Q3 2020 ZoomInfo Technologies Inc Earnings Call
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I would now like to hand, the conference over to your speaker today, Jerry Kaczynski. Thank you. Please go ahead Sir.
Thanks, Judy welcome to assume it's all those financial results conference call highlighting our results for the third quarter of 2020 I wouldn't be on the call today are Henry shock CEO and founder of Zoom info and camera eyes, or our chief financial officer. After their remarks, we'll open the call up to a question answer session I would like to remind all participants that.
During this conference call any forward looking statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 expressions of future goals, including business outlook expectations for future financial performance and similar items, including without limitation expressions using the terminology may will believe NXP.
Russians, which reflect something other than historical facts are intended to identify forward looking statements forward looking statements involve a number of risks and uncertainties, including those discussed in the risk factor sections of our filings with the FCC actual results may differ materially from any forward looking statements. The company undertakes no obligation to revise or update any for.
Looking statements in order to reflect events that may arise. After this conference call, except as required by law for more information. Please refer to the cautionary statement included in the slides that we have posted to our Investor relations website at IR Dot zoom info Dot com all metrics discussed on this call are non-GAAP unless otherwise noted.
A reconciliation can be found in the financial results press release or in the slides that we have posted to our investor relations website with that I'll turn the call over to our CEO Henry Schein.
Great. Thank you Jerry and welcome everyone.
This quarter more customers than ever stepped up to modernize their go to market motion by adopting human data and insights platform.
In Q3, our teams delivered 41% organic growth over last year up 40% from last quarter.
A 47% adjusted <unk> adjusted operating margin, we achieved the most adjusted operating income ever in a quarter and year to date, we have delivered $167 million and unlevered free cash flow.
Because of the strength that we're seeing across all areas of the business, including record quarterly new sales record engagement levels and a new high watermark for a customer spending over $100000 a year with us we are raising our financial guidance for the full year.
As Weve continued to enhance our offerings and capabilities, we saw customers of all types to engage with our data and insights platform at record levels in the quarter, we experienced record high engagement rates, including a 33% increase in and adoption of our foreign complete product, 67% increase in adoption of our intent.
Product and a 40% increase in adoption of our inbox AI product the move from analog single channel to digital multichannel motion that started in the last few years continues to transform business to business selling.
Our teams are focused on consistently executing on our vision, where human cell powers. The closed loop go to market cycle from data to decision and action. One that is less reliant on her ROIC unpredictable out loud for outlier performances and more dependent on a scalable predictable platform or.
Approach with data driven orchestration.
Zooming full platform seamlessly deliver data and insights to drive the day to day go to market activities of thousands of leading organization by using our platform sellers and marketers are able to identify prospects right their target their best target companies monitor in market buying signals in real time get direct contact info.
Nation for their prospects and directly engage with them.
We are in the very early innings of what we now see as more than a $30 billion total market opportunity with meaningful corporate initiatives in flight seeing increased our total addressable market.
And we continue to see a long term opportunity to drive a rare combination of both durable growth and profitability.
During the quarter, we signed deals with companies from a diverse set of industries from the Horton group and insurance employee benefits and risk advisory firm to total plastics, a plastics distributor to Roadrunner recycling, a waste and recycling service to Echo global logistics, a publicly traded provider of transportation.
Management services.
Servicemaster restore who does commercial and residential restoration services and feed grain packaging, the leader and molded fiber packaging solution.
In the quarter, 40% of our new ACB was generated from industries outside of software and business services.
Most of the companies of any size and in any industry can and do use the zoo menthol platform to grow their business.
Q3 was also our best quarter on the land and expand side. Our teams added more customers that are greater than 100000 dollar HCV cohort than ever in our history with more than 720 customers now spending $100000 or more in HCV with us.
To attract new customers.
To attract new customers.
And expand within our existing customers, we continue to reinforce our competitive moat by investing in our platform our robust core data assets and by executing on M&A that fortifies, our strength and increases our reach within sales and marketing organization.
Touch on all of those areas Matt.
To capitalize on our momentum within the enterprise, we released a host of new features designed to provide greater speed scalability transparency security and administrative control to our enterprise customers as part of those initiatives, we greatly enhanced our analytics layer by embedding business intelligence dashboards directly into our plan.
Perform.
These allow users to track real time changes are as an enrichment solutions are making in a customer CRM or marketing automation platforms and to provide detailed usage analytics that given administrators clear views of platform engagement.
This new analytics capability helps to clearly communicate the ongoing value and ROI provided by documents.
On the data side last quarter, we talked about how we continue to invest in and differentiate our data products by using machine learning and AI to ensure our customers enjoy the industry's most accurate and comprehensive data those investments have grown our professional dataset over 30% since the beginning of the year from 100 million per.
Filed at the end of 2019, the more than 132 million at the end of Q3 over that period. We have also increased filled based on direct phones by 29% and validated email addresses by 24% all white, all while simultaneously increasing data quality.
From a platform perspective, we have been extremely busy in Q3, we wash and gauge sales engagement offering designed to help sales teams maximize productivity through access to an automated sale dialer Hilton email automation and technologies to manage sales workflows engage users have a clear next.
Step for activating their data and engaging with prospects and customers although.
Although we don't expect it to be a material portion of our revenue in 2020.
The Tam associated with this market is estimated at around $9 billion by 2025, and we do believe it will help drive incremental growth in 2021 and beyond leading to an increase in our total addressable market.
In addition to launching engage we also released hundreds of new features and improvements in Q3 designed to make our platform easier to use more scalable and able to process more data to meet the needs of the largest enterprises.
This started with but is not limited to a significant redesign of our mobile experience improvements to our quick search redesigns of our company and contact profile alert and the home page. We also added a real time intelligence feed to give our users a place to consume proprietary and actionable content on their target prospects and.
