Good afternoon and welcome to ON24's Third Quarter 2021 Earnings Conference Call. Please note that the live and interactive webcast of today's call may be accessed via the Investor Relations section of the company's website at www.investors.on24.com. Please note that this call is being recorded. At this time I would like to turn the call over to Nate Pollack, Vice President of Investor Relations. Please go ahead.

Thank you. Hello and good afternoon, everyone. Welcome to ON24's Third Quarter 2021 Earnings Conference Call. On the call with me today are Sharat Sharan, Co-Founder and CEO of ON24; and Steve Vattuone, Chief Financial Officer of ON24. I would like to remind everyone that some information provided during this call may include forward-looking statements including without limitation statements about ON24's expected financial and operating results, the size of its market opportunity, the success of new products and capabilities, the impact of COVID-19 and vaccines in the way people do business, business trends, global economic trends, the expected timing and benefit, if any such trends and other statements regarding our ability to achieve our business strategies grow through other future events or conditions. These forward-looking statements may contain such words as project, outlook, future, will, anticipate, believes, intends are referred to as guidance. These forward-looking statements reflect beliefs, estimates, and predictions as of today, and ON24 expressively assumes no obligation to update any such forward-looking statements. These forward-looking statements are only predictions and are subject to substantial risks. Factors that could cause or contribute to such differences include, but are not limited to, risks associated with our ability to sustain our recent revenue growth rate, our ability to attract new customers and expand sales to existing customers, fluctuation in our performance, our history of net losses and expected increases in our expenses, competition in our markets and any decline in demand for our solutions, our ability to expand our sales and marketing capabilities and otherwise manage our growth, the impact of the COVID-19 pandemic, disruptions or other issues with our technology or third-party services, compliance with data privacy and other risks identified in the company's SEC filings. For a detailed description of risks and uncertainties, which could impact these forward-looking statements, you should review ON24's periodic SEC filings including the risks identified in today's financial press release. I will now turn the call over to Sharat.

