Q3 2021 ZoomInfo Technologies Inc Earnings Call
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It came in fifth third quarter year, 2021 financial results conference call. At this time, all participants are in listen only matti.
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I'd like now like to turn the call I wish your speaker for today, Mr. Jerry as you say it.
Again.
Thanks, Tony welcome to zoom into those financial results conference call highlighting our results for the third quarter of 2021 with me on the call today are Henry shocks founder and CEO of Zoom Info and Cameron Heizer, our Chief Financial Officer. After their remarks, we'll open the call to Q&A.
During this call any forward looking statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 995.
Sections of future goals, including business outlook expectations for future financial performance and similar items, including without limitation expressions using the terminology may will expect anticipate believe and expressions, which reflect something other than historical facts are intended to identify forward looking statements forward looking statements involve a number.
Risks and uncertainties, including those discussed in our risk factors sections of our filings with the SEC actual results may differ materially from any forward looking statements. The company undertakes no obligation to revise or update any forward 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. So we have posted to our Investor relations website at IR docs human so dot com <unk>.
All metrics discussed on this call are non-GAAP unless otherwise noted a reconciliation can be found in our financial results press release or in the slides that we've posted to our Investor Relations website.
Lastly, we are participating in a number of investor conferences over the next few months, including RBC Credit Suisse Wells Fargo. The NASDAQ Conference Raymond James Barclays and UBS, We hope that we will have the opportunity to connect with you at one of those events with that I'll turn the call over to our CEO Henry shock.
Thank you Gary and welcome everyone. In Q3, we delivered another quarter of accelerating growth with strong operating margins and strong free cash flow generation. The team is executing well across every area of the business adoption of new products and new features and functionality is exceeding expectations international growth is accelerating.
Our enterprise investment continues to yield results zoom menthol is increasingly becoming known as a category defining company by delivering end to end success for go to market teams worldwide.
This was our best ever third quarter for New customer addition, and the leading indicators are pointing to meaningfully higher annual net dollar retention rates with expected improvements across customers of all sizes.
In the quarter, we delivered GAAP revenue of $198 million, representing 60% year over year growth up from 57% in Q2 and up 12% sequentially.
Sequentially when adjusted for the number of days in the quarter, we delivered unlevered free cash flow of $73 million up 23% year over year, we closed the quarter with more than 25000 customers of which more than 250 customers have greater than $100000 in HCV.
The number of customers with more than $100000 in HCV grew more than 70% year over year.
Our investments internationally continue to be a success story, we materially grew our data coverage in Europe and expanded the number of reps targeting the international opportunity.
We're in the process of opening an office in the U K and have already hired our first team of sales reps that will be based there.
Because of our highly differentiated offering demand for our platform as high driving year over year international revenue growth greater than 80% in the quarter with international representing more than 11% of our overall business or over $80 million on an annualized basis based on these results, we're again raising our financial guidance for the year.
<unk>.
In the third quarter, we continued to expand our modern go to market platform and drove further innovation and integration across the intelligence engagement and orchestration layers of the zoom into a platform prospects and customers tell us they want a one stop shop, a unified platform and they want their investments across the sales tech stack to be integrated.
This further reinforces the competitive moat that we're building with our unified platform.
Starting with the intelligence layer, we continue to grow our contact and company Imation. We now have information on more than 150 million business professionals and $100 million companies internationally, we grew our company and contact data coverage in Europe by approximately 80% this past year and we now cover nearly all businesses.
With more than 100 with more than 100 employees in Europe.
We have expanded our healthcare data asset, adding nearly a half a million new contacts and enriching 750000, others with supplemental contact information.
We are also innovated with new data privacy features customers can now exclude contact data from certain geographies and create a public presence flag to highlight data that is available in the public domain and we've built technology to support preemptive opt outs for contacts not yet in the zoom mental platform. These enhancements enable our customers to control.
We'll and customize their data experience and zoom info and further reinforce why our continued investment in privacy as a competitive differentiator.
During the quarter, our privacy team engage with dozens of multinational customers and prospects at subject matter experts on worldwide data use and privacy through guidance from that World class privacy team, a fortune 1000 network operations and security company rolled out our global data passport by leveraging the robust set of data privacy.
Controls are offered within our platform, including master suppression functionality and region by region granular privacy filtering capabilities.
Additionally, our fast growing internationally based payments processor brought zoom info on in 2020 to fuel their expansion into North America. After a year of success with their North America based teams our privacy team began engaging with the company's data protection officer, who had more than 15 years of experience navigating data privacy regulation.
Across more than 120 countries. Our team was able to walk through our global privacy notice framework historical opt out and noticed the metrics and developments.
And developments and plot and platform native controls that would assist in their compliance practices, including our prebuilt do not call screening and integrated master suppression filtering the interactions with our private teams and the innovation, we brought to our industry industry around privacy controls gave them the confidence to add zoom info is global.
Data passport across their international team.
On the engagement layer of the zoom info platform, we've continued to invest and engage our sales automation solution, we enhanced E mail.
We enhanced email analytic enabling sellers to optimize their E mail content timing and audiences to improve response rates and added an intelligent recommendations engine to deliver insights on the persona is most likely to engage based on prospecting history.
These recommendations are based on a combination of data from zoom info and response activity from engage interactions with a seamless integration to easily import lookalike audiences that maximize future engagement rates with these significant product improvements in Q3, we added the most HCV ever for engage since it.
