ZI - Earnings call transcript Q2 2024 | ZoomInfo Technologies Inc.

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Operator

Good day, and thank you for standing by. Welcome to the ZoomInfo Second Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Jerry Sisitsky, Investor Relations. Please go ahead.

Jeremiah Sisitsky

Amy. Thanks, financial for ZoomInfo's XXXX. second conference results to the call quarter Welcome

Graham become me are and to Cameron of and today the Cameron's Hyzer, who Schuck, CFO; With open call Q&A. CEO remarks, Henry we on the After interim our CFO. Founder will and our O'Brien, Henry will call ZoomInfo;

performance call, safe future U.S. financial of Expressions expressions of similar harbor goals, than identify for are other any business and securities terminology statements expectations historical expect, something anticipate made are without intended to using forward-looking this and statements. including, provisions During forward-looking pursuant believe the outlook, including limitation, and to items, the reflect facts will, laws. which future expressions may,

uncertainties, Factors may The the forward-looking discussed Forward-looking that this statements conference order revise including forward-looking call, from obligation law. involve those arise to to sections after reflect Actual update results our or as a Risk by SEC differ filings. required materially undertakes no except statements. any any and in company number may in of risks statements events of

to please otherwise information, can found slides metrics website. With Relations or release in posted our this I'll statements financial slides All to Henry. in over non-GAAP, at more to reconciliation IR our that, For to Investor the posted the website are call press results on noted. ir.zoominfo.com. refer A unless forward-looking the the be call in the turn

Henry Schuck

and Jerry, welcome, you, Thank everyone.

Let by me our start discussing this results financial quarter.

estimated quarter, with level we previously period that than sales we the had saw prior particularly a had or was In write-offs of to related QX, SMBs. seen higher for

future QX, we we around operational small changes all selling a around reduce comprehensive write-offs. charge which a As a accelerated conducted result, review to volatility of and businesses, the to in expect culminating we in

we a which the revised led $XX and recognized as charge estimates a year full to in million of revising collectibility quarter for our take are us of guidance. the We result, revenue, portion has have our a previously

for charge, and quarter. the results of more a charge, been guidance was this adjusted the second would million, with our was XX%. for income of operating this Excluding million, Inclusive $XX $XXX revenue our margin have second quarter in line GAAP

flow impacted free charge. Our not this by was noncash cash

underlying the high that extended nonpayment of with these XXXX, require meaningful model us transacted In mix greatest $XX place, deployed credit future risk way write-off Accordingly, smaller business creating these new riskier of the away amount in to increased prepayment our grow driver for focusing to renew XX write-offs with bookings upfront rate new of renew and move clients. and pay, The nonpayment. we we new business of and through XXXX the efforts organizations. This of and turned we customers for we prospects our health model QX and million prepayments, and is a customers to April, in investment higher-quality flag at past rate ACV from have the throughout some in over risk to business a and our we new and in months. from made long-term We the time. business, of represents customers mitigates service the an on SMB ACV of the changes likely sell, more higher by a risk

success. been puts impacted us has seeing tail am the I these charge challenges disappointed for which, focus on long We lets improvements our and as we believe the the this the I have company will charge has in operational of that results. describe, financial business, this positioned behind us future

saw of this quarter. number we a were There fundamental improvements

our XXXX. customer with cohort now And most QX quarter again the This a customer ACV. ZoomInfo million on ACV, customer of $X seen has customers ACV over new and stabilize $X makes since growth plus million-plus time we cohort our sequential retention and up and QX both XX% was of investment cohort both basis sequential grew the launch market, total this we've improve in mid-market dollar We of and trends, customers Reflecting ACV in $X new in net X size up accelerated $XXX,XXX and for the and in QX year-over-year. year-over-year, customers the ever. first new focus these XXXX. was been monetize was has upmarket, up been best the ARR since our enterprise know, grew growth quarters. meaningfully you the in and aggregate, best overall $XXX,XXX to is million-dollar revenue enterprise With up XX% As past our year move net business our quarter Copilot. it X% ACV

first the improving Over we since grow fundamentals shift an time, mix saw of we where of our through and was expect is stabilize, rates driven net XXXX, upsells. by as and retention quarter we stabilization return This rates one milestone important QX improvement renewal upmarket to levels NRR structurally which business. higher on to

we and as quarter, such with Deutsche solution, largest closed we new in the to and in United saw the employers BXB largest signed their This and and Bank, our as one the During rich business PwC, data they of leading States, motion. also ever data data, integration transactions transaction. our Manulife, organizations mission-critical capabilities Morningstar compliance customer is

their business contract match exacting moving X-year that fastest commitment. one what needs, $X.X history. with as a their represents had ACV deal of of in described million the This their solution employees the we With new

now net a which often also offerings, of are retention XX% and data-as-a-service company's year-over-year results, and delivering in operations underpin used investment rate, ACV. strong up XX% are AI, help representing to Our our demonstrating XXX%

accurate in and becoming source for highly to need a the of initiatives, they As that. companies we invest data foundation steadily are solid AI look

