Greetings, and welcome to the ON24's Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Sayo Denloye. Please go ahead..

Thank you. Hello, and good afternoon, everyone. Welcome to ON24's third quarter 2024 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.

Before we begin, I would like to remind everyone that some information provided during this call will include forward-looking statements regarding future events and financial performance, including guidance for the fourth quarter and full fiscal year 2024 as well as certain fourth quarter and full year non-GAAP projections.

These forward-looking statements are subject to known and unknown risks and uncertainties that could adversely affect ON24's future results and cause these forward-looking statements to be inaccurate, including our ability to grow our revenue, attract new customers and expand sales to existing customers, the success of our new products and capabilities, other statements regarding our ability to achieve our business strategies, growth or other future events or conditions such as the impact of adverse economic conditions and macroeconomic deterioration.

ON24 cautions that these statements are not guarantees of future performance, all forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statement to reflect the events that occur after this call.

Please refer to the company's periodic SEC filings and today's financial press release for factors that could cause our actual results to differ materially from any forward-looking statements. We'd also like to point out that on today's call, we will report both GAAP and non-GAAP results.

We use these non-GAAP financial measures to evaluate our ongoing operations and for internal planning and forecasting purposes. Non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP.

To see the reconciliations of these non-GAAP financial measures, please refer to today's financial press release. I will now turn the call over to Sharat.

Sharat?.

one, personalization at scale to target priority audiences; two, AI-generated content to automate and scale content creation; three, automated campaigns and nurtures to drive continuous engagement with prospects and customers.

Each of these capabilities help offset the significant resource strain faced by B2B sales and marketing teams today by leveraging the work they're already doing and delivering better conversion rates, broader global reach and greater pipeline results.

Importantly, these capabilities directly match with B2B growth initiatives and align our platform with the AI technology budget that enterprises are prioritizing for investment. Let me share how one of our AI-powered ACE customers, a public mid-market global SaaS company is having success with AI-powered ACE.

Through AI-powered ACEs personalization at scale capabilities, they can now precisely target and engage three unique audiences with just one campaign, combining into one experience content that was previously delivered over many weeks and required totally separate campaigns.

This platform innovation not only improves their team's efficiency and saves a lot of time, it also gives them more qualified leads to convert to pipeline and has accelerated buying journeys. I'd also like to share the story of an AI-powered ACE win with a new customer, a public mid-market provider of enterprise cloud-based tools.

Their marketing leadership was looking to make AI a central part of their go-to-market team's growth strategy as part of a top-down initiative from their CEO.

Recognizing the time savings, pipeline growth and ROI that they could gain from our platform's AI-powered ACE solution, they decided to upgrade from a collaboration tool and will use our platform's AI capabilities to generate demand, automate content creation and deliver personalized experiences at scale to their diverse customer base that spans a 20-plus product portfolio.

As these two examples illustrate, we believe that our AI platform innovations are helping us recapture budget in the technology vertical, an industry segment where we recently faced the greatest amount of pressure due to budget concessions.

In fact, two of our larger Q3 new business deals came from the tech sector, where AI-powered ACE was a critical factor in their buying decision.

With the overall tailwind of AI technology investment, we are continuing to invest in an aggressive AI innovation road map and focusing our development on advancements that will help customers get more intelligent on their prospects engagement data and improve their pipeline and revenue results.

With over one billion engagement minutes per year of first-party customer data generated on our platform, we have a competitive advantage and solid foundation for ongoing AI-based innovation. For example, we've added a new AI-driven capability that surfaces key insights called Smart Tips to our customers.

By delivering a continuous stream of insights, customers can apply these smart tips to their campaigns upfront to help them get even greater revenue results with the ON24 platform.

When we look at the customers who've been using AI-powered ACE between January and the end of Q3, we see those customers typically improve their conversion rates and achieve more uplift of their average reach per campaign. This is an extremely positive indication of a downstream increase in pipeline and revenue results.

We are excited about the performance gains our AI-powered ACE customers are experiencing, and we believe our future innovation can extend that uplift even further. Next, I'd like to turn to our second strategic priority, our enterprise go-to-market strategy.