Thank you and welcome everyone to ON24's Third Quarter 2021 Financial Results Conference Call. Thank you for joining us. On today's call, I would like to discuss three key themes that demonstrate the underlying momentum within our business and the large market opportunity that lies ahead for us. First, we believe our data-rich personalized digital experiences are becoming more differentiated than ever as sales and marketing teams seek to garner valuable first-person intent data. Second, we are seeing increasing momentum within verticals, such as life sciences and manufacturing that are accelerating their digitization efforts, which we believe validates our large market opportunity and increased market awareness. Third, we are driving a robust product innovation cadence to deliver on our platform vision. Before I dive more fully into these themes, let me first review our results from the quarter. For the third quarter, we reported total revenue of $49.4 million reflecting 16% year-over-year growth and above the high end of our guidance range. Subscription and other platform revenue increased 27% year-over-year. Net-new ARR was $3.1 million. While an improvement compared to $1.1 million in the prior quarter, we expect to see further progress in the quarters ahead. Our third quarter ending ARR was $167.2 million, up 20% year-over-year. We posted a non-GAAP operating loss of $1.4 million for the quarter. The third quarter of 2021 marked our lapping the second COVID-influenced quarter. Overall, the dollar value of churn declined quarter-over-quarter and churn rate was in line with our expectations. As we anticipated in Q2, the percentage of first-time renewals in the renewal cohort decreased meaningfully quarter-over-quarter, although we continued to face headwinds from those renewals. We also saw some customers rationalize mid-term additions from last year. Our core customer base of enterprise organizations continued to solidify in the third quarter. The number of customers contributing ARR of $100,000 or more was up 32% year-over-year. Our average ARR per customer also increased both quarter-over-quarter and year-over-year. Within our Enterprise segment, average ARR per customer now stands approximately 60% higher than it was at the end of 2019. In addition, customers are continuing to make larger commitments with us and on our platform with sequential growth in both the percentage of ARR in multi-year contracts and number of customers that have purchased two or more products. More recently, we have been aligning our enterprise go-to-market strategy to focus on selling integrated platform deals. We believe our platform is well-positioned to become a core element of customers’ sales and marketing strategy, as the data we enable them to collect is providing valuable insights across their business and increasingly important to their entire revenue growth engine. As a result, these deals are highly strategic and can involve multiple stakeholders across an organization, which may result in longer sales cycles. We saw that dynamic play out with some deals in the third quarter. Longer term, we believe this is a positive, as we become a strategic and critical investment in customers’ sales and martech infrastructure, creating opportunity over time for larger deal sizes and improved retention. Now, let me briefly highlight some of our notable six-figure new wins within the third quarter. In the US, a leading robotic process automation software company purchased ON24 Elite, Breakouts, and Engagement Hub to help accelerate their sales pipeline with digital experiences, drive greater engagement with their customer-facing content, and automate manual tasks using our tight integrations with their martech infrastructure. Another key win was with one of the largest global aerospace manufacturers that is accelerating its investment in digital engagement, moving from using a collaboration tool to Elite to drive demand-gen and product awareness of its specialized products and services. On the international front, a multi-national industrial company headquartered in the Nordics that is accelerating its digitization efforts as their technical buyer’s journey has increasingly shifted online. This customer will be standardizing on the ON24 platform to drive lead-gen and educate partners on their complex climate control solutions. A European-based medical company specializing in eyecare products is implementing ON24 Elite worldwide to drive thought leadership, product awareness, and continuing education for healthcare professionals. Our land-and-expand sales model continues to be a key pillar behind our growth and demonstrates how we’ve become a strategic partner for our customers as industries fundamentally change the way they engage in order to drive measurable business growth. In many cases, we start small and then over time expand to additional use cases, departments, and geographies within an organization. I’ll share just a few examples of the many customer expansions within the quarter. First, a US-based diversified manufacturing company onboarded with ON24 Elite just over a year ago and has already delivered thousands of digital experiences globally for partner and channel enablement on its vast product portfolio. In the quarter, this customer made a six-figure expansion, purchasing both Engagement Hub and Target, to provide scalable, personalized content journeys for their thousands of channel partners. In just over a year’s time, this customer has expanded by approximately seven times since their initial purchase. Next, one of the world’s largest pharmaceutical companies who already uses ON24 to educate and build product awareness with healthcare professionals running over a thousand digital experiences per year will now expand their use of Engagement Hub and Target to showcase personalized content in a central hub that can be seamlessly localized to individual markets. Lastly, a global industrial company that has been at the forefront of digital transformation purchased Engagement Hub for the merger, partner enablement as well as nurturing its existing customer base. We displaced another vendor based on our real-time analytics, ease-of-use and customization capabilities. This customer is now over six figures of annual spend with ON24. Now, turning to the first theme. Global data privacy regulations and major Internet platforms are increasingly restricting the collection and use of customer data. As a result, marketers are looking for first-party consented data. They're turning to interactive and personalized digital experiences to capture this data and reach prospects, build trust and cultivate closer relationships. When looking across sources of first-party data, we believe ON24 is uniquely positioned to provide the most insightful and actionable first-party data. The comprehensive behavior and intent data that we collect within an ON24 digital experience allows marketers to prioritize more impactful leads by understanding buying intent signals mapped to an actual individual's behavior rather than a generalized persona or a job title. The secret sauce of the ON24 platform is a proven ability to engage audiences with amazing multidimensional digital experiences, live or on-demand, while simultaneously capturing first-person engagement data and intent signals. Data is gathered from the questions asked, polls answered, meetings booked, documents downloaded and more. Engagement with a single ON24 experience generally lasts an average of 15 minutes and typically is to audiences with more than 200 attendees. We use our artificial intelligence and machine learning engine to determine an individual's digital body language by collecting up to 50 data points for each user into a prospect engagement profile and classifying that information into two main categories; one, engagement data, which is used for behavioral profiling and scoring; and two, signals, which depending on the use case are either buying signals or call-to-action signals. The first-party engagement data creates a flywheel effect. With our AI-driven recommendation engine, we surface personalized and curated content recommendations in a Netflix-like experience. Buyers can control their own journey, self-educating at their own pace while also being nurtured for further engagement. We also make those rich insights actionable to drive business results. Data is integrated and orchestrated in near real-time across a customer's martech