data first information and closed receive ZoomInfo's financial we the global Representative data, a organization's are of to send allows innovate their one just ways support Leveraging the to transactions. that our customers messages opportunity is are engineering financial building solution. This many in our that, data-as-a-service solution institutions to transaction. and AI business identify about secure of teams that operational to and to continue EMEA network use world-class to an internal fraudulent able

make a enterprises and accurate as buying and in and its end give users in generative use. better customers' about from partner strategy sales launched selected sets. leadership. reliable more the combines to our of In month experiences. The than announced data buyers. teams integrate AI Google us full entirety across goal Copilot engagement more have renewal authoritative key material managers, was from periods expands trusted success customer across to And to value Copilot, is is sales ACV specific to up have been just $XX go-to-market more show and along already and funnel And offer accurate development rates more successfully June, responses help data and our past marked of and X,XXX the innovative we proposition their ZoomInfo and June our models revenue it that have XX for digital proprietary enterprise into rates. Early marketing The AI in ago. from of best the because managers the top our our Copilot rates and systems, Google so, have selling company's executives, as relevant of more utilization beyond data history correlated signs one retention Improvements AI-powered our we first-party months Copilot our offering performed ZoomInfo data insight best-in-class doing historically support most first with now set our signals and months in nothing funnel. by a improvements million We logos, of value that above solidly expectation. sales account than expanding teams Copilot see to closely these to our few users. account their

of to Copilot unmatched road is to AI ecosystem growing driving with map. a mid-market or an across customer our Copilot were enterprise customer Over upsells aggressive conversations. and commitment continuous proprietary signals, investments in That and road Our in feed accounts. excitement our third-party data new base continues and map XX%

With the customers retention. seeing a we to existing new we'll able traction to our key and upsells on to we driver continue products, win increase base, be and net Copilot of believe data-as-a-service operations and are our

changes and also on appreciate Crockett positive We in company. who board his welcome on the helping impact announced newest additive our Board trajectory our us Associates immediately the at execute had thank has the he we We strategy. years many level. members we representing several TA of be the our Directors Today, of growth of service, we for will Todd Board believe

at Maida times, Bloomberg, and data Domenic where business, is background executive years different businesses experience Dom all leading Officer. scaled a with seasoned engineering strong and at operating the XX-plus Chief and of was spent Data terminal ran he platforms. very a in

investor markets a perspective Investment Wurzbacher, we Officer of background HighSage our Board. to welcome public Owen And Ventures, strong Chief capital and equity also who brings the

and we our built our years, products, our great skills the diversified several underpinning leadership have into leaned last Over the expanded team, AI executive bench, rebuilt Board.

healthier on XX% future. outstanding. over and shares total than new relationships We in double where ZoomInfo, XX have relationships, the are the focused business bringing on of X retired down opportunities million more our past know we And we upside we have quarters, of enterprise approximately in shares

to We run shares. repurchasing will continue business this efficiently while

remaining meaningfully we have June continued an XX, strong -- combine our share anticipate share million repurchase and free reduction, authorization We cash that will of cash of When the year deploying we believe that levered company as number will strong we at and generation you XXXX. existing in $XXX with share count aggressively do in grow ongoing least per $X our flow that. this

guidance. momentum the change and the our around we our announced recognize increased overshadowed is operating positive conservatism I today by estimates that in

that I cash intention highlighting be share to of understand stock profile growing end, ZoomInfo as our Our commitment challenges per well. meaningful intend To share. flow and us the you fully details while these free is to to that our a need put also behind buyer financial personal to

hand the news to to afternoon. want in I this it touch Cameron the over Before announced on greater I we discuss results detail, to leadership

And months and Officer. many announcement, you for his to the the be role the partner you will X to over me myself company, Chief entire over nearly been from smooth years. ensure want a thank all transitioning from Financial transition. the of best. Cameron personally help Cameron, your As you've He I few the our you saw wish a stay behalf and business and on will next with to us last to great contributions as

and of to of bench the are permanent we on search role. handoff. will FP&A, seamless for throughout this during strategic fortunate and are a Graham and O'Brien, successor with our have will initiated a growth familiar organization period. talent be Graham deep a our interim plans, transition this financial intimately CFO a confident finance take our is We've VP

with Cameron. booked, to the over slate. With charge the clean we the start call With now turn I'll that,

Peter Hyzer

Henry. you, Thank

do turning about words results, want our leaving few Before ZoomInfo. to a say I to

Board the and First, I the team want their my thank to partnership throughout for ZoomInfo entire tenure.

Over of full accomplished. and the in generation. growth see free impressive cash and what challenges navigated the continue margins I strong achieved together, flow ZoomInfo confidence in We've company the proud have future and years, I'm lead innovate with we've we've I'm the market. to and excited to numerous of

direction talented the strong, and you remains for support to thanks leadership. and in health strategic I financial trust tracking to success. Thank placed of team efforts you've forward Our ZoomInfo's and continued our collaborative me. look the

turning our Now to results.