Since its introduction in Q3 of last year, we now have more than 2000 customers leveraging engage to drive automation and efficiency in their sales motions. As an example in the quarter. We closed a six figure enterprise deal with a Swiss based pharmaceutical company, where nearly 50% of the ACD came from the <unk>.
Elegance Ware, and our global data passport passport and the other 50% came from the engagement layer.
In July we acquired course Dot AI, a leader in conversation intelligence, a market, which we estimate to be an $18 billion opportunity.
In addition to quickly integrating course into the zoom info platform, we are aggressively investing behind conversation intelligence, driving new and innovative capabilities to help our customers succeed and further drive our technology advantage, we plan to grow head count on the coarse product materially over the next year.
Since the acquisition, we've rolled out a number of significant enhancements to the course product course customers, who use salesforce and engage can now automatically save call recording transcripts and insights to their salesforce CRM accounts. We also added of course tab inside zoom info, where go to market teams can find their interaction history for <unk>.
Oh call recording email interactions a contact list, including those at the company with whom they had interactions with the ability to filter those interactions based on quick signals keywords in trackers and momentum insights, where a detailed summary view of call and email activity indicates how interactions are progressing at each.
Account in September we launched the next iteration of course is revenue intelligence capabilities, which gives users a clearer view of momentum across all deals in their pipeline.
Sales leaders managers and reps all now have the tools that they need to analyze and identify opportunities or risks in the pipeline, enabling our customers to close more business and efficiently drive growth.
We also launched the native course App for Zoom video communications, the new App brings course directly into the zoom meeting experience, enabling improved tagging no taking direct thinking with salesforce and the ability for sales reps to immediately activate specialists overlay sales support and others to join our call and real.
Time.
All of this investment has not gone unnoticed course was recently recognized as a strong performer in the Q4 2021 Forrester wave conversation intelligence course was called out for having differentiated features and standing out above the rest.
And received the highest possible scores in eight categories, including sales performance measurement sales modeling and forecasting post call coaching product and technology innovation roadmap and others.
Cause continues to win other industry accolades as well it was named the top rated product and software reviews 2021 conversation intelligence data quadrant recognized by GTT. One seven of their 2021 Best software Awards lifts and landed on trust radius as 2021 Top rated awards list for conversation in.
<unk> in addition to all of the development and integration work on conversation intelligence. We also integrated zoom info chat inbox from our Q2 acquisition of Incent Dot AI S.
Str's can now be notified and engage directly with high priority website visitors and live chat experiences within the zoom info platform, we surround that in App chat experience with company information News scoops and buying committee data alongside the chat conversations the zoom info chat application is now.
<unk> is a slack marketplace application, enabling sales teams to leverage robust zoom info data directly inside slack as they engage with prospects.
And zoom info recruiter, we added a number of new features to improve the user experience and open up the platform for more integrations, while still early we more than doubled the number of recruiter customers from Q2 2021 from.
From a feature perspective, we added recruiter pipeline management, allowing users to track and manage candidates through pipeline stages for the specific hiring projects. They are working on and enabling better integration with application with applicant tracking systems.
Through contributions from our innovation and data science teams. We added are likely to listen score that uses a variety of zoom info data to help recruiters find candidates that are statistically more likely to open to be open to changing jobs. We also added a new integration with PC recruiter, which allows talent acquisition.
Professionals to add candidates to their candidate pipeline.
Within the orchestration layer, we added significant capabilities through our acquisition of the leading data orchestration platform ring lead bring lead Ingests Queens enhances segments scores and routes customers' data then provide the flexible customizable and rules driven approach to integrating this data in.
To accompany system of record.
In Q3, we launched our first integration between ring lead and zoom info now when customers export records from zoom info to Salesforce. They can first flow through ring lead data orchestration workflows, ensuring deduplication record normalization and routing take place before the newly added records or passed over to their CRM.
With our continued investment in data orchestration in routing and triggers that initiate workflows that drive go to market motions more and more customers are realizing the value of truly automating their go to market motion based on insights surface through zoom info in the third quarter alone we saw 25% sequential growth in this level of automation.
<unk> from our customers through increased adoption of our workflows functionality.
During the quarter, we surpassed 25000 customers.
We now have more than 200 250 customers with greater than 100 K in HCV.
These customers now represent more than 40% of our overall HCV with the ACB from that cohort drilling by more than 85% year over year.
Both is coming both from expansion of existing customers and landing new customers above the 100, K threshold with customers, taking up more and more products at the point of initial sale.
During the quarter, we landed multiple million.
Dollar plus TCP transactions with new customers. We continue to have increasing functionality that is driving success with our largest customers driving ASP growth in that cohort and reinforcing that increasingly central role. We're playing in an organization sales technology stack, one recent customer and the project management and collab.
Duration space highlighted the power of our data and data orchestration platform their investment in zoom info data of the service solutions built the foundation at the company, while they also invested and bring lead cleanse and multi vendor and rich to automate lead flow and remove duplicate contact the customer wanted to understand as much as possible.
About a prospect at the beginning of the lead cycle and the speed and accuracy of the zoom info platform proved critical to increasing their speed to lead driving increased conversion rates and more revenue for their organization.
Our client in the on demand delivery service industry is making full use of our platform in every aspect of their business.
From using our intelligence layer to identify their next best customers from our orchestration layer. They've also implemented are complete and enrichment solutions to increase website conversions and keep their customer and prospect data up to date and accurate.