Customers.
We believe these types of investments in our core offerings pay dividends by providing a better customer experience that delivers greater value, making the product stickier and leading to higher retention rates and upsells from our customers.
We also talk we also tackled the big common challenge for all go to market teams the need to unify first and third party data sources.
To help solve that we released a new bidirectional salesforce integration capability, allowing users to unified data from their Salesforce CRM systems with zoom in third platform search today more than 65% of our customers have activated some form of zoom in FFO integration with their go to market systems.
All of that platform work has not gone unnoticed and Q3 Gtwo crowd released its fall grid, where zoom in FFO was listed for the first time in the count data management AI sales assistants email verification lead mining and visited identification grid.
And the last three years, we have gone from appearing on Fiveg to grids to appearing on 32 grid and placing number one on 19 of them.
This is a testament to our ability to innovate release products to the market that are rapidly consumed and best in class and expand the platform to drive more value for our customers.
These platform enhancements have helped support our legacy platform migration efforts, where today, we have over 60% of our ACB on our new platform we.
We have consistently seen a modest uplift when migrating customers to the new platform on a like for like functionality basis, but once on the new platform our customers embraced the new depth of coverage and improved features and functionality with more than half of migrating customers, adding additional users.
And while very early in the renewal cycle.
Initial indications are that expansion activity from the first cohort of customers on the new platform are even better than what we've seen historically.
Within our accounts, we still see a tremendous white space, our data indicates that our existing enterprise customers represent an opportunity to grow by more than $1 billion in incremental annual spend even taking into account that we have almost doubled our up sell into that cohort. So far this year.
In terms of data privacy, we continue to make progress on notifying every mailable professional in our database by the end of the year and recently eclipsed the 88% Mark.
We also recently announced that we have received the trustee enterprise privacy certification feel demonstrating our commitment to data privacy and to the security needs and growing expectations of our customers.
Finally from a product perspective in Q3, we continued to execute on our acquisition strategy, enabling us to close the acquisitions of click Angie and adverse trends in early Q4.
Given our successful M&A track record and our plan to continue to pursue acquisition I will briefly discuss our philosophy and approach to M&A before speaking to each of these acquisitions.
First we target high value adjacent fees, where we can leverage our leading go to market organization to drive significant growth with an LTV to CAC well above 10, x. across a scaled go to market team touching tens of thousands of customers and products and prospects. We have a proven highly efficient go to market engine with the Q.
Track record of bringing solutions to market.
The sales and marketing ecosystem has a flurry of solution that drive go to market effectiveness nearly all of the solutions much like their CRM and marketing automation predecessors are empty boxes without the data and insights that zoom info filled them with so.
So we look for products that integrate with our data and insights to create a differentiated value proposition to customers that competition cannot match with narrow automation alone.
Third we look for technologies that are near to what we do and adjacent to our current offering we stay close to home, but look for assets that provide immediate and long term value to our customers, while expanding our total addressable market. We believe that there is a real opportunity to become the defacto operating system for all go to market team.
And finally from a financial perspective, we look for transactions that are accretive to our adjusted operating income within the near term.
With a click of GE acquisition, we improve our intent offerings by providing the first streaming content offering for b to B sellers.
The core of what zoom in FFO Doug.
It's helped companies know that companies they should be engaging with and the professional that those companies, who make buying decisions for their products and services.
With streaming intent data unlocks is the when around target buyers being in market doing research and poised to make a purchasing decision.
This allows sales and marketing teams to tailor messages offers and resources to increased win rates.
We are confident that over the next three to five years between intent data will become a central ingredient to how companies target and segment potential customers and tried to go to market motion.
And just a last year, we have seen the number of forward leaning customers that subscribe to our intent offerings more than triple.
And announced last week after a string provides a count and from a graphic data as a service for the enterprise market.
Members terms proprietary AI and machine learning has mastered sourcing and tracking of information on the long tail of SMB companies that are notoriously hard to detect and maintain.
And we do it at scale with an incredibly high degree of accuracy, allowing them to take share from much larger legacy data providers.
Ever streams 100 million company record 70 million professional profiles will be integrated into zoom info data engine, a 15 million company records and $132 million professional profiles.
I continue to be impressed and thankful for the great team that we've put together to go after the opportunity in our market.
We continue to virtually onboard hundreds of new employees to each quarter and we're doing it in a way that truly connects them to our culture, our commitment to providing a great place to work was recently recognized with comparable lead naming thats one of the top 25 work places in the country for happiest employees.
We have also made a company commitment to diversity and inclusion sharing our progress across the company and regularly discussing it at the board level. We're proud that we have meaningfully increased the percentage of diverse employed the zoom infill over the last 12 months and expect to continue our progress here.
With that I'll hand, it over to our Chief Financial Officer Cameron High there.
Thanks Henry.
We are driving a high growth subscription business at scale, and we operate profitably, which allows us to reinvest operating leverage to drive durable long term growth.
In Q3, we posted organic growth of 41% acceleration relative to what we achieved in Q2, and we did so with an adjusted operating margin of 47%.
GAAP revenue in Q3 was $123 million of 56% year over year organic growth based on allocated combined receipts was 41% compared to Q3 19.
Driven by strength in new customer additions and expansions of existing customers.
While GAAP revenue and allocated combined receipts of converged in 2020 the difference in growth rates is due to the fair value adjustments of acquired unearned revenue the impact of the comparative figure in 2019.
Both new sales activity and existing client net expansion improved relative to Q2 and last year, we continued to build momentum and increased win rates throughout the quarter and this combination of strength in new sales and expansion activity helped drive sequential revenue growth of 10% adjusted for the relative days in each quarter.