enterprise a have We to to card impact smaller platform, improvements by new and ACH, the by gaining we mid-market to pay more the write-offs. of QX, team and to implemented progress segmenting In sales credit of operational drive customers our access requiring business. continued to prior or number and riskier this reduce

accounting improvements, customers We needed as escalating to disappointed write-offs that As for these part determine reevaluated expect. account and for prior to increased June be write-offs to estimates our that now in our estimates. of as increased additional have nonpayment visibility and we surprised incurred were we that order we from well in our

in recognized total reserves XXXX charge primarily on increased and debt potential estimates reduced to receivables other revenue date. million million This includes discrete a change The expense million $XX and resulted current increased with combined in to QX, sufficient of in nonpayment expenses. our bad from change recognized $X charges revenue previously related and revenue, in our which $XX cover other $XX million to is estimate related

cash these represents indicated would With performance $XXX revenue charges, and of of excluding The onetime have margin accounting revenue underlying adjusted cash GAAP and income these revenue GAAP which profitability, the $XXX Unlevered quarter operating adjusted does the million XX%. business impacts charge free of we $XX million. $XXX not and of million, million but This income $XXX operating impact a charges million. for delivered of of flow. flow was

the levels share. in in changes is in reflects GAAP this steps adjust and to our we growing XXXX. While we this We period levels available high expense reflected charge transactions growth. which, taking in current level associated flow commitments under XXXX, when per profitability of new are And challenges estimates of signed, becomes QX case, with free cash to are of primarily remain driving committed to reflect information

a we estate current a As took to consolidate result, existing certain we number rates real our footprint. leases market charges impairment as for related of the facilities, and quarter accounting exit in

approximately reducing of aggregate, by In and total to smaller taking this the that accelerated reflected space as we to expect quarter, expect where over July, transition X a restructured addition next additional square facility square expense $XX Waltham an feet, to months overall restructuring and feet are we the footprint. in In million termination a rent XX%. footprint fee, charges agreement are lease sublease costs in recognize we XXX,XXX as we to we our our we eliminating $XX million paid XXX,XXX-plus

we of following looking to approval us. final hearing June. Additionally, $XX to million completely in putting related and forward lawsuits is the lawsuits amount approval these November, The publicity the in settlement funded we July, are behind set preliminary for right

a business. QX to in including also Functionality last QX decline where years, XX%, seeing to first Advanced QX spent best this Retention we Advanced the reporting time net are in of change revenue our marketing we improved experienced the traction vertical, a And and million, payments. and in QX cash improvements the resulted million. indicated, by XXXX. as a $XXX completed $XXX reduce in XXX While perspective, Functionality. Copilot XX% included In and which stabilized million early per historical seen time to is of in Henry at $X increased retention from from up in and $X over Unlevered annual XX grown operations the in deals in to rightsize free cash to QX and the Copilot overall drove XXXX. interest million million the our the we of XXXX. From and overall ACV basis most since software point was agreement lien interest solutions. Operating in of we flow expense first growth flow respect for underlying credit in year. in we our stabilized in plus reduction our expected ACV and we've it are to QX, material as operations QX, address approximately repricing is SOFR $XXX QX NRR for since in our X/X was X performance quarter had with our and facilities, of approximately We interest

quarter interest vast and $X.XX $XXX majority fixed in the carried which investments. million cash of equivalents XXXX. ended the through cash, hedged billion We or We in short-term rates gross debt, has with

deploying. $XXX During million. anticipate the aggressively quarter, of we we we of $XXX indicated, shares June million million XX Henry repurchased capacity ZoomInfo's had stock XX.X of existing remaining as for as that And

ratio performance our is obligations, EBITDA consolidated performance X.Xx and net unearned which $XXX the RPO, defined delivered adjusted and With revenue which as to liabilities are $X.XX or in end credit X.Xx was is to at Our respect and million EBITDA XX million months the obligations, billion, next XX QX cash future months. of trailing months of in expected were $XXX remaining EBITDA, leverage be trailing agreements. XX

on this a position for of number fresh a growth to free share. company flow obviously moving with We respect consistently business growing a focus accounting are for There to action long-term cash and pieces this quarter. the the took with profitability slate create per and

to from guidance our out to that, turn incorporates impact and increased me the conservatism performance. XXXX, operating QX. let charge the With of our guidance QX today's and Looking to for related remainder

range adjusted million We GAAP million, to of $XXX of in operating revenue expect income non-GAAP the million in the and million income net share. the $XXX per $XXX to $X.XX in of $XXX range $X.XX to range

revenue to GAAP operating to $X.XX now billion, million range XXXX, we adjusted year For $XXX the the million. and of income in the full range of expect $X.XXX in billion $XXX

$X.XX based net expect average XXX of share range diluted in million income on to We outstanding. shares $X.XX per the non-GAAP weighted

of expect which, million, payments. the flow the free range impact settlement We excludes to historical million reporting cash $XXX unlevered in with of restructuring $XXX consistent and

negative year growth operating midpoint inclusive range, our revenue of guidance the implies Our XX% margin full quarter guidance second adjusted the X% and at of charges.

margin We're as quarter, efficient operations of the committed year. discrete items to ever driving excluding indicates adjusted to for and operating this the guidance our impacting XX%

count, the compound mindful margins and on X can annual free as issued we And share growth, levered to performance to also expect shift to performance-based of cash the view grow the as here. we cash Henry with and executives value noted, share align free shares it flow believe per is shareholder continued into growth build on We which from have future. $X triggered share of to and equity we business grants creation. important flows per of we We're

