Q2 2022 ZoomInfo Technologies Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Good day, ladies and gentlemen, and thank you for standing by welcome to the Zoom Info second quarter year 2022 financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask.
A question during this session you need to press Star one one on your telephone keypad at this time I would like to turn the conference over to Mr. Jerry Sosinski, Sir please begin.
Thank you Howard welcome to the <unk> financial results conference call highlighting our results for the second quarter of 2022.
With me on the call today are Henry shock founder and CEO of <unk>, and Cameron Hiser, our Chief Financial Officer.
After their remarks, we will open the call to Q&A.
During this call any forward looking statements are made pursuant to the safe Harbor provisions of U S securities laws expressions 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 and believe in <unk>.
<unk>, which reflects 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 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 that we've posted to our Investor Relations website at IR Dot zoom info.
Com all metrics discussed on this call are non-GAAP unless otherwise noted a reconciliation can be found in our financial results press release or the slides that we've posted to our Investor Relations website.
With that I'll turn the call over to our CEO Henry shock.
Thank you Gary and Hello, everyone. We appreciate you joining us for today's call.
<unk> Q2 results once again beat expectations on the topline and bottom line as we continued to execute against our unified all in one platform strategy and set ourselves up to again raise our full year financial outlook.
In the second quarter, we delivered GAAP revenue of $267 million.
Year over year growth of 54% and sequential quarterly growth of 9% when adjusted for the number of days in the quarter and we did that efficiently and profitably with an adjusted operating income margin of 40% ahead of expectation and our highest levels of margin performance since Q2 of <unk>.
Last year together, delivering a rule of 94 quarter.
We quickly integrated acquisitions drove them to profitability ahead of plan and continue to invest in the business we generated.
$108 million in <unk>.
Unlevered free cash flow in the quarter.
Moving that even in an evolving macro environment, we can deliver a leading combination of growth profitability and free cash flow generation at scale.
While we just crossed the $1 billion revenue run rate threshold, we're closing in on our next milestone of $2 billion.
On our way there we are committed to delivering best in class levels of both growth and profitability.
We are convinced that the front office of the future integrated data and insight driven and Leverages software to drive efficiency Zumiez.
<unk> is the only platform that can holistically informed and automate the go to market motions of companies of all sizes.
This integrated experience is what customers want and what all businesses will need to succeed going forward the.
The integrated platform drive efficiency for our customers, helping them to do more with the sales team they have and helping our users succeed and drive more growth for their company.
We are delivering more functionality to the <unk> platform deepening the integration points and integrated experience and making it easier to activate insights from our best in class data.
We achieved a number of meaningful milestones in Q2.
Advanced functionality now represents 29% of ACB in ACD from advanced functionality more than doubled over the past 12 months, an acceleration of growth compared to the end of last year.
Customers with advanced functionality now represent over 75% of our revenue and are leveraging more and more of our platform, including intense workflows and gauge chorus data as a service and more with.
We closed the quarter with 17, 163 customers with greater than $100000 ACB, while the average revenue across these customers continues to grow.
And we now have more than 30000 total customers and are driving record levels of ACB per customer.
Our new products and platforms are also gaining meaningful momentum across the board, creating a foundation for long term durable growth across new market.
Marketing <unk> and <unk>, both out of the most ACD ever in a single quarter, while nearly 50% of <unk> customers are new to zoom info.
Course recorded the most new business sold in a single quarter and we have nearly tripled the course business since we acquired it a year ago.
Engage had a record quarter with the largest amount of ACD added ever as we increasingly increasingly landed engaged upmarket with three X. The number of deals with Midmarket and enterprise accounts than in Q2 2021.
And we have more than doubled ring lead revenue in the nine months since the acquisition in short we are executing well and demand remains strong.
We also continue to monitor the economic environment and look for signs of impact on our business. We lived in the chorus calls we speak with our sales reps and we hear directly from our customers.
We have seen sales cycles that are somewhat extended relative to sales cycles in Q1, driven by incremental finance and procurement review, but deals are still closing.
While a more uncertain macroeconomic environment may create some elongated near term sales cycles are very efficient go to market motion and proven quick time to value for our customers will help insulate us.
The market opportunity is huge and we are executing against it.
We are in the earliest days of what we believe is a generational transformation of how businesses go to market with data insights.
And our purpose built software platform and transformation that we are uniquely positioned to lead.
We have the right platform the integrated data and insights that power of that platform and we are delivering success to our customers as they look for efficiencies and look to consolidate with fewer and fewer strategic vendors.
We continue to deliver success the customers of all sizes across all industries with customers increasingly choosing zoom Intel as a pillar of their go to market Tech stack.
The company's focus on efficiency profitability and unit economics.
Obvious path is to get more out of your existing sales and marketing resources for.
For two decades, we have been a trusted partner to deliver just that.
I wanted to highlight a few of our fortune 1000 wins in the quarter each of which went through meaningful user security and privacy reviews, before either expanding or becoming customers.
These are customers at various stages of sales and marketing maturity, who are each using the zoom info platform in ways that suit their current needs, while providing them the flexibility to grow with us as a sophisticate their sales and marketing efforts over time.
Caesars Entertainment the largest casino entertainment company in the U S chose zoom info to help drive more events at their properties around the world and to drive a more efficient and scalable way to go to market.