The percentage of ARR in multiyear agreements and the percentage of customers using two or more products hit new record highs. We are stabilizing our ARR, and we are working to return to growth. To help improve our sales execution and return to growth, we recently up-leveled our sales leadership by hiring a new Head of North America Sales.

I'm particularly excited that we are seeing encouraging signs on customer win backs, especially from customers who are coming back to us after failing to get results from collaboration tools and point solutions. In fact, in Q3, the percentage of new core ARR, which came from boomerang customers was in the high single digits.

To provide more color, I'll share a few examples of win-back deals in Q3. One boomerang deal was with a $5 billion-plus global cybersecurity company. Facing budget pressure earlier in the year, this customer opted for a collaboration tool and within just a few months, realized their mistake.

They recognize that without a global purpose-built platform for engaging experiences and first-party actionable data and insights, their pipeline was negatively impacted, and they found themselves falling short of their sales targets. In Q3, they reengaged with us to help them refuel their global demand generation engine.

They're excited about our latest innovations and have reinvested in our platform with a six-figure commitment. Another boomerang deal in Q3 was with a $1 billion-plus IT services and solutions provider. Over the past year or so, the company went through a merger and resorted to a point solution.

As they started to centralize and streamline their sales and marketing operations, they quickly found that their point solution could not scale enterprise-wide or integrate with their technology stack.

Leveraging the breadth and depth of our capabilities, especially the addition of our AI-powered ACE solution, this customer's demand generation, customer education and field and content marketing teams are now standardized on our platform.

Using ON24 as a single platform to run digital campaigns, generate customer insights and automate their end-to-end process. We believe that these win backs demonstrate how differentiated our platform is when it comes to supporting mission-critical go-to-market use cases for enterprise organizations.

This is especially true when it comes to highly regulated industries like life sciences, where we have a dedicated go-to-market motion and platform road map. We saw a low single-digit sequential core ARR growth from the life sciences vertical in Q3, and we remain excited about this customer cohort.

To illustrate the strength of our life sciences vertical, I'd like to highlight an expansion with one of our long-term customers, a $50 billion-plus American pharmaceutical company that is among the top 10 biopharma companies in the world.

As a trusted partner, their team came to us to help advance their health care professional digital engagement strategy with a focus on HCPs that their sales teams are restricted from seeing in person. Through our platform, they will be able to engage these hard-to-reach HCPs, providing them with an always-on content hub full of educational resources.

And with the behavioral data from our platform, the go-to-market teams will be able to gain invaluable HCP insights. Finally, turning to profitability. We continue to deliver on our targets. We achieved positive adjusted EBITDA and positive non-GAAP EPS for the sixth consecutive quarter.

Free cash flow was positive for the third quarter in a row, and we achieved a gross margin in the high 70s. We expect to exit 2024 with positive adjusted EBITDA and positive EPS. In 2025, we expect to be profitable for the year as a whole across both of these metrics, while we maintain our focus on returning to growth.

We remain committed to our long-term profitability target of generating double-digit EBITDA margins. To conclude, we are controlling what we can control despite the macro challenges. Gartner reported that in 2019, the year preceding the pandemic, average marketing budgets were approximately 11% of overall revenue.

And in the 4 years since, they have dropped to 8.2%. Despite the headwinds of ongoing macro uncertainty and softness in marketing budgets, our third quarter results underscored stabilization in our business performance and our ability to consistently achieve our profitability targets.

We have improved year-to-date performance across our key metrics as compared to 2023 and entered Q4 with positive momentum. We have more work to do with the strength of our AI solution, our focus on mission-critical use cases in regulated industries and recent customer win-back momentum are very encouraging signs as we look to return to growth.

We expect a sequential improvement in new business acquisitions as we exit 2024. Coupled with improving stabilization in our installed base, we have confidence in our ability to return to ARR growth in 2025. With that, I'd like to hand it over to Steven Vattuone, our CFO..

Thank you, Sharat, and good afternoon, everyone. I'm going to start with our third quarter 2024 results and we'll then discuss our outlook for the fourth quarter 2024 and full year 2024.

Before I get into the numbers, I want to remind everyone that our focus, as it was in the prior quarters, will be on the core platform business as we have deemphasized the Virtual Conference product. We view the metrics from our core platforms such as revenue and ARR as the best KPIs to measure our performance.