This customer didn't stop at the top of the funnel. They have also rolled out chorus to their sales team to drive real time coaching and competitive analytics from every digital interaction they have with customers and prospects.
In order for us to drive success across the organization, we need a world class team the combination of our strong culture, which drives all of us to improve ourselves, 1% everyday combined with a growing investment in recruiting and talent acquisition has allowed us to attract hire and retain top talent.
At all levels of the organization.
Zoom info has been certified as a great place to work for five consecutive years. We have also won awards for being a best place to work for Millennials 111 Comparably Awards in 2021, and we're recognized by the mass TLC as a top company for diversity there as a.
Mobile fight for talent and we win more than our fair share because of the culture of success. We've created our continuing investment in our people to create long term career development opportunities and our focus on diversity and inclusion as a result in the third quarter alone we hired more than 500 employees and we continue to hire aggressively.
To support our long term growth.
In closing Q3 was an exceptional quarter, we delivered great financial results are again, raising our outlook for the year and continue to build on our substantial competitive moat by investing in all three layers of our integrated platform. The intelligence layer, the orchestration layer and the engagement layer the market opportunity is as big as ever and as I indicated.
Earlier, we continue to build a category defining company by delivering end to end success for go to market teams worldwide with that I'll hand, it over to our Chief Financial Officer, Cameron Hi, there.
Thanks Henry.
As a result of the broad based strength that we're seeing we delivered results ahead of expectations, leading us to again raise our financial guidance for the year. We now expect to deliver revenue growth of 54% in 2021 with organic growth of 50% at the midpoint of our revenue guidance and we are increasing our adjusted operating income guide.
<unk> $299 million to $301 million up from $291 million to $295 million.
We are excited about the organic growth in the business that we continue to deliver while at the same time meeting and exceeding expectations for chorus and our other recent acquisitions.
Q3, we delivered GAAP revenue of $198 million.
This exceeded our $182 million to $184 million revenue guidance range and represents 60% year over year growth up from 57% growth from the prior quarter.
Acceleration in revenue growth this quarter was underpinned by organic revenue growth of 54%, which excludes the contribution from acquired products. During the first 12 months post acquisition.
We continue to see success internationally in the enterprise and with our newly launched features and functionality all contributing to help drive the acceleration in revenue growth.
International revenue growth accelerated to greater than 80% year over year, our international business now generates over $80 million on an annualized basis.
We ended the quarter with more than 25000 total customers and with more than 250 customers with more than $100000 of HCV, which is up more than 70% year over year.
Customers with more than $100000 in HCV now represent more than 40% of our subscription revenue and the ECB contributed by these customers grew more than 85% relative to Q3 2020.
In the third quarter, adjusted operating income was $78 million, which exceeded our revenue guidance range of $72 million to $74 million and represents an adjusted operating income margin of 39%.
This margin performance combined with 54% organic revenue growth was consistent with the growth and profitability framework that we set out at our recent analyst day.
This increased investment in the business is intentional and is driven by the recent acquisitions and continued investments in growth.
We believe that our philosophy of maintaining cost of revenue or cost of service R&D and G&A as a percentage of combined revenue in the low <unk> on an annual basis, and managing sales and marketing costs as a percentage of revenue based on the growth that we drive.
Will enable us to continue to deliver sustainable growth over the long term accompanied by a leading profitability profile.
As Henry indicated we continue to invest in growing our team and in the quarter with over 2500 employees from fewer than 13 800 employees at the end of May 2020, just before our IPO we.
We expect to continue to invest across the entire organization with particular focus on product and engineering investments in the expansion of sales capacity to drive sustained growth.
Turning to the balance sheet and cash flow, we ended the quarter with $239 million in cash cash equivalents and short term investments in the third quarter. We generated operating cash flows of $46 million, which included approximately $14 million of interest payments in the quarter.
Unlevered free cash flow was $73 million for the quarter, 93% of adjusted operating income we.
We continue to expect that on an annual basis Unlevered free cash flow conversion will be in the range of 100% to 110% as a percentage of adjusted operating income.
With respect to liabilities and for future performance obligations unearned revenue at the end of the quarter was $288 million and our remaining performance obligations or <unk> or $712 million.
Of which $552 million are expected to be delivered in the next 12 months.
So I've outlined in the past calculated billings and RPM can be imprecise metrics to assess in period activity and forward momentum.
As a result, we focus on days adjusted sequential revenue growth, we delivered 12% days adjusted sequential revenue growth in the third quarter continuing the strong momentum we achieved in the first half of the year.
The strong sequential revenue growth gives us confidence again to raise our expectations for the year.
As of September <unk>, we carried one 5 billion in gross debt at a net leverage ratio of three four times trailing 12 months adjusted EBITDA and two six times trailing 12 months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements.
In the third quarter, we acquired correspond AI and regulated for a combined $665 million.
Concurrent with the acquisition of course, we issued $300 million in add on senior notes due February 2029, and $200 million add on term loan b with a maturity of February 2026.
The time of the announcement S&P upgraded our corporate debt rating to double B minus along with upgrading our first lien securities to double B and upgrading our bonds to single B.
Moody's also upgraded the issue level rating on the first lien to be too.
With respect to the entity reorganization that we announced in September I am pleased to say that we successfully completed the transaction last week, eliminating the up C and multi class voting structure.
Which resulted in all shareholders holding the same class of stock with the same economic and voting interests.
Giving all shareholders one vote per share was an important next step in our evolution as a public company.