and sales stack, which could be a potential game-changer for sales teams to take more data-driven actions with customers. In this age of digital engagement, one of the biggest challenges that organizations face is confidence in delivering successful digital experiences. The practice means much more than just streaming presentations. It's enabling a great customer experience if attendees can engage as if they were in a room together and organizations can drive business insights from those experiences. Without a compelling experience to start, attendees won't stick around, and B2B buyers now have the same expectation as what they experience in their consumer lives. At ON24, brief digital experiences is our only focus, and our platform is purpose-built for sales and marketing teams to deliver tangible ROI for their organization. Our vision is to make every digital experience as engaging as the last with deep insights to move buyers, customers and partners to the next experience. From day one, we bring enterprise-scaled reliability, privacy and compliance and empower our customers with tools, playbooks, benchmarks and global support resources to harness the full power of our platform to be successful. Shifting gears to the second theme. In the past 1.5 years, digital engagement has emerged at the forefront of marketing and customer experience. Industries such as manufacturing and life sciences have accelerated their digital engagement efforts and seen tremendous success with use cases ranging from educating health care professionals to demos of complex machinery for lead gen. Even as physical events become possible again, these organizations are realizing that digital is not only the new reality, but a better approach to scaling engagement, generating higher-quality leads and driving more pipeline and revenue than physical events ever did, and at a fraction of the cost. In a recent survey from the Global Business Travel Association, more than 40% of travel managers who responded noted that their company has reevaluated the ROI of business travel, and 59% cited the increased use of virtual meetings. As you heard earlier from some of the new logos landed in Q3, we are seeing accelerating momentum with manufacturing and life sciences organizations, which now represent our fastest-growing verticals. We believe the adoption of our platform and emerging partner enablement and training use cases within these verticals demonstrate our large Total Addressable Market and how we are still in this market opportunity. Let me share two customer examples. Owens Corning, an international building materials leader, is an example of one of our many manufacturing customers. Contractors depend on Owens Corning for learning, education, and training to stay ahead of changing technology and best practices. Pre-COVID-19, they historically relied on bringing contractors together across the country for in-person events. Partnering with ON24, Owens Corning has seen amazing success using Elite, Engagement Hub, and Intelligence to implement a scalable digital approach to reach and engage global contractors, so they can self-educate at their own pace and get the resources they need anytime, anywhere. Manufacturing leaders such as Owens Corning are shifting to digital approaches that are strengthening partner enablement and education across the vast network of stakeholders. One of our life science customers, AbbVie, is a global biopharmaceutical company that treats 57 million people annually with its products across more than 16 medical conditions. The pharmaceutical industry had a long-standing tradition of in-person conferences to facilitate peer-to-peer research and educate health care professionals on their products. With COVID-19, AbbVie transformed from in-person conferences and has delivered more than 1,000 events with the ON24 platform and engaged more than 100,000 attendees across 60 countries. Now let's shift to the topic of our robust product innovation cadence and platform vision. Less than five years ago, ON24 was essentially a one-product company with our flagship product Elite. We listened to our customers' key pain points, innovated on their behalf and now bring to market a multiproduct system of engagement that combines digital experiences, engagement data, and personalization. The percentage contribution from non-Elite ARR has nearly doubled since the end of 2019 from low teens to nearly a quarter, and more than 30% of our customers have purchased two or more products. We were one of the first to market in the webinar and virtual event space more than a decade ago and bring a unique heritage and perspective. Our flagship live webinar experience product, ON24 Elite, was launched about eight years ago, which started our platform journey. Since then, Elite has gone through a continuous evolution, redefining the marketing webinar category, providing new differentiated ways to connect with audiences and becoming a powerful engine for driving revenue for many of the world's largest organizations. I'm thrilled for us to launch the next generation of Elite which we will be rolling out over the next few releases. It will have a new user experience, engagement features that mirror the social interactions we have in our personal lives and a re-architected presenter experience that resembles the power of a professional video production studio. Go Live, our newest experience addition to the platform is a self-service virtual event solution to deliver live-streaming video events faster and easier. It brings a participation-first approach to events and is optimized for two-way conversation to come to the forefront of the experience, so that content is being created, delivered, consumed, and discussed all at the same time. With Go Live, 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 prebuilt templates and an easy-to-use and engaging interface. It is slated to GA at the end of Q4 and we expect it will open up our Total Addressable Market over time, particularly in the mid-market segment as it addresses the pressing need for sales and marketing teams to quickly stand up video-centric events to drive engagement with prospects, customers, and internal audiences. We believe Go Live complements both our webinar solution, which takes a more content-first approach, and a Virtual Conference product geared towards large-scale highly produced events. Today's B2B buyer expects great virtual events, but they also want to engage with brands outside of a predetermined point in time. As such, we are bringing to market a new approach with Engagement Hub live using content and event marketing. Elite can now be integrated into Engagement Hub, so audiences can now go to one smart multimedia content hub and engage with all content whether happening live or on demand. We envision Engagement Hub as a B2B version of Netflix, a highly personalized single destination for audiences to engage with, with all content from any device that can be accessed any time from a single link. Our platform value to create all digital experiences with ON24 is the data that it generates and the flywheel that it creates. Each ON24 experience is purpose-built to capture every audience interaction and behavior in our prospect engagement profile, find additional insights that increases buying interest and intent and surface those signals for action. Our AI personalization engine uses the attendee's history and specific business interests from engagement with experiences across our platform to deliver a greater personalized experience which we believe drives better prospect engagement and conversion. Now, with the addition of Go Live to our platform, we will have six different experienced products, creating a powerful network effect and making our prospect engagement profile and personalization capabilities even stronger. We are building for the future of ON24 and have a robust product road map on the horizon underpinned by enterprise scale, privacy, compliance, and reliability. Our innovation is centered on driving maximum engagement within every experience enabling diverse digital experiences from large annual conferences to regional networking events to multimedia content hubs and targeted web pages and synthesizing all of that engagement across every experience into insights that marketing and sales teams can use to drive results. With that, I'll hand it over to our CFO, Steve Vattuone to walk you through our Q3 results in more detail.

