effect to the following:
Summary Consolidated Financial and Other Data
The following tables present our summary consolidated financial and other data as of and for the periods indicated. We have derived the summary consolidated statements of operations data for the years ended December 31, 2018 and 2019 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary consolidated statements of operations data for the nine months ended September 30, 2019 and 2020 and the summary consolidated balance sheet data as of September 30, 2020 from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on a basis consistent with our audited consolidated financial statements included elsewhere in this prospectus and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to fairly state our financial position as of September 30, 2020 and results of operations for the nine months ended September 30, 2019 and 2020. Our historical results are not necessarily indicative of the results that should be expected in any future period, and results for any interim period are not necessarily indicative of results for the full year or any other period.
You should read this data together with our audited and unaudited consolidated financial statements and related notes included elsewhere in this prospectus, as well as the information under the captions “Selected Consolidated Financial and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.
Key Business Metrics
We review a number of operating and financial metrics, including our number of customers, our ARR, our NRR and our number of customers contributing at least $100,000 in ARR, or $100k Customers, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.