In addition to demonstrating good corporate governance, the streamlines our operations reduces complexity and is expected to enable the company to become eligible for inclusion in relevant stock indices.
Prior to the conversion to a single class of common stock and eliminating the up sea structure, our pre IPO holders converted the majority of their shares to class a shares in a taxable event, creating a step up in basis the.
The company benefits from a step up in basis through the tax receivable agreement.
As a result, the company currently has a deferred tax asset of $4 billion and a tax receivable agreement liability of approximately $3 billion.
Which will be payable over time upon realization of the deferred tax asset.
Additionally, we recorded GAAP tax expense of $42 million in the quarter, the majority of which related to a noncash basis shift building from the entity simplification and reorganizations executed in Q3.
With that I will provide our outlook for the fourth quarter and updated outlook for the full year 2021 for.
For Q4, we expect GAAP revenue in the range of $260 million to $208 million and adjusted operating income in the range of <unk> $79 million to $81 million.
Non-GAAP net income is expected to be in the range of 12 to 13 per share.
Our Q4 guidance implies year over year GAAP revenue growth of 48% at the midpoint and an adjusted operating income margin of 39%.
We are updating our full year 2021 guidance as follows.
We now expect GAAP revenue in the range of 731% to $733 million, an increase from our prior guidance of $703 million to $707 million and adjusted operating income in the range of $299 million to $301 million, an increase from our prior guidance of 291% to 200.
$95 million.
We expect non-GAAP net income in the range of 51 to 52 per share up from our prior guidance of 50 to 51 per share both amounts based on 405 million diluted weighted shares outstanding.
Okay.
For Unlevered free cash flow, we expect a range of $320 million to $325 million, an increase from our prior guidance of $300 million to $305 million.
Our full year guidance implies 54% GAAP revenue growth, which compares to our prior revenue guidance of 48% and implies organic revenue growth of 50%.
With that let me turn it over to the operator to open up the call for questions.
If you have a question press Star one army Jonathan Keypad.
Your first question is from Spain Husky.
Greenstein.
Perfect. Thank you so much guys and congratulations on very strong quarter.
Couple of questions from my very high level. The international business is generally doing really well very impressive 80% growth.
Just put up in the quarter, but from a data perspective right.
Could you help us with kind of the relative size of your U S data set versus the international dataset and is there anything different as far as building out those datasets. The U S data centers versus the International's a dataset that makes it the process more challenging or perhaps it's just different.
So how you build those datasets.
Yeah, Hey, Stan Thanks for the question.
First you saw that we invested two quarters ago. We said, we were going to invest behind the international offering this.
This quarter, we announced that we grew our data asset in Europe by over 80% year to date.
And feel really good about the can continuing investments, we're putting behind that I would say there are unique challenges when putting together an international data set obviously, we don't have to worry about translation, our multi languages or multi currencies and the United States or North America really and then internationally, we do have to be concerned with.
Those those aspects so we built translation layers.
Currency.
Converters, we also have tapped into the different.
International datasets government data sets that provide.
The high level financial metrics for all companies public and private and different markets and so it's a unique challenge.
And how it's different than North America, but from a relative size perspective, I would tell you that Europe is.
Europe is close to 90% of what you would have from a coverage perspective in the United States over we have nearly every business with over 100 employees in Europe, and that's where we're really launching the international offering and we continue to build the rest of the world as well.
Got it perfect and Cameron quick follow up for you.
You mentioned at the end of the.
50%.
Target for them for the full year, our organic base basis, and then also just a 54% growth in Q3.
On revenue if we look at billings.
Can you give us a rough sense for if there was any meaningful write downs that needed to happen and of course, AI ring lead and what kind of inorganic impact you saw to Q3 billings from those those two acquisitions.
So.
The acquisitions added roughly $10 million in unearned revenue at the acquisition date.
As I'm sure I've stated before.
In our mind on our revenue in <unk> and the metrics that can be derived from those arent the.
The cleanest metrics that people can use to assess in period activity.
So we're much more.
Focused on on the sequential revenue growth, but overall, we arent going to be breaking out.
Billings from customers from the businesses post acquisition, just given that we're already bundling and have integrated those businesses.
And.
The difference that you see in the noise is probably less than the variability that you would see from the.
From the metrics themselves.
Perfect very helpful. Thank you.
Okay.
Your next question is from Mr. Nagy.
Great.
With Mizuho.
Thanks for taking my question.
To see this strength in the enterprise side, mainly the 100 K P.
Plus a citi customer so help us understand what's driving is it more on the user side or is it more you're able to cross sell more and more products into that.
Yeah, so any color would be helpful.
Yes, I think we see growth in both of those city, we see growth from a user and seat expansion across the enterprise and that just fits into our land and expand motion, where we can land.
One sort of business unit of an enterprise customer and an expanded that business units. The success and then the other is we are selling and expanding product set into the enterprise and so where we may land with the intelligence layer, we ended up selling the engagement layer in or we sell.
Our chat functionality, our engage functionality the course functionality.
We sell our gas offering which is an outgrowth of our ever straying acquisition last year end of the enterprise in an accelerated fashion and so you really see growth in that enterprise cohort coming from both new products that we're able to cross sell in as well as new user seats and expansion within that customer base.
Okay.
Great color and then on the English could you help us understand a bit is it is it about improving your data quality or are they able to cross sell.
And to your customer base.
So improving data quality and what kind of ASP theory.
ACD.