Our land and expand motion continues to underpin our success, particularly in the enterprise customer spending $100000 are greater in HCV increased by about 70 to more than 720, which was our strongest quarterly increase.
As we move to expenses adjusted gross profit in the quarter was $109 million, yielding an adjusted gross margin of 88% in line with the margin we delivered in Q3 2019.
Adjusted sales and marketing expense was $30 million or 24% of revenue up from 22% a year ago. We.
We continue to drive an LTV to CAC that is well above 10, x., reflecting our go to market efficiency and success. This quarter and we will continue to invest in expanding capacity to drive sustainable growth.
Adjusted R&D expense was $8 million or 7% of revenue in Q3 up from 6% a year ago, we continue to invest in R&D as well as innovation in data accuracy and coverage to further deliver value to our customers and extend our competitive advantage as well as expand our addressable market and create a pipeline for new revenue sources in the fee.
Feature.
Adjusted unit expense was $13 million or 10% of revenue as compared to 7% a year ago. As we have added capacity to operate as a public company and incurred public company costs, including increased corporate insurance and professional services.
Adjusted operating income in Q3 was $59 million, yielding a 47% margin, which compares to $47 million in a 54% margin in Q3 2019.
Operating margins were consistent with our guidance, which called for higher public company costs. As Q3 was our first full quarter of being a publicly traded company.
Adjusted net income for the quarter was $43 million or 11 cents per share based on 403 million weighted average diluted shares outstanding.
Turning to the balance sheet and cash flow, we ended the quarter with $306 million in cash and restricted cash and used approximately $70 million of that to fund the acquisitions of click to June ever stream after the close of the quarter.
In the third quarter, we generated operating cash flows of $49 million, which included $10 million of interest payments Unlevered free cash flow was $60 million for the quarter and $167 million year to date.
With respect to liabilities and future performance obligations on unearned revenue at the end of the quarter was $176 million and remaining performance obligations were $458 million of which $349 million are expected to be delivered in the next 12 months.
In Q3, we did experience an improvement in the mix of annually paid contracts relative to Q2, we are still below what we experienced in 2019.
Some analysts look at calculated billings to approximate in quarter activity, but I would caution you from placing too much weight on this calculation our dynamic mix of billing terms and lack of consistent seasonality of contract explorations cause a significant level of variability with respect to honor revenue calculated billings and archeo as evidenced by comparing.
In the last two quarters as such given the fully subscription nature of our business. We focus on sequential growth in revenue adjusted for the days in the quarter to more accurately assess the signal through the noise.
As of September Thirtyth, we carried we continued to carry a $756 million in gross debt and our Q3 net leverage ratio on an LTM basis is down to 2.1 times.
I also want to speak to the disclosure. We made this afternoon with regard to our plan to restate. Our Q2 financial statements. This is a restatement of tax benefits that we recorded in Q2 related to our up sea structure in the IPO transactions, our internal team identified it as part of our preparation and review of Q3 financials and determined that it should.
Not have been recorded.
This difference is driven by certain calculations and estimates regarding the impact of the IPO on long dated deferred tax assets derived from the difference between the GAAP basis and tax basis of partnership interest held by corporations within our structure, which were impacted by the restructuring of sponsor owned entities stock compensation expense and carrier.
Our tax basis from prior transactions.
We will be filing an amended 10-Q for a previously reported Q2 results.
Year to date figures in our Q3 financial results press release and presentation materials properly reflect this change which is detailed in our press release increases GAAP net loss in Q2 by $22 million and principally impacts the balance sheet by reducing non current deferred tax assets $62 million.
The adjustment did not impact any of our key performance metrics, including revenue adjusted operating income cash flow or adjusted net income.
The FCC structure deliver significant value to our shareholders, but requires extremely technical and specialized accounting knowledge. We have expanded our team over the last three months and are confident in our ability to effectively manage these complexities moving forward.
Before we turn to guidance, we've noted the GAAP revenue and allocated combined receipts of converged in 2020 and to simplify comparisons and avoid confusion, we have consistently guidance to GAAP revenue.
As such this will be the last quarter, where we provide allocated combined receipts as a supplemental metrics.
Is that helpful. Addition, please note that we have included historical ARPU balances for Q2 2019 forward in the financial slides to provide incremental transparency for investors as it pertains to trends remaining performance obligations.
As we move to guidance. Please note that our that reflected in our guidance is the expectation that click Aegean ever stream will contribute a couple million dollars in revenue and will be mildly loss modestly dilutive to adjusted operating income in Q4, we expect them to be accretive to airline in the first half of 2021.
With that I will provide our outlook for the fourth quarter and our revised guidance for the full year 2020.
We expect to generate GAAP revenue in Q4 between 129 and $131 million and adjusted operating income between 50 and $60 million.
This guidance implies 43% annual revenue growth or 35% growth relative to the previously reported allocated combined receipts figure for Q4 2019.
And a 45% adjusted operating margin.
At the midpoint of the range.
Non-GAAP net income is expected to be nine to 10 cents per share based on 404 million diluted shares outstanding.
For the full year, we now expect GAAP revenue to be between 465, and $467 million up $13 million at the midpoint relative to our prior guidance and adjusted operating income of $220 million to $222 million of $6 million.
Our upwardly revised guidance for the full year implies 39% organic revenue growth and 47% margin at the midpoint of the range.
Non-GAAP net income for the year is expected to be 31 to 32 cents per share of two cents per share at the midpoint.
And we now anticipate unlevered free cash flow to be $213 million to $215 million up $6 million at the midpoint.
To summarize.
Q3 was another quarter, where we delivered strong revenue growth profitability and free cash flow.