Finally, implied half our this the is we flat our the the that and XXXX. fourth indicative in of sequential of range, X%, guidance roughly revenue growth that most the view is down trajectory top we exit as please note in quarter believe to

questions. open me that, turn With call the for to operator over to let it the

Operator

And Instructions] of Elizabeth the Morgan first comes Stanley. of our from line Porter question [Operator

Elizabeth Elliott

for the which a After the be should has pressured largely through renewal now. EBITDA, while we the QX, risk, business

great. be from that incremental just is NRR round business So I'm of back just of year, are could the half assuming second the outlook of decline half in or coming new downsells to of the for Or the on back get understanding kind we get the changed materially? you if pressure a assumption the year. has So on the would where better some hoping of and a color

Peter Hyzer

Elizabeth. Sure. Thanks,

as are the about until hold next operational really factors year. take assumptions potential think won't elevated this we've it. of that improvements the the I our with we've variety the implemented respect go And that the year write-off or guidance a of of so certainly, continued to there at into we beginning more thought in think probably that end

environment under the be Additionally, fluid. operating pretty to we're continues operating which

a we've for you of companies. it, think making So if world we in uncertainty, decisions with respect the both but inserted the that I the companies, as of incremental in also to there's people look see out conservatism the growth guidance. for And of terms those lot

Henry Schuck

around not the guidance I add and taking see rates volatility improvements, of did customers half trends the make year upfront half just well. business, year, here, $XXX,XXX number going wanted we the here, make up net in while assuming -- in back that the an to remove was sure retention trend even back -- growth in of for we as assuming we the of the the that years, write-off in set in would continues also and I that our from time move to business. a any new operational stabilization we're our improvements operational we're lot And of talked improvement forward prepayment when what the we our the the of we've cohort, enterprise and that in upmarket done that about with those to don't a in the impact market of the first don't business, And those

Operator

question next Mark from JPMorgan. Our line Murphy the of comes of

Mark Murphy

half. might you're that surprised did industry continue all newly because, to since assuming the see you going June that the are Henry, just I'm July layoffs not you said curious any in in and QX at of that these volume you I have technology if second announced think the in improvements of

Intel Salesforce these and others and we OpenText, since announcements Intuit So from then. had UiPath and and

might to might follow-up. of curious sense if to expected? quick count go-to-market I'm a is that more head just second And X X have a in affecting say, you if so -- be I you little layoffs something you last a the wave weeks And causing than have

Henry Schuck

business. the The of year-over-year. of business not that's that One, now is is makes our It's portion that's a business, about seat-based, business two is usage-based or OperationsOS ACV, data-as-a-service not thing a which seat also our growing to our We XX% remember there up things. XX% about usage talked and based. meaningful

the fully And mid-market are any our any of customers. enterprise of then we on across of seat-based our business, -- or part not penetrated our really

to seat don't incremental add we so to us need for from hiring base. And the to grow within -- perspective customer our a

that just that where expanding the would places thing Copilot, funnel we're top other to is, case bullish is The of I beyond there our about, full the use add prospecting it's of one the funnel.

seeing open users the now that customers not or not of in bringing otherwise opportunities were so of And of we're were were where ours. ours past in or users pre-Copilot we're sets

a seat-based a shrinking so And opportunity, both perspective despite layoffs go-to-market despite a of tech in grow lot perspective we usage-based -- the from have from to team? and or

Mark Murphy

can then, it customer that us you And claiming remind like Okay. from to some failures And it contract Cameron, then did is the how allude is versus or business non-collectability on possible receivables, services incremental stemming a provided? often -- something you write-off not potential. dispute were

just help there I type think that? saw balance it an in in second half And revenue going just ongoing on put possible you factored have something we as QX? offset to understand in forward, as us the any of is

Peter Hyzer

Yes.

have Certainly, number And one of larger a to of see driving where that of write-offs capital stem a is we from that an certainly, ones challenging some harder in to, think different more is escalation I down. is in companies get environment rates. terms continued do environment, increase. shutting factors. the we access factored write-off to So do And of that in the

they are small that particularly achieved thought business, with going value feel up they that they've level end we that to, in the them. in also don't were a of There instances where, customers the dispute that when

a it's escalation. that world them is for that harder in tangible sales, sometimes harder value think kind to getting also where make And of so I and

as strength gets to just are is those while about that shifting quarters. from largely of worse, many business view our the view are as well this, few prepayment as requiring So economy -- situation particularly upfront the making questions we generally there write-off feel impact to of changes the operational that the smaller next assume customers and is the the we the over upmarket, prudent riskier

Henry Schuck

write-off So We assume Mark, year. the rates rates did half the write-off the escalated -- I'll the back add continue that here, through too. of

that practices upfront remember now our our $X we riskier credit require to I from against in think $XX transacted was previous to is we've million were we here That creditworthy, the million prepayments to not extended thing through and prepayments. customers. any of ACV in our our big the changed quarter, had of SMBs upfront up And quarters.

And for so we've made type a commitment way this get of volatility estimate our both operationally that and rid of in we in to collectibles the these business.