Revenue from our core platform, including services in Q3 of 2024 was $35.6 million, representing a decrease of 7% year-over-year. Total revenue for the third quarter, which includes revenue from our Virtual Conference product, was $36.3 million. Total subscription and other platform revenue was $33.9 million.

Overages represented approximately 1% of total revenue in Q3. Total professional services revenue was $2.5 million, a decrease of 12% year-over-year, representing approximately 7% of total revenue, the same as in the year ago period. 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. Ending ARR related to our core platform totaled $129.7 million, a decrease of approximately $1.37 million compared to Q2 of 2024.

While we still have work to do in this area, ARR performance has improved sequentially each quarter this year. We are encouraged by signs of continued stabilization in our installed base with in-period gross retention improving by high single digits year-over-year in both Q3 and year-to-date as compared to the same periods in 2023.

In fact, in Q3, the percentage of new core ARR, which came from previous customers who return to us after failing to get results from collaboration and point solutions was in the high single digits. Total ARR, including the contribution from our Virtual Conference product, was $132.2 million at the end of Q3 2024. Turning to customer metrics.

The ARR contribution from the $100,000-plus customer cohort continues to represent approximately 2/3 of our total ARR, which is consistent with the prior quarter and demonstrates the continued strength of our largest enterprise customers and their commitment to our platform. 311 customers contributed more than $100,000 in total ARR.

Enterprise customers continue to be our focus, and we have seen these customers commit to longer-term contracts. The percentage of our ARR and multiyear contracts increased sequentially from Q2 and now stands at the highest ever with over 50% of our ARR in multiyear agreements.

The number of customers with 2 or more products was also at an all-time record. In Q3, the average core ARR per customer was consistent with last quarter at approximately $78,000 per customer. Total customer count at the end of Q3 was 1,666.

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, restructuring charges, impairment charges for real estate, amortization of acquired intangibles, shareholder activism-related costs 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.

Our gross margin in Q3 was 77%, consistent with the past several quarters and up 100 basis points from Q3 of last year. On a year-to-date basis, gross margin is up 200 basis points from the same period a year ago and reflects the cost reduction actions we have taken to streamline our operations. Now, turning to operating expenses.

Sales and marketing expense in Q3 was $15.9 million compared to $17.6 million in Q3 last year. This represents 44% of total revenue compared to 45% in the same period last year and 42% last quarter.

Our sales and marketing expenses have decreased in absolute dollars year-over-year, largely due to the cost savings measures we have implemented over the past quarters to improve efficiency in our go-to-market organization. R&D expense in Q3 was $6.7 million compared to $7 million in Q3 last year.

This represents 18% of total revenue compared to 18% in the same period last year and last quarter. While our R&D expenses have decreased in absolute dollars over the past year, we have continued to invest in product innovation related to AI, including our AI-powered ACE platform.

G&A expense in Q3 was $6.2 million compared to $6.3 million in Q3 last year. This represents 17% of total revenue, up slightly from 16% in the same period last year and consistent with last quarter. We have taken actions to streamline our G&A functions and reduce our G&A costs.

And as a result, our G&A expenses in absolute dollars have decreased as compared to the prior quarter and prior year. Moving on to our bottom line performance. I am pleased to report that we exceeded the profitability targets that we provided in the prior earnings call.

In Q3, we achieved positive adjusted EBITDA and non-GAAP EPS profitability for the sixth consecutive quarter. Operating loss for Q3 was $0.8 million or a negative 2% operating margin compared to an operating loss of $1.1 million and a negative 3% operating margin in the same period last year.

Net income in Q3 was $1.1 million or $0.02 per share based on approximately 45.6 million diluted shares outstanding. This compares to net income of $1.5 million or $0.03 per share in Q3 last year using approximately 48.3 million diluted shares outstanding. Turning to the balance sheet and cash flow.

We ended the quarter with $188.8 million in cash, cash equivalents and marketable securities. In March of this year, we announced a new $25 million share repurchase program, which runs for 1 year until March 2025.

This new share repurchase program follows the completion of 2 earlier capital return programs, which collectively returned $166 million to shareholders.