We continue building our teams developing and acquiring technology, increasing the value we provide to customers further differentiating ourselves from competitors and expanding our sales and marketing capacity to drive future growth.
All of this enables us to confidently execute against our plan.
Now, let me turn it over to the operator for questions.
As a reminder to ask a question will need to press star one on your telephone.
Joel Your question press the pound key we ask that you. Please limit yourself to one question. Please standby, while we compile the queue in a roster.
Our first question comes from the line of Brad Zelnick from Credit Suisse. Your.
Your line is now open.
Excellent. Thank you so much and congrats on a great quarter.
Henry I listened very carefully to some of what you said today, you talked about becoming the de facto operating system for go to market teams and as I contemplate what you said of around zoom info engage and totally appreciate that this expands your market opportunity.
Just trying to understand was this something that customers were asking for versus your vision of where this market is heading and and how should we think about the lines blurring between zoom info in core CRM platforms.
Hey, Brad Thanks for the question I think first with engage when we saw it as an opportunity to have a closed loop system, where customers can live inside of zoom and fell they have an opportunity to find the data on their customers and prospects and then actually have a method to engage with those prospects. So we heard from a lot of customers.
That.
Having the data and insights was incredibly powerful but activating it was.
Was a struggle for them and so building engage into the core part of our platform allows our customers not only to have access to our best in class data and insights, but also to be able to engage and activate that insight.
Update on insight.
Against their customers and prospects and I actually think that theme the idea of having access to data and actually debating it and having access to insight and actually activating. It is the same theme, we see with the click at GE acquisition, where.
Total FFO who is.
The sales and marketing arm of Gartner talks.
Talked about how companies are continuing to invest in intent data, but they don't have a way to activate it and so bringing that underneath the umbrella of zoom in style and then creating automated ways for customers to activate against that data I think is going to be a core focus of ours going forward.
Excellent thanks, and if I could just ask ask one follow up clearly there is tremendous opportunity for you here right here.
At home in the us, but any update on international investments that you're making thanks.
Yes, absolutely ready so international was this quarter. We spent a lot of time on international It was actually Q3 was our very strong internationally, we grew revenue 60% year over year against that segment of customers.
The pandemic did make us rework our strategy to open local offices in the short term and we adjusted by aligning a segment of our East Coast sales account management and customer support team to European hours that shifted in alignment is working very well for US and then on and then we spent some time on the current dataset internationally, we focused on increasing our cover.
Rich on companies in contact in the UK, and Ireland, where we're beginning our international focus and in the quarter, we increased contact coverage over 50% in those countries, we increased contact coverage across Europe, 168% year to date direct down numbers across Europe, 35% in the quarter and then our acquisition of adverse trend also cigna.
Typically expands our company coverage internationally that data asset includes over 5 million companies in the UK and Ireland and 13 13 million companies across Europe. So we feel like we're in a stronger position than ever to be the single source of truth for company and contact information for any multinational enterprise.
That's awesome, thanks, Henry and congrats to the entire team. Thanks Brett.
Thank you. Our next question comes from the line of Raimo Lenschow from Barclays. Your line is now open peak.
Hey, Congrats from me as well.
Henry on on ever string just kind of because you are not public that long just how difficult is it to bring these two data sets together and just kind of get type one coherent AI on it and just kind of combine like how you clean and healthy clean it and just have like one integrated stats and then kind of what does it mean like.
From from a customer check you you've touched already on it but it seems like its changing your b to be quite a lot in theory.
Yes, Hey, Raimo. Thanks for the question. We the good news is we have a lot of experience with this starting with our acquisition of BBI profile in 2015, where we went through that same motion the acquisition of ranking where we combine data sets and then the acquisition of Xoom info, where we combined our data sets and processes.
Systems together, so we've seen the movie a few times, we have learnings from those experiences that we're bringing to bear.
In the run up to and during diligence in the run up to announcing the acquisition. Our teams go through a pretty rigorous planning and integration process, where we're identifying exactly where are the merging of their datasets is going to happen, how it's going to happen in the short term how that falls to the medium and long term.
And so we're already integrating that data today, we're already in a place where weekend, where we can deliver to customers a superset of that data that we'll continue to refine overtime.
Okay perfect. Thank you, Chris Thanks very much.
Thank you. Our next question comes from the line of Jennifer Lau from you via your line is now open.
Great. Thank you and maybe just following up on Brad's question a bit you mentioned some of the challenges that that your customers have had kind of figuring out how to take action on things like intent data and if it gets even asking a level higher how many of your customers are really at the level that they understand the intent data.
Insights and are taking advantage of those at this point versus customers, who maybe are still there earlier in the adoption curve and really more focused on contact data at this point.
Yes, Thanks Genesis Super interesting question, our customers come from a variety of different places when it comes to.
Sophistication and using our data sophistication and going to market.
There are some customers large and small today, who.
Just who use our platform as a prospecting tool on as you move up the sophistication curve, we find clients, who use our data and insights to drive complicated propensity to buy model.
To drive territory mapping for thousands of sellers I think the thing that we realize is regardless of where our customer is on that maturity curve. Our solutions can drive quick value in their customer acquisition efforts.
And then an interesting thing that we're seeing.
Than I've seen in every customer call that I've had this quarter, we found companies asking us how they turn their CRM system from a system of record to a system of insight literally every single customer is having this conversation with us today and they're getting value from CRM at the hub. There are just not seeing their users.
Topped it or get real value value out of those system because on their own. They just provide new insights and so they're looking to us to help them make that transfer formation and.
So again those are those are companies really early in their go to market maturity.
To companies that are really sophisticated about the way they go to market.
Okay. Thank you.