Operator

comes of line question Zelnick Bank. next Brad Our Deutsche the from of

Brad Zelnick

Henry, market. it's of ZoomInfo the fit, much as seeing market some segments numbers, exposure about think how the execution environment a has and of what no control? the we're doubt do versus tougher we of within you in feel is to versus tough outsized But environment product your

saw the And trends quarter? that maybe you you in can Cameron. on just Cam, the one comment a quick pricing for

Henry Schuck

time the amount that's QX software rates. quarter operational that time we've about of business. rates, frustrating that in $XXX,XXX this and there's seen Stabilization retention The growth, in retention we're I incredible net the that first actually since the improvement that think the of XXXX. an first since part net QX of seen we've is Stabilization vertical 'XX. cohort seeing our

seeing the in also our time monetizing year-over-year. we're we're Operations X% business customers, with customer monetizing sold that, now net to base. enterprise innovate grew business throughout and and our And DaaS enterprise that customers. When we're happen solidly mid-market XXX% our we grew AI continue OS expectations in and year-over-year retention. XX% as well. the XX% there of Our above Copilot

product and this where operational the execution in momentum fit tremendous actually business, getting And stronger. is believe I our of amount so happening there's operational market

motion is the base, performance business. Copilot in sales in in getting the better you're come the through seeing upmarket. that monetizing We're Our operational and

time, Now the same write-offs at escalated. the

to this volatility estimate to to quarter a behind from away to that we put our this move with have and take clean and slate accounting take to have We us, charge increase that forward business. all this

Peter Hyzer

And lower to with we the when Brad, to downsell green think But And people the at continue of QX, taking see shoots see pricing changes of proactively opportunity market. pricing are any changes the some I make really respect we are didn't we particularly some in to pricing. good pressure, do Copilot. starting to ends

So copilot. And of that's being we There we're a move beginning into focused and see something on monetization of as uplift Henry able we're are mentioned to to the that from that. QX. pricing continue where QX number opportunities

Operator

Our next question comes from of Raimo the line Lenschow Barclays. of

Raimo Lenschow

somewhat to been worse? had -- like ability of the markets to Because of tough, where and about changed because COVID collect be XXXX, to in if current getting like just how you've that seen feels surprising in you XXXX you you've compare this is either does you what before. this how like in before? time before, think it's or wrote compared you it it clients, Can the how seems was given kind Cameron, kind environment compare contrast the from like like -- we tough the this of kind to XXXX,

Henry Schuck

two did We the from are elevate escalate Raimo, thing. We and big saw and the it's Henry. accounted historical elevate XXXX They're increased off year, one writing issues. cohorts. these against this happened rates. we've XXXX there Look, XXXX things trend I we've what we've or in more, see more this XXXX obviously, and rates think for estimates charge, accounting taken That's rates than collectibility and we've the our those made this that were. why --

you we this moving is we way prepayments. that small tell the upfront risky in prepayment thing we you comes did with what from change ZoomInfo, from these a forward require a fundamental through, upfront that When the is I they other would going SMB The or solve them customer can achieve now lot of but That's operate. forward. value and way a that

doing significantly a so contracts the in our by collectibility that. going make we're And of dent to future

Operator

comes from Stifel. Lane the next Parker with Our question of line

J. Lane

they're the idea based on of stick it from adopting model, risk business customer of that is onset? about? products Henry. on also seats size of the to there Are Or talking number the parameters Just the new or guys at you're the about the you the simply

Henry Schuck

-- number a and into who of didn't We're look the new at obviously related other then into takes of then size through, us industry, come or past. firmographic in accounts those takes as model clients that of like accounts. can a collectibility of it number of look-a-likes using assess points a is the number pay against the points that data about business one the size, it key them. risk salespeople data risk compare a of who Yes, to looks paid back and account the But you think model

Operator

Our next line Zukin question Wolfe the Alex of of comes Research. from

Aleksandr Zukin

just background Apologize your the maybe swear in increasing charge-off and I'm trying customers the improving also comment of because the on would and South the comments of two I rates retention just, increases, maybe parts Henry, for in ones. saw non-retaining particularly that do the something say out around kind noise. customers, different. these to quick are or linearity quarter, Maybe And rates? Western you going to go

think you of you this reported your my basis, Can bad I bookings, -- made to debt some... of bookings down Cameron that CRPO single effectively, just question, can understand kind how square a can was at back if mechanistically, second to Difficulty] start out kind digits that which or help low on inform take about that of reason this you us like us look flat, bookings something we that much [Technical to of for getting once comment

Henry Schuck

time hard -- a had had a hearing we you. of Alex, we lot

So if in take could much see second the -- could room. collect could and we that of how we you just a if

Peter Hyzer

All right Alex.