Under the new $25 million share repurchase program, we have utilized $16.2 million to date with approximately $5 million utilized in Q2, $8.3 million utilized in Q3 and approximately $2.9 million utilized thus far in Q4. Our balance sheet continues to remain strong with almost $189 million of cash and investments at the end of Q3.

Turning to our cash flow metrics for Q3. Cash provided by operations in Q3 was $0.3 million compared to cash used in operations of $2.9 million in Q3 of last year. Free cash flow was positive $0.1 million in Q3 compared to negative $3.2 million in Q3 last year. This is our third quarter in a row of positive free cash flow.

Our cash flow in Q3 includes cash outflows related to our restructuring efforts, which totaled $0.7 million in Q3. Before I move on to guidance, I want to provide our outlook on Q4 ARR.

We are encouraged by the continued stabilization in our installed base with gross retention up meaningfully compared to prior year levels and our net dollar retention rate increasing by mid-single digits compared to year-end 2023 levels. Our AI-powered ACE platform continues to gain traction, reaching new ARR record levels in Q3.

Looking at Q4, it's our largest renewal cohort of the year by dollar value. And from a linear perspective, it is back-end loaded. We expect to see continued stability in our installed base. However, recognizing that marketing budgets are still under pressure, we believe at this stage, it is prudent to apply conservatism to our core ARR outlook.

And as such, we are forecasting a sequential reduction of core ARR of 1% to 2%. ARR from our deemphasized Virtual Conference product is expected to reduce by approximately $0.4 million in Q4 compared to Q3 and is expected to be $2.1 million at the end of Q4.

We expect gross ARR to show a positive trend in Q4, along with a continued strong demand for our AI-powered ACE platform. In terms of net dollar retention, we expect to end 2024 with a net dollar retention rate higher than 2023 by mid-single digits.

As we move into 2025, we expect continued improvement in gross and net retention performance, continued momentum in our growth ARR and to echo what Sharat said earlier, we have confidence in our ability to return to ARR growth in 2025. Turning to Q4 guidance.

We expect Q4 platform revenue, including services, in the range of $34.7 million to $35.7 million and total revenue, which includes our virtual conference product in the range of $35.4 million to $36.4 million. Professional services is expected to represent approximately 9% of total revenue. We expect gross margins to be in the mid- to high 70s in Q4.

We expect a non-GAAP operating loss in the range of $1.3 million to $0.3 million and non-GAAP net income per share of $0.01 to $0.02 per share using approximately 45.7 million diluted shares outstanding.

We expect a restructuring charge of $0.4 million to $0.7 million in Q4 related to our ongoing cost reduction efforts, which is excluded from the non-GAAP amounts provided above. Lastly, we expect Q4 to deliver the seventh quarter in a row of positive adjusted EBITDA. Now, let me turn to our annual guidance.

For the full year, we expect core platform revenue, including services, to be in the range of $143.6 million to $144.6 million. We expect total revenue to be in the range of $146.8 million to $147.8 million. Professional Services is expected to represent approximately 8% of total revenue.

We expect a non-GAAP operating loss in the range of $3.3 million to $2.3 million and non-GAAP net income per share of $0.08 per share to $0.10 per share using approximately 45.8 million diluted shares outstanding. We expect gross margins for the year to be approximately 200 basis points higher than 2023 gross margins, which were 75%.

We expect to have positive adjusted EBITDA for 2024. Restructuring charges and amortization of acquired intangibles and certain other items are excluded from the full year non-GAAP amounts provided above.

This guidance reflects a balanced approach between maintaining cost discipline and delivering positive adjusted EBITDA for the year and positioning the company for a return to growth. To summarize, what we have accomplished thus far in 2024, we are stabilizing the business with churn and downsells improving significantly.

We have continued to make progress in growth vectors, including momentum in AI-powered ACE and in regulated industries like life sciences and financial services. In addition, we have started to see increasing win backs from boomerang customers who left us for cheaper but less effective solutions and have since returned.

On gross margins, EBITDA profitability and cash flow, we have made significant improvements in performance thus far in 2024 as compared to the prior year. While we know we still have work to do, our progress in 2024 gives me confidence about our business heading into 2025.

While we are not providing 2025 guidance on the call today, our goal is to maintain adjusted EBITDA and EPS profitability for the year as a whole in 2025 with a focus on returning to ARR growth.