Thank you, Sharat, and good afternoon everyone. I'm going to start the discussion of our results with revenue. Total revenue for the third quarter was $49.4 million, an increase of 16% year-over-year. Subscription and other platform revenue was $43.6 million, an increase of 27% year-over-year. As a reminder, this includes overages that have been trending around 3% of our revenue, but can fluctuate depending on customer usage of our platform and seasonality. Professional Services revenue was $5.8 million, a decrease of 30% year-over-year, representing 12% of total revenue. This decrease was in line with our expectations that we provided last quarter. As a reminder, Professional Services revenue in Q3 2020 represented 19% of total revenue due to higher-than-typical demand for implementation and deployment services we experienced during the COVID pandemic. We continue to see more of our clients electing to be self-service, which speaks to our platform's ease-of-use. Moving on to ARR. ARR represents the annualized value of all subscription contracts at the end of the period and excludes Professional Services and overages. Net new ARR was $3.1 million, an improvement from $1.1 million in Q2. Total ARR at the end of Q3 2021 was $167.2 million, an increase of 20% year-over-year. In Q3, we lapped another COVID-influenced quarter and first-time renewals from customers who purchased in the year-ago period represented slightly more than half of the total renewal cohort, a meaningful decline compared to Q2. We faced headwinds with respect to those first-time renewals, particularly with organizations that were not our ideal customer profile and had one-time needs. We also saw some rationalization with mid-term additions from the year-ago period. Overall, the dollar value of churn declined compared to Q2 and the churn rate was in-line with our forecast. Our core customer base of enterprise organizations strengthened in the third quarter. We added 14 net new $100,000-plus ARR customers, ending Q3 with 59 customers contributing ARR of $100,000 or more, an increase of 32% from the prior year. These $100,000-plus ARR customers comprise 67% of our ending ARR, which is the highest to date. We view the number of $100,000-plus ARR customers as a key indicator of customer quality, success of our Land and Expand strategy, and validation that we are increasingly becoming a strategic partner in customers’ tech stacks. Both the percentage of ARR in multi-year contracts and the number of customers that have purchased two or more products increased sequentially and reached the highest level to date. Total customer count declined slightly quarter-over-quarter to 2,054, with SMB churn representing the largest contributor for the decrease. Given the learnings from the past couple of quarters, we are laser-focused on acquiring enterprise and mid-market customers that meet our ideal customer profile and with whom we can develop a lasting strategic relationship. Before turning to expense items and profitability, I would like to point out that I will be discussing non-GAAP results going forward. Our non-GAAP results exclude stock-based compensation as well as certain other items. Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP results, can be found within our earnings release. Gross profit in the quarter was $38.0 million, representing a gross margin of 77%, and a decrease of 300 basis points year-over-year. We continue to invest in our cloud infrastructure capabilities and growing our customer success teams to enable sustained growth. Turning to operating expenses. Sales and marketing expense in Q3 was $24.2 million compared to $15.6 million in Q3 last year. This represents 49% of total revenue, compared to 37% in the same period last year. As you heard from Sharat, we are in the early days of a large market opportunity and we will continue to invest in marketing to drive awareness and continue to add sales capacity across regions and segments. R&D expense in Q3 was $7.9 million compared to $4.6 million in Q3 last year. This represents 16% of total revenue, compared to 11% in the same period last year. We are driving a robust product innovation cadence and will continue to invest in R&D to build for the future. G&A expense was $7.3 million for the quarter, compared to $6.4 million in the Q3 last year. This represents 15% of total revenue, compared to 15% in the same period last year. Our G&A expenses have increased due to the costs associated with being a publicly traded company. Over time, we expect G&A expense to scale and decrease as a percentage of our revenue. Operating loss for Q3 was $1.4 million, or a negative 3% operating margin, compared to operating income of $7.5 million and an operating margin of 18% during the same period last year. Net loss in Q3 was $1.6 million or $0.03 per share based on approximately 47 million basic and diluted shares outstanding. This compares to net income of $7.2 million or $0.42 per diluted share in Q3 last year, using approximately 17 million diluted shares outstanding. Turning to the balance sheet and cash flow. We ended the quarter with $399.7 million in cash, cash equivalents and marketable securities. Cash used in operations in the third quarter was $0.9 million compared to cash flow from operations of $11.5 million in Q3 last year. Free cash flow was negative $1.6 million in Q3 compared to positive $11.1 million in Q3 last year. Free cash flow margin was negative 3% in the third quarter compared to positive 26% in Q3 last year. Now turning to guidance. I would like to first point out that we face a challenging comp for the upcoming fourth quarter. In the year-ago period, revenue excluding legacy increased 137% year-over-year, and Professional Services represented an outsized 22% of the total revenue mix. We expect to see improvement in net-new ARR compared to Q3, while we still lap another COVID-influenced quarter. For Q4, the percentage of first-time renewals drops to approximately 30% of the total renewal cohort. As Sharat mentioned, we have become increasingly focused on selling an integrated platform with enterprise accounts. These are strategic deals which can be more complex and lead to longer sales cycles. While it's still early to draw trends, we are being prudent in factoring this dynamic into our Q4 forecast and guidance. As such, we expect total revenue in the range of $51 million to $52 million. We anticipate Professional Services revenue to contribute approximately 13% to 14% of total revenue for the fourth quarter of 2021. We expect a non-GAAP operating loss in the range of $4.7 million to $3.7 million and a non-GAAP net loss per share of $0.10 to $0.08 per share based on 48.2 million basic and diluted shares outstanding. And for the full year 2021, we are updating our guidance range for revenue to $202.6 million to $203.6 million, which represents year-over-year growth of approximately 29% to 30%. We expect Professional Services will represent approximately 13% to 14% of total revenue excluding our legacy business for the full year 2021 compared to 22% in fiscal 2020 and 18% in 2019. We expect a non-GAAP operating loss in the range of $0.9 million to non-GAAP operating income of $0.1 million and a non-GAAP net loss per share of $0.04 per share to $0.02 per share using 43.6 million basic and diluted shares outstanding. Looking out to fiscal 2022, I would like to make a few initial observations. Q1 will mark the last COVID-influenced renewal quarter. In the first half of fiscal 2022, we expect revenue growth to be muted given the large year-over-year comparisons and outsized growth we experienced last year. However, in the second half of the year, with the tough comparisons largely in the rearview mirror, we expect revenue growth to inflect. Overall, we expect a return to historical seasonality patterns with Q2 and Q4 representing our seasonally strong quarters. Lastly, our current view is that the mix of Professional Services revenue will be in the low teens as a percentage of total revenue for fiscal 2022. We plan to offer detailed guidance on our outlook for fiscal 2022 on our Q4 earnings call. With that, Sharat and I will open the call for questions.