We would expect some relief.
So from a product perspective that is a product that were cross selling it's not designed for our own data quality.
Measures, we've built a number of tools and dashboards that track that our last call. We talked about from a data accuracy perspective, we look at 138 different dashboards every day to make sure. Our data accuracy is continuing to improve <unk> as a tool that sits on the <unk> and the customer base and allow the customer to clans.
And rich route and score their leads that are coming through their different systems.
From an ASP perspective.
So for.
From an ASP perspective, it very much depends on the.
The size of the customer and their relative usage of data. So the pricing for originally it was much more heavily geared towards the amount of data that they're orchestrating for our customer.
Whereas zoom in for pricing can be geared towards both the data that they're integrating into their systems, but also on seats and other pieces of functionality. So when you look at the.
<unk> had customers that were overlapping.
With some info customers some of them could be as low 10%.
Of the zoom info asps.
Some customers can be paying even more for <unk> than they are for some info, but on average overall the ASP is around 20%.
That's great. Thanks, guys.
The next question is from Mark Murphy with JP Morgan.
On a very strong quarter. So Henry you mentioned in your script, the global fight for talent and I'm wondering.
If you could sense that the shortage of skilled labor in the U S and this great resignation.
We're experiencing is impacting your customer zone ability to fill open sales roles.
And then perhaps if they can it's maybe causing them to digitize their go to market motions, even more rapidly. So basically I'm just wondering if youre, if youre able to.
Cesium info being viewed as a solution actually for some of the labor shortages out there.
Yeah, absolutely marketing I think first.
Within our enterprise customer base there.
The majority of the opportunity is still in expansion of user seats. So even if they are struggling to hire at someplace in someplace in the enterprise, there's still a tremendous white space opportunity for us within the enterprise I think we're where we see the opportunity and the great reshuffle or the great resignation isn't the zoom.
Our recruiter product.
Both from our ability to sell it in to customers who are experiencing that struggle to hire we think we've built the world's best passive candidate data asset and have delta engagement automation around it and technical and technical and digital tools to help recruiters identify and source candidates and of <unk>.
Digital way, so we feel really good about that offering and the growth that we saw there in the quarter and that continuing growth that we see in the future. If you use engage as an analogy here.
We rolled out engage in Q3 of 2020, we now have over 2000 customers on the engage platform any point solution provider in the space took nearly a decade to get to that same customer account and we feel very similarly about recruiter as we feel about engage and the momentum that we're seeing there and so I.
I think it is.
It serves us it serves us well on the zoom into a recruiter product for sure yes.
You've done that very rapidly no doubt cam.
Cameron.
Perhaps also for Henry that my other question is just how many of your customers do you think are reaching a conclusion that zoom info is as important.
Or perhaps more important than their their CRM system that it had for a long time.
Such that maybe maybe you can envision zoom info, becoming.
Number one line item in their sales and marketing Tech stack is I think that was a topic you had touched on last quarter.
I think mark we still envision the world that zoom info is.
And intelligence and engagement solution that can help you get more out of your CRM investment.
And were never fighting for dollar against CRM solutions today, we're really trying to convert those systems of record to true systems of insight and I think when customers are using zoom menthol alongside their CRM and embedding zoom info inside of their CRM whether that be.
Salesforce or hotspot or any number of other CRM is out there they are getting more value out of those platform. Their users are engaging with those platforms in more meaningful ways and they are able to drive the insights that they've always wanted out of those platforms.
Excellent. Thank you very much.
The next question is from Michael <unk> with Wells Fargo Securities.
Thanks, Good afternoon.
Full details around the organic growth growth profile. Cameron is there anything you are able to provide just to help us think through the 39% margin and how much is impacted from M&A versus some of the broader investments you referenced driving towards those longer term targets.
Sure Great question so.
We announced the <unk> acquisition obviously.
There is significant growth opportunity there as well as.
Investment that's required so.
The.
The acquisition itself puts us from low Forty's too.
So 39, yes, I think as we've talked about courses.
Prior to the acquisition was growing.
More than 100% annually, we've actually been able to accelerate that already.
Through the use of our <unk>.
Go to market team and feel really confident that we'll be able to further push that acceleration in the in the coming quarters. So we're excited about that growth.
As we discussed before we're still on track to make it accretive to operating income in the second half of 2022.
That's super helpful. Just to follow on on that point just.
Henry you also referenced investing heavily into Cora. So I'm just wondering how much of that might be driven by some of the initial observations and customer conversations you're having now that that is.
Part of the zoom info product portfolio versus just aligned with plans you had.
Behind this product set prior to acquisition.
And Michael I think the first thing I would say is we're obviously listening to customers and helping them and listening to them to help drive our product roadmap in the future. So those are ongoing conversations that by the way are made significantly easier with core sitting in the background of all of those calls.
What I would tell you is the investment behind course is largely in line with what we anticipated when we made the acquisition, which is driven by the fact that we're seeing tremendous white space in the conversation intelligence market.
When we're talking to customers about conversation intelligence, it's a largely evangelistic sale. It's technology that they didn't know was available to them are available to go to market teams and we see a big opportunity to continue to drive growth and innovation across that product set.
That's great thanks very much.
Your next question is from Terry Tillman with Juno.
Hey, guys. This is Joe Meares on for Terry Thanks for taking the question.
Our analyst day, your intention to add 30% plus sales capacity annually.
And acknowledging you guys I think you've mentioned 500 hires.