I'll to hopefully, be most get I and think we'll through of your this. questions, able answer that,

that retention it of had seeing the stabilization terms continued to think, a and throughout as we I of in quarter. the first certainly, retention, off, relates been linearity,

that think enterprise, and that's mid-market retention. with. happy think true -- we particularly were improvements the I in in And something we I where saw

I as went respect and think accelerate those to themselves, more on certainly, the write-offs in And on, pressure with to June. quarter SMBs. the continue did see we

it impact issue than throughout really those the quarter. end of And so quarter was was more an of the

basically bookings. about some the that the asked impacted had get you obligations. then And remaining are because write-offs by we Certainly, the performance impairing bookings of

writing we're as off that's -- existing off there. writing receivable performance the revenue continued out when off a when that of obviously, So the allegation we're we're of contract, as any writing or well

Henry Schuck

just we of retention that rates I'll And in we the any the stabilization the of from quarter, prepayments, into we haven't the Alex, of does anticipated -- this guide assume -- guide. upfront improvement or don't in that of take the improvement not not impact saw this add net does those the any either

Operator

comes line question of the of next Goldman from Sachs. Kash Rangan Our

Unknown Analyst

your compare what improvement? enterprise this I remaining take is Thanks versus provided ones has second, deals on the two the mid-market you. This prior do for had cycle in on quarter How duration And for win periods? And the you you from customer large Kash. quarter it this away close pipeline? to for color sales your lessons and [indiscernible] saw really call. that seems quick also all

Henry Schuck

question. in Thanks Sales largely the cycles same. the in force sales business the Great. for segmented We the the customer new have stayed -- quarter.

of at in deals, than value X, they so our but Xx take deals. X, obviously or those And mid-market enterprise come deals SMB our longer the

we in nothing didn't space. the business so new And that expect

And stayed segments. so same have across those the sales largely different and cycles

sales thing the deal the across segmenting business is enterprise, into largest that new improvement and the I closed upmarket we learned that results the in and history allocating resources then we've to us. is mid-market that for our reps continued and think turning in

set continue going and enterprise retain us year to throughout in with mid-market strong a new mid-market segments. more from think us base that's in came an that the record. business quarter and We have foundation to increased grow and And and that for rep up the believe focus sales those against as we enterprise that's on future of the at different And rates. segmentation higher highest customers we -- going the really

Operator

the Our Brent line next Piper comes Bracelin of Sandler. of question from

Brent Bracelin

back just kind exposure go to much wanted SMB. I to have of how framing to you

think year. $XX I last million, $XX looks it bad debt accruals were like million

make how of You're at as the at year. risk now. What would you worst much kind that think, behind I clearly not kind a of X that of just pre this helpful. would happening could to a exposure, of mark think mark similar you're versus additional of portion that first kind as business still trying being what I here weakness? Just overall, SMB is But that frame months SMB at we year point be in through maybe baking frame think at we you? that ago, thought

Peter Hyzer

business. enterprise to up grow above point. of seen be that's at to around mix, terms So our We've this continue SMB in so X/X of continues XX%

to on has do customers and those SMB are smaller really upfront -- of not really but taking been anymore, that ultimately and focus Our or just that. serving not prepay SMB credit riskier out the forcing risk

sales really and focus market. product is at going our investment of point this All up

of of of continue sales to So we're system their well. value get drive necessarily but as that focus to away system to motions continue not customers -- are -- out smaller a that going to us turn real is the and use clear ours, the

Henry Schuck

forward, think also But and the we I increase the after charge estimates. should of We forward. think our on guide after took the with in create volatility half the you we business putting anticipate today going this and in back charge volatility this the going toward behind about And us. write-offs increased actions our intend don't will estimates that fully year in Brent, the

Operator

Our of line of next Koji comes from with Bank the Ikeda America. question

Koji Ikeda

couple me Cam. for the Maybe A first one from here.

impact? the XQ year. little for understand headwind write-downs thinking write-downs the into And 'XX? to year the full wanted Just too? a quarter does and the guidance about And just but XXXX the to impacts affect lead I on it guiding potentially aren't you more second a of it guys into Is potential full Does heading know it XXXX. of XXXX, bit

Peter Hyzer

portion or the we revenue already from another have through change down revenue big written in out write-downs recognized that receivables nonpayment written that certainly, was we've on the realized And against. we've of So the now that go those then taking as we earned year. that have we of customers risk eliminating we that guidance remainder would were of the the off

that and smaller this that lot businesses. results. an But they and way to have would the the guidance those at ensuring shifting more mid-market upfront well related requiring a we're to is prepayment that enterprise in on to we've impact continue defined focused more our on as sales that point as volatility eventually, on of and team expectations focus eliminate we've write-offs they or improvements continue to should put the place, and escalate assume Our those ultimately, operational customers from customers, small to risky the

think reduce deals in year, you growth. aiming beginning off as write-offs about those write risk if to we're we we so X of would end the so move that the next months, the potentially to X of the And at the in of we're significantly selling year, into of today that terms

Henry Schuck

this in going per I about would of you this we add we're of share, we finish in XXXX. we based a lot grow meaningfully a new We the $X expect what when year XXXX, here, think tell flow cash quarter, to more in around add had year is that. the confident and that with -- to fact in rest I'm ARR our best and And free year. we'll the than that net

Koji Ikeda

have about that you. boomerang Henry. And I'll think it follow-up, back Henry, customers, don't in I you left you your commentary. to it, you. prepared talked about quarters, them Got may have for much if prior customers call ZoomInfo here, talked come one I really just that In

ZoomInfo some So color returned platform? bigger the on any of sort customers to have that maybe

Henry Schuck

Yes.