We'll take our first question from Rob Oliver of Baird.

This is Srinek going on for Rob. So one quick question for Sharat and then one for Steve. Sharat, you mentioned the focus on selling an integrated platform and customer events, the non-Elite ARR nearly doubling from 2019 earlier in the call like some longer-field cycle. So on the new products, right, that you announced in particular the Go Live for mid-market, could you provide a sense of the specific use cases with the templates and then the events and in terms of the fit targeting the mid-market? Can you comment on the up-sell, cross-sell opportunity there as well as relative positioning and pricing, vis-à-vis the legacy offering, which is the Virtual Conference geared towards the large-scale events?

The question is about how Go Live fits into our product portfolio and its relationship with our current Virtual Conference product. We've evaluated our experience platform, which includes various offerings like a webinar platform, Engagement Hub, Breakouts, and ON24 Target, our personalized landing pages. Traditionally, the Virtual Conference product has catered to more complex, globally managed virtual conferences. However, over the past year, we identified a gap in our lineup for a product that is extremely self-service and focuses on video-centric virtual events with strong audience participation and interactivity. We believe this was a significant addition we needed. Our strategy with customers emphasizes that we serve as a one-stop shop for these engagement products, and we are enhancing our market presence. This offering will help us reach a wider Total Addressable Market in the mid-market sector initially, and as we grow, it will create substantial opportunities for bundling products for up-sells and cross-sells in larger enterprise deals globally. While the Virtual Conference product remains focused on managed, complex conferences worldwide, Go Live will provide a straightforward, self-service solution for audience-centric video events. Importantly, all data from these experience products will feed into our customers' data framework and integrate with their sales and marketing systems to improve business outcomes.

Got it, got it. Thanks a lot. That's really what I need. And one question for Steve, so you mentioned the headwinds to the ARR, adds to the decline. You added 3.9 in Q3 and should be more meaningful in Q4. So if you can provide any update or color on that front and also help us think through the NRR or normalization trends going forward looking out into 2022?

I think there are two questions there. I'll start with the first about the ARR growth in Q4. We do expect some improvement in new net ARR compared to Q3, even though we are still dealing with another quarter affected by COVID. For Q4, the percentage of first-time renewals is expected to drop to around 30% of the total renewal cohort, but this will still be our second-largest renewal cohort ever. We're anticipating a first-time renewal rate in Q4 similar to what we observed in Q2 and Q3, so we are being cautious with our outlook. Looking ahead, we believe Q1 2022 will be the last quarter influenced by COVID, and the challenges from first-time renewals will lessen after that quarter. Regarding your question on NRR, we plan to provide that information during our Q4 earnings call, which isn’t something we typically release quarterly. However, the NRR in Q3 was consistent with what we discussed in the Q2 earnings call, rounding in the low-100s. There are many factors at play, and we are being conservative with our forecast and outlook in that area. We expect the NRR to hover around or slightly dip below 100 before starting to trend back up in 2022.