Third quarter, how are you tracking that as target thus far in 2021, and how do you expect to shake out for the full year.
So we continue to be very focused on continuing to add sales and marketing capacity.
Yes, I think that that overall goal is probably over the long term. It say in 2021, where we're ahead of that pace and expect to be.
To be ahead of that pace, so long as we have the.
Really solid solid opportunities to invest in.
<unk> largely driven by continuing to have a very large market, where again not only is the conversation intelligence space, but also the.
Overall Intel.
Intelligence space and the orchestration engagement platforms somewhat evangelistic sale, we continue to find great people that can reach out to those customers and demonstrate the value to them. So we're excited about the pace and continuing to see real performance out of that team as well.
Thanks, so much.
The next question is from Nikolay <unk>.
With Goldman Sachs.
Hi, Thanks for taking my my question, you, specifically called out today and the increase in the depth of the health care data set can you. Please double click on this and specifically call out what type of data and the health care vertical you're collecting.
And your exposure to the health care vertical today and in general your plans for Verticalizing work to date has been pretty pretty broad.
These aren't the solution. Thank you.
Okay.
Pink.
We're focused on health care is at that prospecting layer, so where customers are engaging with data.
Identify their next best customers, and then have conversations and engagement with them and so we believe today, we cover over 90% of the.
Of the doctors in the United States within our platform and we continue to drive expansion within that data asset and surrounding that data asset with contact information that our different health care clients can use to engage with those decision makers, but it's primarily around prospecting.
Prospecting and engagement with that.
With that vertical.
Got it and Kevin on a quick one for you the <unk>.
The receivable that you mentioned now that the FC structure has been resolved.
I'll show investors modeled that tax receivable and the impact on free cash flow going forward. Thank you.
So the way that I would consider modeling the tax receivable agreement is largely based on our non-GAAP tax rate. So.
At this point.
We will be continuing to make payments to our pre IPO holders.
That are generated by the savings versus taxes that we would have otherwise paid.
On the way the accounting the GAAP accounting works.
Those payments will still run through our non-GAAP tax rate.
So I would think about those as just being part of.
The model in terms of the non-GAAP tax rate going forward.
Okay. Thank you so its nothing incremental got it thanks so much.
Yes.
Your next question is from Alex Zukin with Wolfe Research.
Hey, guys. Thanks for taking the question.
Henry maybe just for you you mentioned first a couple of the large multimillion dollar deals you signed in the quarter.
Put that into context for us either versus prior quarters versus prior third quarters, and also give us a little bit of scope in terms of the pipeline for those transactions going into <unk> and maybe just how those deals were driven or is this more of an expansion of the kind of core sales intelligence skew to more sale.
These reps globally are you seeing actual cross sell with some of the other products you've talked about.
Be helpful to walk through that a little bit.
Yes, Thanks, Alex.
First those deals those are on the new business side, So we're landing larger and our pipeline for landing larger accounts.
On the land side is expanding a couple of quarters ago, we made the decision to specifically carve out some of our more tenured reps to manage the larger enterprise opportunities that were coming in.
Lead funnel and those transactions they are buying more than just the core intelligence layer. They are often buying the engagement layer, they're buying data as a service they.
They are buying enrichment inside of their CRM and marketing automation systems.
Many are buying engage as a sales automation solution and so we do have a much broader set of solutions to sell.
At the point of new business sale, we're accelerating that and we see a large pipeline. We're building a large pipeline of larger deals for the future as well.
Got it that's super helpful and then I guess.
We put it into context some of the enterprise metrics are those customers over 100 K the.
The sequential add was was pretty pretty staggering I would say.
In that metric as well as I think some of the outperformance you saw versus your own guidance for chorus, which came in almost triple the amount.
Thought it would.
Is there anything to read into at least early on in terms of the corus traction within those larger.
HCV accounts and.
I guess to the extent that Michael touched on earlier with the incremental investment in sales and marketing.
Encore.
Being leveled up how should we think about this kind of balance.
Sales and marketing spend in general going forward, where do we think it'll be did this new level as kind of the right level.
<unk> could it go higher and whats the way that you you ultimately make that that case for yourself internally.
I'm going to let Cameron answer the bulk of those questions. The one that I would tell you is on the cost side from a go to market perspective.
Our focus has been largely on unlocking our account management team against our existing customer base for of course, and we spent a large part of the quarter and enabling our account managers setting up demo environment teaching teaching them the value proposition and how to go to market with CT and then creating the connectivity back from the product organization.
To the go to market organizations to really drive growth across our customer base and so we really do anticipate leveraging.
Our account management team across our 25000 customers to drive the cost growth.
And then.
Yes, I think its worth.
Quarter relative to our guidance was not solely driven by by Cordis, while of course did outperform we had.
We had stated that we thought they were going to contribute about $3 million. It was over $3 million, but certainly most of the outperformance was from <unk>.
Other parts of the business, because we had really strong performance across the board.
Do you think we're excited about the traction that we're seeing both with large customers.
All customers and everyone in between and we will continue to invest into that and as we think about sales and marketing growth.
Yes, I think we're continuing to invest into our sales and marketing capacity, but we're always focused on making sure that the investments that we make.
Solid efficient returns.
So.
Getting well above kind of mid to high <unk> range would require us to really grow that team faster than revenue growth and at this point, where we're growing revenue on an organic basis in the low to mid fifties.
That's probably more growth than I would expect for the sales and market getting up into the <unk> fat.