was our best back win ever. on quarter This quarter record

Operator

comes the question from Hynes of DJ Canaccord line of Genuity. next Our

David Hynes

for you. one Henry,

with? CRM that AI-driven that ZoomInfo confidence vendors intelligence, are the CRM to action. So prompting also you help will with best system trying vendors versus that What CRM today gives your the build of is of live The functionality Copilots systems. partner record a lot data or being you next the piped activating with into

Henry Schuck

data win that into sort of Copilot CRMs perspective, signal a Yes, and tomorrow a contact data you out use amount is data you I piped the company to that that to And the why. today, about reasons which to from as the to would think of reach customers gets or tremendous data. identify actually need

or think can right page of are customers that Or at competitor's hire or your the or time. intense signals signals CRM, researching signals competitor. And new you signal. so review And they for or visiting you of signals -- page to those is signal signals, as your in proprietary or and a pricing right that all engage funding ZoomInfo, live don't those to the and with visiting necessary

And CRM, Copilots off so the Copilot's be always work necessary missing to sit of data inside signal and just of useful. be we'll built actually a for that

building signal signal offering Copilot into our gone far good around ecosystem invested robust expectations. base of to well. And of us we've making was best Copilot lot we able people, the a that in in And a we've companies sure innovation built above puts Copilot, customer the been we've and sales so about the have that started last the but ahead and providers we there competitor monetization really also in as in we've the our and our of any year. solidly space deliver of feel It the out

Operator

question of Our from Taylor UBS. comes next the McGinnis line of

Taylor McGinnis

it So recent reversal some trends we've is look increase, of sequential a XQ the which a assumes if from I seen. guide, the rev at

write-downs there. But impact I an that in I might quarter. can mentioned $XXX gap? bridge you that Now imagine of Cameron, softer having revenue due think the us adjusted the be million new of be some to would that might help business changes you in

as and And embedded? difference impact quantify that reported? that's So up pieces we you make write-down able are the XQ XQ, to can the and business what into between you quantify was the in that look new

Peter Hyzer

we receivables the So estimates in that quarter, the and charge a second to related estimates change are we had, from of took customers. of those the collectibility around

run to through with of to QX. the that was in recognized respect So revenue that's that we've needed to due change million the that revenue, but effectively estimates and $XX charge, historically,

but And changed QX. clean was around estimate going a really a on million, as that of with we GAAP in write-downs So at the start into slate. therefore, we million revenue those, recur included perspective that our identifying everything we shouldn't put that forward, risk, $XXX from was focused we've to $XX generated felt it QX that want

million, in So out it you think QX, to while based growth that, million, be the of $XXX to will $XX the compared still if be were a on it write-down. decrease to relative back that million I would $XXX

Operator

Markets. KeyBanc the Capital comes Jackson with of line Our Ader from next question

Jackson Ader

why removed Henry, is, the are are just guidance or from being kind trends in are trends actually Or it happening curious, me as we business the we to is not are momentum of the that's on I'm enterprise August? in conservatism? taking seeing that for the some expected true one here already guidance? is early just the of here and Or slow you're it positive forward. as or going you Really, out of -- continue, this

Henry Schuck

the operational slow down in feel to that or and execute we're anticipate We about going that to against and really business improvements the seeing No, the the the that. upmarket seen not good we're momentum success momentum. enterprise continue operational we've

Operator

of comes Turrin from Wells line of Michael the Fargo. question next Our

Michael Berg

the a how how a on Michael I how can about of write-offs, Turrin. flows And for through rolling of can into Berg think margin I that think that quick fiscal percentage I follow-up. margin the 'XX When fiscal about on have impact? the you impact through Michael think 'XX? then about rest Then

Peter Hyzer

Sure.

as expect well Those are out charges won't that that. XX XX-Q. laid points in So in we higher, higher. And margins specific did almost When would of press a events. additional past been discrete we the have you like have the number materially look have release I'd charges, the as those

perspective. think charges I'd kind out, the would pro a if underlying that from those business modeling you -- the of forma I start performance of be the So that with

Michael Berg

Helpful. a for follow-up here. And quick Henry

to point You shares driving be here. to be that's aggressively a scooping point buying on mention up things would the your your plan to in key that moving What more shares to you forward? call made confidence

Henry Schuck

saw. our since since Look, DaaS operations time that We retention business and first first the a we time this We net tremendous about $XXX,XXX growth stabilize QX improvements saw part I saw XX% growing cohort had think for that in year-over-year. tough amount of growing that QX is operational revenue the saw DaaS business of our -- we 'XX. for 'XX. the quarter We

cohort. ACV base. into issue the write-off the our significant our to a upfront addressing continue solidly from We're million $X our business sales expectations new taking perspective customer a grow is amount above through of by We prepayments. Copilot

the to because and being have tremendous hard year. excited And rest buyer. of that's a of investors ZoomInfo, way confidence fit the we have lot in be there. that for that going to think I'm for guidance of charge to thinking really market tremendous see and I That we're a product said, the accounting be I about this

Operator

of line question Thind the comes next Jefferies. of Surinder from Our

Surinder Thind

your color is then on winning, any current does down you when so between And how And what that you're SMBs mid-market? enterprise? ARR NRR Henry, SMBs maybe the breaking that to the the Just, mix compare look mid between maybe at mix? new and business that and and

Henry Schuck

watermarks Yes, you we side, can business new think about the had -- enterprise for business on high new and side the mid-market on new business.