Got it. Thank you.

Thank you. We'll take our next question from Steve Enders of KeyBanc Capital Markets.

Hi. Great. Thanks for taking the question here. I just want to get a better sense for, I guess, the kind of 4Q guide and how to think about that into the first part of next year. It just looks like it dipped down maybe a bit versus what we were previously thinking in 4Q. I just want to get a better sense for kind of what's driving that and how much the little longer deal cycles that I think you called out are impacting some of the pieces here.

Sure. I'll go ahead and take that. First of all, let me talk a little bit about the annual guide and then I'll jump into Q4. So on the annual guide, we are tightening the range on that from what we gave previously, and we are actually increasing the midpoint of that a little bit. And we did bring up the low end of the guide, and we're doing that based on increased visibility now that we're further along in the year and we're seeing how things are playing out. And I will also mention that we are increasing the bottom line and will guide a little bit as well. Now in terms of the Q4 revenue specifically, there are some puts and takes there. As we mentioned, we did make progress in Q3 with $3.1 million in net ARR adds, and churn was in line with our expectations. Now as Sharat mentioned, we did see some longer sales cycles for the larger, more complex deals in Q3. Now it's a little too early to draw trends, but we are being prudent in factoring this dynamic into our Q4 forecast and guidance. Now long term, we view this as a positive because we are becoming more strategic to our customers. And this ultimately provides an opportunity for larger deals and improved retention. And I will just reiterate again that for Q4, the percentage of first-time renewals does drop to approximately 30% of our renewal cohort, which is down meaningfully from the current quarter.

Let me expand on what Steve mentioned and give you some broader insights. We have a significant market opportunity with only a small share captured so far. The momentum we are experiencing in manufacturing and life sciences sectors reassures us that we are just beginning to explore this potential. Currently, we count 14 of the top 20 pharmaceutical companies among our customers, and we are enhancing our customer retention efforts. Our annual recurring revenue for enterprise customers, as noted earlier, has increased by about 60% compared to pre-COVID levels, indicating strong growth. Additionally, we are launching innovative platform developments that we believe will foster the next phase of sustained growth. In the short term, we are encountering challenges with first-time renewals and significant year-over-year comparisons, but we anticipate these challenges will lessen in the latter half of next year.

Okay. No, that's helpful context there. I guess, just on the go-to-market, it seems like there is a bigger point of focus on some of those verticals you called out there. But I guess how are you kind of augmenting what you've been doing historically to better go after some of these new opportunities you're seeing?

Yes. I think our go-to-market strategy is evolving in two main ways. First, we have our enterprise business, which is our primary focus with operations in North America and global markets, and I will address international aspects separately. This segment involves a stronger emphasis on account-based marketing and execution. Then there’s our mid-market and commercial business, which targets a more general audience where Go Live also plays a role. We believe Go Live will significantly expand our Total Addressable Market in this sector as well. Additionally, a key part of our strategy for growth is our international focus. It's worth noting that international accounts for nearly 25% of our revenue, but bookings exceed 30%. Our investments in EMEA and JPAC are proving effective, and we plan to allocate more resources to the Japan market. This is crucial because, in our enterprise sector, once we secure an account, we can expand our presence on a global scale, as these global clients have specific needs related to privacy, security, compliance, and data that we can address. This outlines our approach to the go-to-market strategy.

Okay. Great, that’s helpful. Appreciate you taking the questions there.

Thank you. We'll take our next question from Brent Bracelin of Piper Sandler.

Hi, guys. This is actually Hannah Rudoff, on for Brent today. Just the first one, I guess this is the first quarter that we saw new adds down sequentially. It sounds like SMB churn was a big component of that. But I guess, how should we think about both total customers and sequential adds going forward?

Yes. Let me go ahead and take that question. So in terms of Q3, given our learnings from the last couple of quarters, we are really most focused on customer quality and adding enterprise and mid-market customers that really meet our ideal customer profile. I can tell you that SMB was the largest contributor to the customer count decrease in Q3. And I do want to point out that our $100,000-plus ARR customers did increase 32% year-over-year and increased sequentially as well. Now these $100,000-plus ARR customers represent 67% of our total ARR now, which is trending up from what it was in the prior quarter. Now looking ahead, we do expect that we would return to net logo growth in Q4.

Great. And then second question here a hybrid mode in ON24 webcast Elite like it could be a really good driver of retention and growth going forward. I guess, how has initial feedback been for that? And what are your expectations for that product or that feature?