Faster than I would expect in the short term.
Perfect. Thanks, so much guys congrats again on a great quarter.
Thanks.
Your next question is from Brent <unk> with Piper Sandler.
Good afternoon, I guess Henry wanted to go back to engage a little bit it looks like that product is approaching close to 10% logo penetration. You gave one example, where it has the potential to two X revenue for that six figure deal just versus just the intelligence layer.
What what's the potential cross sell do you think half of the customers could actually embracing gauge just give us.
A little view into the future here given you had such good success early on here, where could that go longer term.
Thanks, Brent I think first of all I would tell you is we expect engage as a solution that can spread across our entire customer base.
Whether you're an enterprise customer you're an SMB customer once you invest in our intelligence layer you want the ability to deploy and activate that intelligence layer in an automated way and.
And engage provides you that capability what I would tell you is the price points or the asp's. They obviously are driven by user seats, primarily and so what you would see it in our SMB customers. Those asp's are going to be a lot smaller than what you'd see in a large six figure enterprise customer where there are numerous.
<unk> fits that it's spread out across.
And so that's what you would see from an ASP perspective.
Got it so to the extent that you do have brought us to assess what the gauge that could help with.
The enterprise momentum.
Makes sense there I guess, Kevin for you just a quick clarification I think in the past you talked about servicing the international market from kind of your east coast regions, just given the time Delta there the most.
<unk> you had in the quarter I think you've talked about over 80% international growth was that all kind of driven by the existing teams or did you actually have initial contribution from that first UK team driving the further acceleration in international this quarter.
That was all driven by our east coast sales teams and so as we bring that.
The UK sales team online we expect mean.
Meaningful contribution from them as well.
Perfect perfect. That's all I had thank you.
Thank you.
Your next question is from Raimo <unk> with Barclays.
Thanks for squeezing me in Henry only if you think about the offering that you have now with costs included in rates.
B.
How does it help the conversation with the clients are changing and does it kind of maybe if you think more longer term.
Require a change on the go to market where at the moment you still have to have a lot of inside sales, but you want to become a larger and larger kind of purchasing.
If the strategy continues to work so.
How do you think about the evolution of your go to market. Thank you.
Yes, Hey, Raimo and thank you I think look today. We're so we're still very very early in the transition of our customers perspective from us being a company and contact data provider to being a true end to end go to market platform and so in a lot of our conversations today, we're really just <unk>.
Hitting our customers on all of the different ways that we can help their go to market motion.
So inevitably when we get in a conversation about activating the data that they purchase we're talking about engage and we're talking about driving traffic to their websites, we're talking about using chat and form complete to increase website conversion, we're talking about our website product to D. Anonymize that website traffic so that they can use our workflows product.
To create automated go to market motion and so it's really advocating the customer on what a truly digital go to market motion can look like and I think what we've had a lot of success doing as we really have built out a team of solution salespeople here at zoom info really over the last 18 months, who are able to sit down with our large enterprise.
As clients and solution the different ways that we can help them solve problems and a different solutions within the <unk>.
Stack that we can bring to bear against those problems and so there is more sophisticated selling happening at the enterprise level and we continue to invest behind the resources to allow us to be able to do that.
Okay perfect. Thank you.
Your next question is from Parker Lane with Stifel.
Yes, hi, thanks for taking my question.
Those force at Microsoft dynamics integrations have been really successful on extending the value of the platform. If we think about the whole landscape of sales and marketing software tools out there I know you had a slide in the IR presentation about this.
How important is that that same level of deep integrations to all these other platforms or is it going to be situations, where maybe zoom info invest to foster a really strong relationships with a handful of those most widely used sales marketing tools.
Yes, great question I think.
I think where we see big opportunity across our customer base will will will invest in building stronger integrations with the different platforms, we see our customers leveraging so you saw a couple a couple of years ago, the significantly enhanced our relationship.
With hotspot and belt really meaningful integration back into hotspot through our hotspot enrichment product.
The other place where we're seeing a lot of statistics <unk> go to market teams going is having a data store.
Having all of the data from all of their different systems within.
<unk> unique data store like snowflake or an Amazon.
We're in Azure and so building solutions that sit alongside the places where all of the data from all of the systems live will also be a strategic direction for us. So that we can do simple enrichment.
And drive our insights within those different systems.
Great feedback thanks again.
Okay.
Your next question is from Tyler Mcginnis with UBS.
Great. Thanks, so much for taking my question and congrats on the quarter.
The new logo activity has been impressive and you've talked a lot about land being larger and that being driven by engage and enrichment enrichment and other pieces. So can you maybe talk about the contribution from those pieces in these larger lands and how much of an uplift you guys are seeing from those relative to typical land a year ago.
And then maybe as a follow on to that I know you have a lot of new products with Corus and others. So maybe any early reads there there would be interesting to you.
Yes, Thanks Tyler.
As we think about the new lands.
For engage which tends to be one of the more popular.
Features that people are taking at that initial sale it tends to be.
Call it teens ish.
In terms of.
The incremental ESP that we get but very much depends on how big of a customer it is and where their seats are kind of coming from I think four things like our enriched products.
To be something that.
While people do take it in the initial sale its actually more often taken as part of the expansion and certainly for chorus.
And really it is probably a little too early just to focus on the wins themselves. We've seen a lot of momentum within our account management teams.
But really it is very exciting for our larger customers because those customers that have a variety of different data sources that they are trying to rationalize and some.