Thank you. Our next question comes from the line of David Hynes from Canaccord. Your line is now open.
Hey, Thanks, very much guys. Henry you made an interesting comment in your prepared remarks that expansion dynamics are even better on a new platform and I realize it's early cohort data, but maybe you could talk about why you think thats the case and if there is any way to quantify it.
I think it's a couple of things DJ first.
The coverages broader so our customers are migrating from legacy discover or to zoom info find somewhere in the neighborhood of 10 X the amount of data and our new platform than than what they were accustomed to and so they are coming into our platform, they're seeing significantly more coverage and so they are adding additional seats with our sellers who.
You couldn't get the value out of our legacy platform because they didn't have enough coverage and then in the last.
During the last year year, and a half we spent all of our.
R&D effort on the new platform. So we've built new functionality new features from things like form complete to inbox AI.
To invest in 10 products and so you see customers stepping up and adding new features and functionality that they didnt have before inside of the new platform as well.
Angie.
It's worth noting it is still early days on those core cohorts, but based on our analysis. We are really excited about the fact that not only are new customers that signed up with.
With the.
New platform.
Expanding at a higher rate than new customers historically, but also customers that migrated over to the new platform or expanding a higher rate than when they migrate.
Yes, yes, Okay, and then one very quick follow up for you Cameron will add it. So current IPO is up 60%. Thanks, thanks for that year over year disclosure there in the in the slides is there anything in there that monies that year over year comp or is that.
Pretty good leading indicator of growth.
Okay.
Thanks for including me on the questions I appreciate that.
Yes, I do think that those are.
Metrics that we need to be careful with advisors.
Advisors investors to be careful with it does depend on a number of factors that we do have.
Less consistency and the seasonality of when contracts expire a big part of that is.
As part of our land and expand motion a lot of our Upsells are done off cycle, which creates a little bit of noise with respect to.
That ARPU metric so.
I very much focus on the.
Sequential revenue growth, which obviously you could annualize out those.
Does show that we are continuing to do very well and be somewhat careful with those bookings and billings.
Sure.
Okay very good thanks, guys.
Thank you.
Our next question comes from the line of Mark Murphy from JP Morgan. Your line is now open.
Yes. Thank you I'll add my congrats on a very strong performance.
So Cameron I also had a question for you as we kind of think through the 40%.
This trajectory for zemin, so right now if we turn to overlay the effects of the pandemic and the recession for Q3 would you say that Thats a net headwind now would you say it's neutral. We are you would you say, it's become a net tailwind and just given your reporting on the Dave.
Coincidentally that the Pfizer vaccine news came out how do you see the impression of the pandemic.
Going forward in terms of you.
Zoom into his ability to kind of benefit from from Reopenings next year and the year after.
Yes, So I think we've always said that the.
Okay.
The resulting economic uncertainty presents both headwinds and Tailwinds for us I think from a headwind perspective.
We continue to have customers that are at least partially impacted by by the pandemic and also just buying patterns, obviously change I think over the course of the year as customers and particularly larger customers became more acclimated to the environment I think we have seen.
Yeah.
What kind of benefits as people are looking to improve their their sales and marketing activities.
Overall with respect to where we are the.
The trend of people looking to improve their go to market activities.
Achieve better efficiency and effectiveness started well before the endemic and we have seen this is.
It's become more important but post pandemic, we expect that that trend will continue for a very long period of time that secular secular trend will actually help us as economic uncertainty continuously.
No I would.
Study by Mckinsey that came out in the quarter that down and only 20% of B to B buyers say they help to return to in person sales and they're getting not even in sectors, where field sales models and traditionally dominated like pharma and medical products and once you make a shift from analog to digital I can't think of an example, where you go back.
Yes, that's a that's a very good point I think we can all relate to and so Henry one other question I had for you. If you if you think through your typical customer that's maybe.
Maybe been with you for a couple of years. If you go back and try to look at their their own head count trend for their sales teams and for their marketing teams I think we're aware that's a lever that can drive some some dollar retention for you through its receipt extension do you have any feel for how thats trending in recent weeks or have you.
Seen any indication that.
Your customer base is kind of beginning to Reengage and.
Start to just kind of expand their sales teams more rapidly.
Yes, Mark maybe I'll jump in and then you can add color, but we certainly see within our enterprise cohort that.
That has improved in terms of our that expansion in up sell capabilities.
Well there has been some volatility in terms of overall headcount we are still so materially underpenetrated that theres a lot of opportunity for us to continue to grow and as Weve.
We've looked through our customer base, but we do have some customers, where we operate wall to wall or provide real benefits to them all the while the vast majority of our customers were.
Very underpenetrated and within the in the enterprise cohort. We believe we have at least a billion dollars of.
Incremental revenue just from the customers we have today.
Excellent. Thank you very much.
Thank you. Our next question comes from the line of Michael Tiron from Wells Fargo Securities. Your line is now open.
Hey, there thanks, and good afternoon, Cameron, maybe going back to those points on the macro you just laid out and the mix of potential impacts can you. Just spent some time following up there on some of the assumptions that went into Q4 guidance and is there anything else. Given this is your just your second quarter as a public company for us to be aware of from a seasonal expense.
From a seasonal perspective, as we head towards the end of the year.
Sure that's a great question.
We look at our business and we're still very positive on the secular trends that are impacting us and you'll continue to see great execution that being said.
This has been a year, where a lot of things have happened, whether it's economic uncertainties theres potential for election fallout.
Today, we really don't know what we don't know so we've taken a prudent approach to how we set our guidance to make sure that we're providing guidance that's.
Achievable and realistic.
From a seasonal perspective I think we've.
As a kind of completely.