XX% quarter significantly said And rep a by the And as the you than XX% percentage across business seen driven base, about customer are base of -- the SMB. intention the rest enterprise. significantly in those in the Around is it That sales allocating under as the that properly a so resources XX% and higher and in then we've mid-market reps move to enterprise. SMB, was historically. market up group. Cameron kind little our mid-market breakout and in think segmenting the into and can mid-market enterprise

Surinder Thind

The time? ARR on of Was clarification that Copilot. it. $XX figure you provided, as period Got of think that is different it million. or just question of I And quick as end was one a quarter

Henry Schuck

was of quarter That as end.

Operator

comes of question Peterson next Our James. Raymond from of the Brian line

Brian Peterson

I are quarter, charges I figure? sure prior in periods? the XQ to million in of NRR? So how Cameron, make the just of NRR future periods that just some that been this much is embedded want to $XX understand would is the clarify, impacting or Or have how charges just the on you mentioned impacted

Peter Hyzer

Yes.

the most new estimates, changes really So of through to we've and the in write-offs more increase they the NRR. brought on business than have of that gone do that

not by So the really impacted NRR is those charges.

Operator

Panigrahi Siti of line the with from comes question next Our Mizuho.

Sitikantha Panigrahi

half, you're I just about exclude talked you to if if look at down that write-off. $XX in second revenues, million $XX million I your clarify, taking want you guidance

or you're see quarter? how of $XX million versus a much So that to -- softer new any the or downsells kind renewal how that is going much QX that sales taking write-off given strong out, another of you're of any cannibalization

Peter Hyzer

entire of to the that, that the that that Roughly is So million. full has change incurred. way guidance, in half write-offs do Siti, with the we've of think I so about $XX

So the part of that is charge.

over Another half recognized would wrote those customers revenue that second year. the off that of the part is have from the we we

that in write-offs. Part of an half assumptions in an in around really other of is that terms the of increase The ongoing overall. conservatism is conservatism the market increase

just as write-off and those as well around escalate environment. the So rates seeing retention forward conservatism sales going

Operator

from Joshua Needham. Our next the with of comes line question Reilly

Joshua Reilly

one for quick me. one Just

renewals is You what other what weren't changed you that in the increased for was maybe relative Was some a for SMBs. first there and then of considering? factor when period maybe time, great at first bit what little in came where of period Or of or end month the better saw the quarter? do seemed were guess period to of in for like that the the write-offs I SMBs be we play should it macro quarter. a seeing worse? got it think June we time Because you factor it dramatically into mentioned there some

Peter Hyzer

period a the and of up in write off. fully happen we So obviously we an something time to immediately. get write-offs. us and is point catching Part ready an those take we're We're Write-offs did timing rates in associated where the in and of payment don't to for folks, chasing before the write-offs. does see the of it with revenue increase that increase certainly,

businesses We their access to in terms further of have stretching seen also small capital. of

So down, as into you summer. that's see gotten happened more shutting in we've increases the companies think the

as those look June. saw If we QX of end say the I'd improvements to factors so reverse And then got to that QX, in through trend we saw the into those we the got as from we rates we and actually write-off two quarter. changed QX at our certainly back

Operator

comes the JMP. Citizens question next from of Pat Our Walravens line of

Austin Cole

here. ACV. This And XX% just on to doing can it Pat get? wanted of success ask Can is drive do for you think about big you're the I Austin what business, about how just to Cole Walravens DaaS there? you talk

Henry Schuck

can year, a built can the responsible We customers our integrate that real get it's are data workflows within like new growing, workflows continue specialists helping anticipate who meaningful rates it's that business DaaS and their the of behind planning be question. our and this -- for that to they're Yes. territory growing account We be last -- a -- or workflows AI part going of grow at team for forward. or our building. that scoring Thanks

Operator

questions the And to to remarks. like over showing further I I am no turn call would this at Henry time. for closing

Henry Schuck

important tonight. you, Thank everyone, like call. the for are takeaways just I reiterate tonight's think key joining what take us moment most to I'd to from a

the taken our while this impact and our comprehensive QX us write-off, results and accounting for action fully full charges and well they this very negatively quarter we've address the First, sets future. flow guidance, to quarter through and necessary up year

business. we've necessary credit operational be Additionally, way that extend we that do headwind to in write-offs ensure to the continue not customers, our made the adjustments in our to a

NRR performance, operational strong stabilized. delivered we Second,

in cash Thank speaking seeing the new to expectations, of net in the creation our share. I year. value committed have cases. look best investor over consistently And flow and $X per driving million customers. long-term use growing you you. solidly we by in we a quarter were growing opportunities forward number through as a events to see with we weeks. growth free We are above ARR We're coming Copilot and you AI sales and participate $XXX,XXX data-as-a-service our person driven

Operator

participating. you call. for conference Thank all today's concludes This

now disconnect. may You

ZoomInfo (ZI) 5 Aug 242024 Q2 Earnings call transcript