Some cases bring in zoom info to help drive their motion.
A great place, where the complexity gets simplified through their regulated solution and can help us drive that initial sale to begin with.
Great. Thank you so much.
The next question is from DJ Hynes with Canaccord.
Canaccord.
Hey, Henry Hey, Kevin Congrats on the great results.
For me for Henry I wanted to ask about sales modeling and forecasting. It was mentioned in the script is one of the areas where.
Of course scored well.
It doesn't really fall into your core pillars of intelligence engagement orchestration. So I'm wondering if there's a sales management layer there that can be built out and how you think about that.
Yes, I think what Youre seeing is filled on the core side around the momentum product specifically is the ability to look at all of the opportunities that our customer has in play and then used courses analytics to flag opportunities that have that are forecasted to close in the quarter, but have little <unk>.
<unk> from an email or call or meeting perspective that are missing key people from the buying committees, who that are opportunities that have never gotten above a director level and so we're using all of those analytics really 10 form the forecast and a flag anomalies across the opportunities that are forecasted to close.
We see a good opportunity there and leveraging both the tremendous amount of digital interaction data that's feeding off of course, and then zoom info intelligence layer data to flag anomalies across the opportunities.
Yes, okay.
Makes sense. Thank you.
The next question is from Rishi <unk> with RBC.
Hey, guys. Thanks, so much for taking taking my question and really nice to see continued strong results in this environment I wanted to just go back to the commentary around the kind of tough hiring environment.
You talked about how recruiting can help companies in this sort of environment wanted to go one step further and.
What do you think would be kind of the appetite to go more deep into training because youre already doing a little bit of that with chorus right to help close that skills gap to help make better.
Existing employees more productive and really just better overall.
Do you think that would be an area that you would explore going deeper into either by acquisition or building something out yourself.
Hey, Rishi. Thank you for the question I think look what we focus on from an M&A perspective.
Our tools and solutions and software that sales marketing and recruiting professionals are using every day and they're in their workflow and if one of those solutions can be enhanced through our intelligence layer in our data asset those are really interesting opportunities for us from an M&A perspective.
Learning and training is an interesting area youre right that within core it.
We've built an infrastructure that allows you to save best practices playlists and key moments in calls that significantly reduce ramp time Mongo DB saw a 40% decrease in ramp time of their account executives when they brought correspond.
We have a tremendous opportunity.
To really drive learnings across an organization through cost, but no immediate plans to.
To go really deep in the training and learning space.
Great. It looks like our next question is with Pat at JMP.
Jimmy if you can open up the <unk> line. Please.
Okay.
Great. Thank you.
Can you guys hear me okay.
Hey, Pat.
Hi, Henry Congratulations amazing. Thank you so we're getting to the end of the call.
I'm, hoping you can just sort of.
Explain to US where this is all going right. So.
Have you guys of the $16 billion market cap has gone that just raised $7 billion and outreach at $4 billion and.
Gartner is laying out this whole revenue operations with vision.
Is that where the world's going.
What do you see this category being a couple of years out and who do you see the big players in it and how are they differentiated that too much for the end of the call.
No, but Pat I will just point out.
That I think our market cap is actually much larger than you quoted one of the benefits of our reorganization is that simplify the share counts and everything else, but I think we're north of 25 as of the close today.
Just don't want I was confused by that but I'll, let Henry go into the base going.
Yes, and I think kind of I think it's a great question I think the way we think about.
First we look internally at our own operations, how do we go in the market. We think we run one of the most sophisticated and efficient go to market engine in the world and so we're looking at how we are leveraging.
What tools, we're either building for our own go to market uses or buying and which ones are mission critical and which ones get better with our data and then we're looking back at our own product and saying if these tools were integrated inside the zoom info platform is that competitively differentiate it and so I think what you've seen us build and buy.
<unk> are really opportunistic looks at how we go to market.
The conversation intelligence is a key part of that sales automation is a key part of that website chat is a key part of that what we really see is the future where companies want all of these solutions integrated in one place and driven through their systems systems of record what they don't want is for an accounting.
Thank you to sit down at their seat and have to log into 60 different platforms just to do their jobs.
It's taxing it's difficult from a management perspective, it's difficult from a training and Onboarding perspective, and we think we have a real opportunity to bring that into one place and then drive its effectiveness with our data and intelligence layer.
Alright, that's great. Thank you Andrew.
Thanks Pat.
Your next question is from Brian Peterson with Raymond James.
So this is Jason on for Brian and Thanks for taking the question really strong results in international.
Hey, guys set up the first team this quarter, but how do we think more broadly about your international expansion plans as we finish out 2021 and head into 2022.
Yes, we see tremendous opportunity internationally, and we think we're somewhere in the bottom or the top of the first inning internationally and.
Every time, we step up to bat there, we're getting hit and so we think theres a big opportunity there we're going to continue to invest behind it both from a data perspective and from a go to market perspective.
So I would expect to see us.
Continue to drive growth internationally.
Both in Europe, and outside of Europe, and continue to invest in our go to market and product differentiation in those regions.
Perfect. Thanks, guys.
Thanks, Brian.
Great. Thanks, everyone.
Alright.
Thanks to everybody and as Jerry indicated we have a very active IR calendar in Q4 for more information on where we'll be in which events. We're attending please visit our IR website at IR <unk> zoom info Dotcom I. Appreciate you all joining us today. Thank you.
That concludes today's conference you may now disconnect.
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