Subscription based company, obviously, the revenue and expenses the only seasonality that you really get is based on our revenue recognition, where you get days in the quarter and obviously Q4 as a similar numbers.
Three we will see obviously, we will see as you move into Q1, which has fewer days that could have an impact and we adjust for that in our sequential growth thought process, but also how small impact on on margins as well.
And so overall I think those are the kind of seasonal aspects that we tend to focus on when looking at our.
Our reported results.
Got it thanks for taking the question nice job on the results.
Yeah.
Thank you. Our next question comes from the line of Alex Zukin from RBC capital markets. Your line is now open.
Hey, guys. Thanks for taking my questions. So maybe Henry first for you. When you look at your early stage pipelines, you're late stage pipelines. The sales cycles are close rates.
How did they look and compare to maybe earlier this year to your expectations during the pandemic to Mark's question around.
Around the pandemic, serving as this forcing function or or a change agent for you.
Where are we today kind of how does that look on it on a go forward basis and I got a quick follow up for Cameron.
Yes, I think if you look at that is kind of.
Every month coming out of March all of those metrics converge.
Conversion rate.
Demos opportunities close rate sales cycles, everything has improved coming out in March and that's come in every month weve seen improvement against the month before.
And so we're getting very close to our pre co bid.
Time period.
Got it.
And then I guess, you know Cameron if I look at some of the metrics pretty much across the board whether it's in revenue gross whether it's in billings growth, whether it's in current archeo or even current or bookings on a on a year over year basis sequentially, you're seeing acceleration.
Are there any adjustments that you would particularly on the billings number on the one hand. Your billings number is also very different and you talked about why it's not a good number to look at it across all three of those numbers is there any adjustments that kind of sticks out that we should keep in mind or pay attention to.
To take us away from that acceleration there.
And once again, I think that particularly those bookings and billings numbers do tend to have a lot of variability in them. So you know.
You look at.
Billings in Q2 that was a 17% growth Yorkers billings in Q3.
55% growth.
It's going to go back and forth I think when you look forward.
It will likely be in the middle of those numbers I wouldn't expect it to go.
Continue to grow because there is variability and realistically when you look back at Q3 of last year.
As always.
Adjustments that you could consider overall it's.
It's just.
There are so many adjustments in terms of whether its due.
In terms or.
The.
The.
All right.
Seasonality of when we'd soles prior periods that are that caused that variability and reasons why I'd be careful.
Yes.
Got it okay perfect. Thank you guys.
Thank you. Our next question comes from the line of Terry Tillman from two with Securities. Your line is now open.
Hi, guys. This is Nick on for Terry Thanks for taking my question.
I'm, so sorry to event and data a little bit. So certainly seems like your intended as solutions are seeing this uptick in terms of adoption again mentioned, 67% increase in adoption of the intent the intent product.
Just wanted to know if you guys could talk about the importance of unintended when selling the overall platform and this has led to an increasing number of enterprise customer wins it potentially much larger lands then just as a follow up how is the recently introduced streaming intense solution as they with customers so far thanks.
I didn't catch the last part now what did what did you say at the end.
So just as a follow up I wanted to know how the streaming antenna solutions resonate with customers. So far sorry about that got it none of them.
Yes, so look we think customers.
I think two things one companies wanting gauge what their potential buyers at the time that they are interested in their products and services and the BDC World has done an incredible job from a digital advertising and marketing perspective of being in front of their buyers when theyre thinking about the products and services that they.
Provide and sell and the B to B World has been far far behind B to B to C. Sophistication around there and we believe the biggest reason for that is the fact that these comp that the b to b companies have not had a way to kick off line in temp data and then activated through their go to market systems and so there were two things there.
To kind of important things when we think about intact. One we want to have the best content solution on the market, we want to be able to predict when cust customers and prospects our end market to buy any number of different products or services, we want to deliver that in real time to our customers. So they can take advantage of that data immediately moments after their customer.
Those are our crossing thresholds for engagement on certain topics or product and then we want to make it seamless for them to activate that data across their go to market system and so that the activation of that buying intent apple happen simultaneously without giving them the signal and I think bringing that together give us the gifts Buda.
The company is the opportunity to be truly a sophisticated BDC companies are in their in their go to market effort.
Got it thats helpful. Thanks.
Thanks, guys.
Thank you. Our next question comes from the line of Brent Thielman from Piper Sandler Your line is now open.
Thank you and good afternoon, I had one for Cameron and a quick follow up for Henry Cameron I wanted to drill down into the growth metrics I appreciate the caution reading or PEO in billing metrics here given the volatility, but if I look at just like sequential growth, 11% was the highest in three years.
Years year over year growth accelerated.
As you think about just the quarter in what drove the momentum was it broad based was it all enterprise just help us give us a little more color on.
Why yet you've reported the highest sequential revenue growth rate in three years and was there kind of a onetime benefit in there as well.
Yes, Thanks, that's a great question Brian.
It was broad based across the board, we saw really strong new business sales and Thats with enterprises and.
Mark as an SMB customers I think one thing to make sure to think about is that all of our customers or so into other businesses. So you know at the end of the there were probably lessened.
Less impacted by some of the coated headwinds that you might see than say a restaurant or.
Other folks.
And many of them are pivoting and finding ways to succeed these happen to be many of the more.
More agile and.
Forward leaning go to market teams in the world. So I think our system really help people to continue to perform and I think one of the things that we continue to see throughout was that the.
Retention or expansion among our customers continue to accelerate month over month.
Throughout throughout the year so.
No again.
Based on both new sales and retention across all of the different segments of customers.
Great. Good here and then Henry just a quick follow up with the recovery you're seeing in the mid market and SMB, how should we think about the ever stream acquisition and I would add to a broad swath swath of SMB contact data does this strengthen your share gain.