Additionally, for modeling purposes, I want to remind everyone that Q1 is typically a seasonally softer quarter for us with fewer days in the quarter to deliver platform revenue and it is seasonally softer for services. As such, we would expect quarterly revenue to increase in 2025 from seasonally soft Q1 levels.

In summary, we are pleased that we exceeded both our revenue and profitability targets in Q3 and have raised our 2024 annual guidance for both of these metrics.

With increased stability across our installed base and notable progress across our 3 strategic pillars, we are well positioned to return to ARR growth in 2025 while maintaining adjusted EBITDA and EPS profitability. Lastly, we remain committed to our long-term goal of generating double-digit top line revenue growth and double-digit EBITDA margins.

With that, Sharat and I will open the call up for questions..

[Operator Instruction] First question comes from Robert Oliver with Robert W. Baird..

Encouraging to hear about some of the win backs from customers who maybe went to other competitors or less functional or not as strong as you guys. And would love to hear a little bit more color on that, Sharat? You guys have obviously done a ton to enhance the platform during this tougher period for marketing spend with AI ACE.

And would love to hear what those conversations are like? And then any commentary you can give us relative to what you're seeing in the kind of general spending macro relative to marketing spend and trends would be great..

Rob, let me take the win-back question first. I'm particularly excited that we are seeing encouraging signs on these customer win backs, especially customers who are coming back to us after failing to get results from collaboration tools and point solutions.

We talked about this in Q3, the percentage of new core ARR, which came from what we are calling boomerang customers was in the high single digits. And let me share a win back deal from Q3. One was with a large global cybersecurity company.

They were facing budget pressures earlier in the year, and this customer opted for a collaboration tool and within just a few months, realized their mistake. They recognize that without a purpose-built platform for engaging experiences and first-party actionable data, and insights, their pipeline was negatively impacted.

And in Q3, almost with after a quarter, they reengaged with us to help them refuel their global demand generation engine and have reinvested in our platform with a 6-figure commitment. Other examples are where companies have found they may have gone to point solutions that they are not scaling enterprise-wide.

They don't have the first-party data capabilities or the AI capabilities, those that match ON24. Now, the next thing that you talked about, any change about the marketing budgets and how I'm seeing that. So, yes, Rob, the last 2, 3 years have been tough.

That being said, if you ask Gartner, they would say, "Hey, the marketing spend in 2024 was about 280 basis points compared to 2019. So, that's a significant reduction. So, there have been some headwinds. But at the same time, I'm very encouraged because we are seeing increased stabilization.

And based on our customer conversation, especially the win backs we are seeing, there are some green shoots. Our customers are still committed to our platform. They're seeing value in our platform. Our ARR per customer is over $78,000. The number of customers in multiyear contract is significantly the largest we've had.

So look, companies have focused on reducing their martech and tech stacks for two to three years now. They have cut real deep. Now, if the win backs are any guide, we see that as a sign of stabilization, and we expect these companies to start investing in the revenue-generating products in 2025. We are cautiously optimistic..

Next question, Arjun Bhatia with William Blair..

This is Linda Lee on for Arjun.

Sharan, what does the win-back pool look like right now? And what percentage of that pool expected to win back from here on forward?.

So, overall, we do expect as the market stabilizes that the percentage of companies or the number of companies that are going to come back to ON24 and really focus on driving revenue and demand generation and other various things will continue to accelerate. At this stage, it's hard for me to give you a number on that particular thing.

But we are also seeing the stability and seeing that as we go into next year, our customers are probably going to be more focused on revenue-generating activities as an execution team from a sales and marketing point of view. We are also aggressively focused on that.

So, if you were to ask me, as we go into 2025, we do expect continued momentum on winbacks. Another thing I will point out is we've talked about how life sciences and financial services has become 1/3 of our ARR in the last 4 years compared to 20% in 2019. So, that's great.

The other thing that we are seeing is, we are seeing these win backs, a lot of them coming from the technology sector. So, we are also seeing green shoots in the technology vertical there with increased win backs, and momentum with AI-powered days. So, that's a good thing.

We feel that our business is now more diversified and well positioned to drive broad-based growth once investments in front-end software return next year..

