Scotiabank has revised its price target for OneStream (OS, Financial), reducing it from $35 to $27, though it maintains an Outperform rating on the company's shares. Analyst Nick Altmann attributed the adjustment to a broader reassessment of price targets within the U.S. software sector, prompted by a recent downturn in the market.
The firm highlighted that the recent changes are aligned with sector-wide trends and potential tariff repercussions, which are predicted to affect financial results starting in the second quarter and continuing into the latter half of the year. Despite these adjustments, OneStream remains a favored entity within the sector, as reflected in its maintained Outperform rating.
OS Key Business Developments
Release Date: February 11, 2025
- Revenue Growth: 29% year-over-year increase in Q4; 31% year-over-year increase for 2024 to $489 million.
- Subscription Revenue: 41% year-over-year growth to $428 million for 2024; 35% year-over-year increase in Q4 to $119 million.
- Free Cash Flow: $59 million for 2024, representing a 12% free cash flow margin; $25 million generated in Q4.
- Gross Retention Rate: 98% for 2024.
- Net Dollar Retention Rate: 113% for 2024.
- Annual Recurring Revenue (ARR): $568 million at the end of 2024.
- Remaining Performance Obligations (RPO): Greater than $1 billion, with a 23% year-over-year increase.
- International Revenue: 38% year-over-year growth to $155 million for 2024; 49% year-over-year increase in Q4 to $46 million.
- Non-GAAP Operating Income: $9 million in Q4, with a 7% operating margin; $1 million for the full year.
- Non-GAAP Net Income: $12 million in Q4; $14 million for the full year.
- Non-GAAP Earnings Per Share: $0.07 in Q4; $0.14 for the full year.
- Equity-Based Compensation Expense: $53 million in Q4; $316 million for the full year.
- Cash and Cash Equivalents: $544 million at the end of 2024.
- Guidance for 2025: Total revenue expected between $583 million to $587 million; Non-GAAP operating margin expected to be 1%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- OneStream Inc (OS, Financial) achieved a 29% year-over-year revenue growth in Q4 2024, demonstrating strong financial performance.
- The company reported a 98% gross retention rate, highlighting the stickiness and value of its platform.
- OneStream Inc (OS) introduced 15 new innovations in 2024, enhancing its product offerings and market competitiveness.
- The company successfully completed an IPO and secondary offering, strengthening its financial position.
- OneStream Inc (OS) received FedRAMP High authorization, enabling it to work with high-security federal agencies, expanding its public sector opportunities.
Negative Points
- The strengthening of the US dollar negatively impacted financial metrics by approximately 2%, affecting ARR, RPO, and Q4 billings.
- Macro uncertainties, including geopolitical tensions and regulatory changes, caused deal scrutiny and delays, impacting revenue timing.
- The company faces challenges in transitioning customers from term licenses to a 100% SaaS model, which may affect short-term revenue.
- Despite strong growth, the company reported a non-GAAP operating margin of only 7% in Q4, indicating room for profitability improvement.
- There is uncertainty in the public sector market due to spending pressures, which could impact future revenue growth in this segment.