Capability in the mid market and SMB or is this more of a product play just trying to understand the logic of every screen.
Is it really shoring up SMB mid market and opportunity for you there to gain share or is it more of a product extension.
Yes, so from.
First ever string expands the from a graphic information we provide on small businesses that ends up being a key need for our enterprise customers are sophisticated mid market clients and our SMB clients, who sell to other smbs.
And we talked about every client that somewhere on the go to market maturity curve and this type of data and insights that are delivered at this type of data and the insights that are delivered from it is used for everything from simple prospecting activities to complex lead and predictive analytics, scoring but.
One of the places, we're especially excited that ever string helps us accelerate the success, we're seeing in the enterprise. It allows us to provide the data and insights to solve go to market challenges that exist across an organization and ever since then largely focused on that enterprise space with customers like Fedex and Iheartmedia Snowflake.
That they call their own and so.
We're excited about integrating it because we think it helps us.
Solve complex problems across the enterprise, but also had value to our sophisticated midmarket clients and our SMB clients, who sell to other SMB.
Helpful color. Thanks.
Thanks, Matt.
Thank you. Our next question comes from the line of Dan King from Morgan Stanley. Your line is now open.
Perfect. Thank you so much guys and thank you congratulations on a good quarter. Thank you for taking my questions.
From from my end of Henry maybe maybe one for you obviously.
Obviously, a very strong quarter of what it seems like a new customer acquisition, maybe just qualitatively what are these customers who are coming on board now in adopting zoom info to really help their go to market activities and how did they frankly survived through the first seven months of the.
Of the pandemic and then a quick follow up for Cameron on.
On the metrics. Thank you for giving us current ARPO and in as much as current RPL. Obviously, you know controls for some of the billing term.
These issues.
That also inflected very very strongly versus the momentum that we were seeing Q2.
Was was CRP owed simply a function of very very strong customer acquisition that you guys saw in Q3 Thats. It from me. Thank you guys.
Great. Thanks, Dan ill start look.
Look I think what we're seeing on the new business side is really strength across industries and across customer cohorts.
And everything from.
Plastics distributor to commercial and residential restoration services company came on in the quarter and so we see continued strength across industries I think what what you really see as companies are looking for digital ways to go to market some of them.
Some of them, because they're just coming up to sort of making the transition and some of them because they have been forced to make necessary changes because of the pandemic.
What you see often is companies that have.
And that have historically had a field sales force and have gone to market through expensive sort of field sales sellers coming to us and saying how do I make these.
These this sales team productive.
From home, how do I give them the insights that they would otherwise be getting by walking the floors inside of companies and shaking hands with their decision makers and warning that way how do we provide them instead of insights and data that they can use to continue to be productive when they're not and in a customer's office and so we hear it.
That often we hear companies accelerating.
Their motion to digitally transform on and then again, we see a lot of companies who are making transitions from salesforce instances are doing deployments of salesforce and they're making those deployments they are coming to us and saying look our sellers don't adopt and they don't love Salesforce it tends to be on a 10.
Tends to be a tool that they feel like they are obligated to go into to enter data into and we want to transform that into a system a system of insights for them a tool that they're excited to go into because they know they're going to get a unique piece of insight from from logging in and going into the tool can you help us drive that insights driven.
In motion.
And so thats, what were saying I'll pass to Cameron yes.
And then in terms of the.
A question on the current Archeo question sort.
Certainly as Brent pointed out we did have.
The best quarter that we've seen.
Yours in terms of sequential revenue growth and that certainly was driven by both angles one.
New sales that you were able to execute against in the.
In the quarter and also the net expansion that we.
Throw with existing customers as well and certainly that that plays into it.
An inflection point around.
Billings and calculated bookings as well, but again I would caution people from putting too much weight on.
Bookings and billings.
Billings.
Metrics just because.
Those do have other variables.
We'll drive different answers at different times, but just looking at sequential growth.
Got it thank you.
Thank you. Our next question comes from the line of Tom Roderick from Stifel. Your line is now open.
Yeah, Hi, everybody. Thank you for taking my questions great to hear from you. So Henry you noted in one of your remarks that there is potentially a billion dollar opportunity or just bill opportunity I think just in the customers that you have and the ability to expand their footprint I look at that number of customers over 100, k. that spend spend over.
I agree with you that jumped up pretty meaningfully this quarter, but still against the overall installed base, so pretty low percentage. So I guess, it's kind of a two part question Cameron, perhaps you could jump in with some of the financial metrics behind it.
First part of this is.
How are you getting these customers to make that jump in other words of that 720. When you landed another 70. This quarter was that predominantly back to the installed base are you seeing that new customers come in at that level and then the second more functional part of that is what are you doing with the go to market motion.
They are hiring new sales reps or changing the way that you go to market to attract more enterprise customers. That's it for me. Thank you nice job.
Got it so so first.
We run a pretty sophisticated land and expand the motion.
And so we are we are deriving existing customers from sort of low sort of low entry point in the enterprise to much larger subscriptions with us and I think youre seeing sort of most of the growth in that customer cohort.
And the 100, k. customer cohort coming from that expansion motion.
And again really because the way we sell as we can go into a large enterprise.
So.
Sell up 50000 dollar contract to some small division there to or a small set of sellers there and then grow from there by showing value against that that group of sellers.
Bye bye.
By expanding to other divisions at the company and not as a motion that we're running and investing until we do continue to invest in and refine the go to market approach in the enterprise as well one of the things that we released in the quarter as auto provisioning of free trials that allows us to target specific users within our enterprise customer base give them free access.
Presume info for a period of time gather in product feedback and then take that feedback up to senior executive executive that those companies to increase seats and that capability. We've deployed now across more than 2300 of our accounts, we expect that to continue.