And what does downsell and churn look like from here?.

This is Steve. Let me go ahead. I can take that. So, you're asking me, I think about gross retention. So, let me start with that. In-period gross retention in Q3 compared to the same period last year improved by high single digits, and I'm especially encouraged by the positive trends related to gross retention.

For the fourth quarter in a row, we've seen in-period gross retention trending much better than the average annual rate that we've seen for each of the past 3 years. And we saw a meaningful improvement in downsells, in fact, close to the best performance in the last 3 years.

And we started seeing more significant win backs, as Sharat discussed, at the high single digits as a percentage of our gross ARR. Several customers who left for us for cheaper tools came back, and it tells me that customers are beginning to think about revenue growth again, as Sharat said. And in addition, we have more multiyear contracts.

In fact, it was the highest ever at the end of Q3 2024 as a percentage of our ARR. So, we feel that we've stabilized the business. And as I look at 2025, we expect to improve our gross retention in both churn and downsell performance..

[Operator Instructions] Next question comes from Noah Herman with J.P. Morgan..

Maybe if you could just double-click on some of the go-to-market changes that you're implementing. I know you're bringing in some new leadership, especially in the Americas region. Just curious if there's anything changing fundamentally on the go-to-market side? And then I have a quick follow-up..

Yes. I think if you look at our ARR performance, Noah, there are 5 things. There are 4 things we've talked about stabilizing our business. We've talked about the win backs. AI-powered ACE has become a strong growth vector for us. The regulated industries, financial services and life sciences is 1/3 of our business and becoming an important growth vector.

The one area for improvement that we are focused on is our new business execution. And we have hired a new sales leader for our North America business. We must make our execution here to be more business outcome oriented.

And we need to do a better job in orienting our solutions to solving business challenges and creating these measurable outcomes by the various verticals and use cases. I mean, especially at a time when we believe that the marketplace is stabilizing and there's going to be more appetite for revenue-generating things.

So, one, our focus has been is bringing in the right talent from a leadership point of view and a sales and other part. But the other thing is to really optimize our execution to be even more benefit solution oriented by the various verticals and use cases that we focus on.

And I believe that this will allow us to drive growth, better profitability and cash flow for our shareholders. So, that's a very important thing that we are doing. And we've learned to operate in this tough environment with some headwinds. Like I said before, this cannot continue.

We are seeing increased stability with the win backs, with the enhancements in the go-to-market. After 2 years of deep cuts, companies will have to start investing in these revenue growth opportunities, revenue growth solutions, which will help us, and we are beginning to see that..

And then maybe just on 2025, you provided some helpful commentary around Q1, but with more customers now under multiyear agreements, just anything to call out in terms of seasonality as we think about next year?.

I'll take that one. So, we're not giving 2025 guidance today. We'll be doing that on our earnings call next quarter, but we do expect to return to ARR growth during 2025. And our goal is to get ARR positive next year. In terms of Q1 revenue, that's typically a seasonally softer quarter for us.

As I mentioned in the prepared remarks, there are fewer days in Q1, our service business is also seasonally soft. So, we'd expect that Q1 would be the trough for revenue in 2025, and we would expect revenue to increase from there. In terms of the bottom line, we've shown that we can be disciplined on cost in a tough macro for marketing dollars.

In fact, we've taken $69 million of annual run rate cost out of the business since Q2 of 2022, which is a reduction of over 30%, and that's resulted in margin improvement and positive cash flow for the year.

On the bottom line, we'll continue to balance returning to growth with profitability, and we expect to maintain adjusted EBITDA and EPS profitability for 2025 as a whole. In terms of our thoughts on ARR, I'll let Sharat go ahead and provide some color on that..

stabilization, win backs, AI-powered ACEs, regular industries and that we are focused on improving our new business execution better. So, based on the progress this year, it makes me encouraged about 2025. The market is stabilizing. We are seeing that in the win backs. We believe we are at the cusp of turning ARR positive.

And I expect ARR to turn positive during the year, and our goal is to have positive ARR for the year. And if you add that to the discipline that Steve talked about in margin, profitability and cash flow performance, it positions us well for 2025..

Thank you. This does conclude today's teleconference. We thank you for your participation. You may now disconnect your lines..