Yes, based on what our customers are telling us, the future is centered around hybrid engagement. The initial response to the hybrid capability in our product line has been very strong. Our customers indicate that physical events do not provide valuable data. As a result, even if they hold physical events, they may conduct fewer of them due to higher costs and lack of data. However, there is still a desire to return to these events. They will continue to host hybrid events because they can obtain data and personalization all within a single engagement system. We believe this is the future based on customer feedback, and we are excited about it as it will enhance our implementation and retention with our customers.

Great. Thank you.

Thank you. We'll take our next question from Scott Berg of Needham & Company.

Hi, guys. This is John Godin on for Scott. Appreciate you taking my questions. Just curious if you can provide an update on your progress with your partner network sales and marketing agencies. Are you seeing any additional leverage here? And could this be kind of an avenue to help maybe pull in some of those longer sales cycles over the longer term?

Yes, this remains a key strategic priority for us as we work to increase leverage in our model. Currently, we're at mid-single digits, and my aim is to raise this to double digits by next year. We have identified three focus areas, and we've expanded our efforts significantly with a strong team in place. The first area involves key technology partners and marketing automation and CRM systems, which includes larger companies like Adobe and Veeva that we're partnering with for integration and go-to-market strategies. The second area involves system integrators, both national and regional, where we've recently signed two regional integrators who work on integration for customers. Lastly, we are intensifying our efforts with sales and marketing agencies. We're targeting these three segments, and while it's not a fixed target, my goal is to reach double digits by the end of next year. This initiative is one of my top five priorities.

Great. Okay. And then next, I mean, you've been investing a lot higher in sales across both enterprise and the mid-market. Just curious how you're seeing current hiring patterns trending if you're seeing any potential negative impacts on the tighter labor environment or hiring trends are maybe robust? Thank you.

So, on the sales side, we started ramping sales hiring in the second half of last year. And just for your perspective, some of those early-stage reps are just beginning to get ramped up, and they are starting to show some impact. Our capacity right now stands about 50% higher compared to what it was in Q3 2020. So, some of that was really catch-up because we were really behind last year. But now that we are here, we are continuing to add capacity, but we are being a lot more selective about it, and with our additions, and more focused really on driving enhanced sales productivity. So that's really what our focus is a lot more driving. We will continue to hire not at the way that we were hiring before, but again, a lot more focus on enhancing productivity.

Great. Thank you, guys.

Thank you. We'll take our next question from Bhavan Suri of William Blair.

Hey, guys. Thanks for taking my question. It was a nice job in the quarter. I guess, especially in that $100,000 customer count, I think can we focus on that? I understand that's so much of the revenue now and sort of growing sequentially again. I think that's helpful. I guess, I want to ask a high-level question. I know we're getting something competitive. But as customers become more deliberate in their approach to digital engagement, right everyone is beginning to understand this is really important, I guess, are you seeing more multiproduct lands? I suspect you are, but I would love to understand how – some color on sort of are customers asking initially for multiproduct lands? And so what does that do to the sales cycle? Does that lengthen sales cycle slightly, or – deliberation speeding up sales cycles? Help me think through how that actually plays out in the field.

I think you asked two questions about multiproduct lands and the sales cycle. Generally, customers are being very deliberate, but our sales cycles have been fairly short, typically ranging from three to six months, longer for enterprise customers. With our emphasis on selling multiple products as well as the churn profile we've seen in previous quarters, there is an increasing focus on selling multiple products. Data privacy and compliance requirements are also becoming more significant for customers. Despite being in Q3, which is usually a soft quarter, we are still performing well. Our strategy of promoting multiple products is crucial because we believe it will ultimately help us increase deal sizes and improve retention, which should have a positive impact for us in the long run.

Yes. That's super helpful, Sharat. I appreciate that. Let me just ask one last one here, just about the customer focus shifting towards hybrid events. And I think someone has asked a question about that before. But I guess how does that change the competitive landscape? Are you going to start competing more with vendors that have kind of the traditional routes in physical events? How should we think about the competitive landscape and how that changes from sort of the webinar-only guys, who can only do basic webinars, which you can easily compete against versus the guys that may have more traditional routes on the physical side? Help us think through that. Thank you.

Yes. First of all, I want to emphasize that this is a large market with room for many companies to succeed, despite increasing competition. Let me explain who we are; we are a sales and marketing engagement platform that leverages engagement data, focuses on personalized approaches driven by annual recurring revenue, and integrates deeply to facilitate revenue growth. We began our journey with webinars, but with the introduction of Go Live, we will have six interconnected experiences. All of this data is processed through ON24 Intelligence, utilizing AI, and integrated into the sales and marketing ecosystem. Currently, we don’t see any other sales and marketing engagement platform doing what we do. In this business, spending more time with the customer translates into a greater competitive advantage due to the wealth of data you gather. We observe the market becoming divided; on one side, there are collaboration tools like Zoom aimed at IT buyers and focused on video collaboration, where users first engage digitally and then turn to us for sales and marketing solutions. On the other side, there are competitors in the virtual event space, including some companies that traditionally focus on physical events but are now offering virtual solutions. These companies generally target the commercial and SMB markets; however, they mostly have point solutions that focus on virtual events. Our emphasis remains on being a comprehensive sales and marketing platform catered to enterprises globally to drive revenue growth.