To drive incremental growth within the enterprise and we've continued to hire.
Rex in the enterprise space as well one of our key hires in the quarter as a vice president of enterprise sales that we hired from Salesforce, who is running that enterprise sales team and so we continue to put make investments behind that team.
Excellent. Thank you so much for the detail appreciate it.
And I guess, Tom just to follow up on those numbers for us.
Lenders right that most of the customers are expansions, but Q3 was one of our best quarters ever in terms of landing new customers over 100 case that we are starting to see some.
Some good traction in customers coming in at slightly higher levels to begin.
Excellent. Thanks, a follow up appreciate again, thanks Henry.
Thanks, Tom.
Thank you. Our next question comes from the line of 15 pending gravel from Mizuho. Your line is now open.
Hey, this is Michael Bergeron capacity planning right. Congrats on great quarter I wanted to quickly follow up on quickly and.
And everything and I guess, where are you on winter in terms of integration how much longer do you have to go and do you have any early customer feedback whether it's from their existing customers using your platform were from existing dimicco customers using some of the new.
Feature sets and any commentary or color around that thank you.
Great.
Ever string we closed on Thursday, So weve had 70 twoish hour work hours of.
Customer conversations now I will tell you whatever string and Don for Us in a big way is we were involved in enterprise conversation, where enterprises are looking to us to solve their go to market data needs across the organization and a lot of that comes down to our ability to enhance and enrich the data that already exists across their end.
Our price and our ability to match and sale and enrich a broad set of that data the broadest set of that data with a go to market focus data asset.
We're already having those conversations were already seeing traction from the enterprise and excitement around our ability to do more with them, we really arent out position from from an average drink perspective, where we don't need to create demand within the customer environment.
For these data enrichment solutions thousands of our customers today use our data enrichment solution and the integration of the asset is going to instantly provide them value as we will be able to enrich more record.
And monetize for those record across what Theyre already enriching from us.
Then on the clinical side, which there has been a little bit more room between the acquisition and now we're releasing our our streaming intent data our streaming intent product. This month, we've already have customer sign up and ready to go on that lots of exciting customers, who want to get access to that as soon as it comes out.
And we continue to build an enterprise grade product that will allow us to pipe.
Intent level data directly into the enterprise into data science and machine learning organizations in the enterprise as well.
And so we're working towards those outcomes right now.
Perfect. Thank you and a quick follow up you know the $2 million in to Q4 is that correct.
Yes, that's our expected revenue from the two acquisitions combined.
So it's about if my math is correct about $10 million run rate or so.
Good write offs.
Yes, certainly, it's not going to be immaterial to our to our financials mixture.
Mixture as well.
Okay.
Okay. Thank you got to get.
Thank you. Our next question comes from the line of Brian Peterson from Raymond James Your line is now open.
Hey, Thanks, guys, Kevin year on for Brian You've mentioned before seeing an uptick in leads and brand awareness surrounding the IPO and I'm curious if theres anything specific you'd point to indicating that that is sustained and how do you think that may be impacting pipeline generation or that 40%, new HCV mix across some of your verticals with lower penetration rate.
Yes.
Yes, I mean, I think that the best thing to look at there is.
Is what our marketing more what our marketing teams look at and the strict the stuff that they track most closely as marketing qualified leads and those leads them marketing generates primarily from the website. Those leads reached an all time record both the number of end Q wells as well as.
TV over empty well Q3 was 65% higher than Q3 of 2019, and so thats a metric we track very closely and it is really what drives the the overall conversion rate to close when opportunities and so we continue to see really great momentum across that metric from a website and marketing perspective.
That's good color. Thank you.
Thank you. Our next question comes from the line of Pat Walravens from JMP. Your line is now open.
Oh, great. Thank you and let me add my congratulations.
So Henry if I'm, if I dividing this up wrong, let me know, but but it seems to me to kind of have firmer graphic techno graphics and intent data is your big areas I'm, just wondering where do you see the most white space for you guys in terms of.
More organic product development or more acquisitions.
Yes.
That's a great question I think Todd it's more like pharma graphic and you could put tekna graphic ads as an element of pharma graphic.
And from a graphic is like account data than professional data or contact data and then intent data I think those are all in like unique places from an adoption perspective from a graphic data.
The type of data that every enterprise knows that they need.
And we often find them kind of using a BPL solution to fill in some blank.
It's a pretty broken process inside of the enterprise to.
Gathering maintained keep that data up to date, but it had been around the longest.
Then professional data I think we're actually still in a really early stage of companies leveraging professional data for ideal buyer profiles to engage the right buyers at the right time I think we're pretty early there and then on the intent data side, that's still like a pretty like a largely evangelist excel.
And you're seeing customers totally understand the value of it because they seen its use in the BSD world and so they're familiar with why this would work for them in a b to b context, as well, but we're probably in the earliest stages of that from a data perspective.
In the go to market.
Okay, Great. That's really helpful. Thank you.
Thank you at this time I am showing no further questions I would like to turn the call back over to Henry Schein for closing remarks.
Great. Thank you look we continue to be extremely excited about the near and long term growth prospects for the company, we're focused on delivering value to our customers increasing engagement with our platform investing in technology to further expand our competitive moat building out a world class team and executing against value.
Creating M&A opportunities as I said last quarter. This is the starting line for US we have a very active calendar for the fourth quarter and I invite you to join US at one of the many conferences or events that will be participating in for more information on where we'll be in when please reach out to visit our Investor Relations Web site I. Appreciate you all joining us today. Thank you good.
Afternoon or good evening.
Ladies and gentlemen, this concludes today's conference call. Thanks for participating you may now disconnect.
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