Got you.

Does that help?

No, I appreciate the color. Appreciate taking the time. Thanks for taking my questions guys.

Thank you. We'll take our next question from Drew Glaeser with JPMorgan.

Hi, this is Drew. I joined late, so I apologize if this was already discussed. Could you share insights on the productivity of your new representatives and the progress of your sales and marketing hiring?

Yes, I did address that, but let me clarify. We began our ramp in the second half of last year, and some of our representatives are now fully ramped up and starting to make an impact. Our current capacity is approximately 50% higher compared to the end of Q3. Some of this increase was to catch up since we were previously behind. Now that we have these representatives ramped up, we are being more selective with our new hires and are focusing on enhancing productivity. There is significantly more emphasis on productivity, while we continue to add capacity in a much more selective way.

Got it. Thank you.

Thank you. We'll take our next question from Daniel Reagan of Canaccord Genuity.

Excellent. Thank you for squeezing me in. So Sharat, I just wanted to circle back to the experience event where you had a few good releases like hybrid mode and Go Live. I'm wondering about the integration of these solutions into your sales motion, the initial uptake in demand from customers following these releases, and then maybe how you're thinking internally about the contribution to revenue from these products over time?

Yes. Let me address that question. We received great feedback from the event where we showcased the next generation of Elite, including the introduction of Go Live and enhancements in Engagement Hub and our data capabilities. We also discussed our improvements to make the product more hybrid-compatible. This event was focused on our customers, and we've received tremendous responses from them. We are still in the early stages with Go Live, and more features will be introduced in future releases. Two things will happen: there will be core webinar releases, and customers will begin receiving these updates as they are rolled out. This will allow us to concentrate more on the redemption framework. Our customers have been asking for hybrid capabilities for quite some time, and I believe this will continue to facilitate the adoption and retention of our product. The Go Live product we are marketing is expected to expand our Total Addressable Market in the commercial sector, which is very exciting. Regarding revenue, it's too early to provide specifics, but as we engage in enterprise deals, you can anticipate that we'll bundle more products for the marketplace. Therefore, we will see upsell opportunities and further expansion through bundling as we progress.

Got it. That's helpful. And then Steve, at the time of the IPO, the firm had pointed out a roughly 40-day sales cycle. We've talked about this a bit on the call already. I'm wondering how much has the sales cycle gone up. And is it directly related to a more keen focus on landing enterprise accounts, or is it that you're taking longer to land similar-sized accounts?

In terms of the sales cycle, as we mentioned, it generally ranges from three to six months. I won't provide a specific average, but it typically falls within that timeframe, subject to various factors. We have noted longer sales cycles for some of the more complex deals, particularly as we shift toward platform sales. We are also increasing the number of customers utilizing multiple products in their portfolio, which has resulted in longer sales cycles. While it's too early to identify a definitive trend, we are being cautious in our guidance and considering slightly longer sales cycles as we provide forecasts.

Yes. Let me just add to what Steve just said. I think as you can imagine in the COVID times, the sales cycles are a lot shorter. Now generally, our sales cycles are still three to six months, a little longer on the enterprise compared to the commercial as you would expect. But more and more Daniel, our focus has become about selling multiple products in the platform and also as we have seen the churn profile in the previous quarters of the cohorts as we've talked about and increasingly a lot more focus on selling multiple products. Also, data privacy and those kinds of compliance requirements are becoming important for customers. So, we are still for enterprise, we still do quite well. And you saw this a little in Q3 which is a seasonally soft quarter. But I think our cadence about going with multiple products is important because in the long-term, we believe that is really going to help us increase our deal size and increase the retention. So we believe that is going to be a net positive for us.

Excellent. Make sense. Thank you, guys.

Thank you. At this time, we have no further questions in queue. I would like to turn the call back to Sharat for any additional or closing remarks.

Right. As you heard today, we made progress in Q3 and expect to see continued improvement in the quarters ahead as first-time renewal headwinds continue to abate. We have a very large market opportunity and are focused on delivering an enterprise scale sales and marketing platform that is transforming how organizations drive measurable revenue and growth. I'm proud of the innovations that we are delivering to our customers, which will set the stage for our next phase of durable growth and generate long-term shareholder value. Thank you everyone for being on the call today.

This concludes today's call. Thank you for your participation. You may now disconnect.