Historically, there are sales stack was primarily salesforce and linkedin, but they needed to transform their CRM from a system of record to a system and insight.
First by making sure the data in Salesforce was up to date and accurate and next to push insights directly inside of CRM. They did a short trial with zoom info immediately saw positive results and their sales team was ready and excited to rely on zoom and felt going forward. In addition to sales at west in CRM enrichment Caesars has also implemented.
<unk> zoom info chat functionality, which allows their events teams to respond and engage with prospects in real time converting more of them to customers.
A multinational financial services company that has a global pioneer and leader in payment processing and technology started with a mix of sales our <unk> user seats and data as a service across six subsidiaries in the last year, we consolidated those agreements into a single MSA added additional sales out west user seats.
Additional das enrichment as well as intense data form complete website visitor identification and ring lead within operations.
We are now the duping normalizing and enriching all accounts and contacts across their core salesforce instances, allowing them to build custom modeling and driving a much more efficient M&A integration and combined go to market motion.
At striped what initially started at the deployment across a small team of business development professionals has grown to a relationship that spans hundreds of sales professionals on sales as well as the new footprint across their data science and engineering team to provide our best in class data and insights, including techno graphics advance.
The attributes and intense stripe is an incredibly data driven organization and is now driving a more centralized and holistic approach to data integration and prioritization for their go to market efforts, ensuring that every client interaction is timely and insightful.
One of the largest communications companies in the world is using sales oss across more than 1000 sales reps and multiple channels of their business, including inside sales wireline and wireless with a large percentage of users and their global enterprise sales team.
As part of the deal we will integrate directly into their instance of sales force and we are also supporting their data and analytics teams with regular delivery of our scoops data.
In the quarter. We also added PNC bank one of the top 10 banks in the United States as a customer of sales our.
First I think seeing a top 10 bank in the U S. B common new customer this quarter highlights just how much truly white space opportunity there is for us.
P&C is deploy zoom info across their commercial account teams to capitalize on growth opportunities and to ensure that when they are engaging with clients and prospects that they are having high quality interactions backed by data and intelligence.
In Q2, we introduced the meaningful new integrated experiences across <unk>, most notably we integrated the most powerful sales automation capabilities of engage with our best in class data targeting and workflow workflow capabilities and sales or <unk>.
Through this experience sales out west and engage customers will be able to click the dial click to email and our professionals to multi touch multichannel prospecting campaigns without leaving sales OIS and.
And teams can now view first party activity data from chorus, and engage alongside zoom info data in sales or <unk>.
<unk> E mail and online meetings populated and activity feed and sell go out and that activity data can be used that filter criteria to create dynamic audiences for targeted prospecting and account expansion motion. This enhanced functionality is similar to our bidirectional sync with Salesforce hotspot and Mark Caddo, where we.
We enable customers to customers to merge their first party CRM and marketing automation data with humans both sales.
Marketing and operations the Oss platform.
Through Q2 customers have synced over 2 billion records from these systems four times the number of records synced through Q2 2021, highlighting the value our customers are seeing by bringing their first party data into zoom info to create targeted audiences and the system. They used to go to market.
In Q1, we launched marketing our west for account based marketing, giving marketers the ability to build targeted audiences with human felt best in class intelligence and to deploy ads across social media and display networks using our DSP.
The average account is now building a dozen audiences and running multiple campaigns.
As we did with sales OS we continue to look for opportunities to integrate and unify experiences within our platform within marketing at this quarter, we introduced air cover enabling sales reps to identify key accounts and cell dose and share them directly with their marketing team to instantly creates an activate targeted social media.
And display advertising campaign.
This cross functional motion set up a sales rep for success and enables a truly aligned account based marketing approach.
And we continue to invest in developing new technology, finding new valuable data sources, and streamline streamlining processes to advanced coverage and accuracy in our data cloud in Q2, our contact database surpassed $220 million record and our sales our customers will see a forex increase.
In SMB coverage at two X increase in company locations with a 10 percentage point improvement in match rates.
Incorporating multiple machine learning models enabled us to improve our company database with 100% fill rate on core from a graphic attribute.
We released multiple artificial intelligence models, enabling us to increase the accuracy of our data, including machine and deep learning models that have grown our technology data coverage by more than 30% year over year.
And that detect employee employment changes for contacts in our database faster and with higher accuracy, which which is a result of us improving our detection of company's entitled and raw data produced by our technology that actively monitors for these types of changes.
From a privacy standpoint in Q2, we achieved ISO $27 701 certification. This is a global standard for organizations looking to put in place a system to support compliance with the EU GDP, our California, CPA and other data privacy requirements.
Meeting the rigorous qualifications of ISO 2700, 70, <unk> further strengthens our commitment to data security and privacy.
We have also rebuilt our privacy center to make it as easy as possible for as easy as possible for professionals to access review update or remove their profiles are center also explains what <unk> does to be a privacy first company and helps our customers with their privacy compliance as well.
And we are yet again going beyond our regulatory obligations by re notifying millions of longstanding individuals in our database ensuring they remain aware that they are in our platform that they can claim their profile or opt out if they wish.
Before I wrap up I wanted to welcome Alison Gleeson to our board Alison was previously the SVP of Americas at Cisco responsible for more than $25 billion in annual sales. She is a true sales professional having been in multiple sales leadership role since the earliest days of holding an individual quota.
We are incredibly excited to welcome her to our board and look forward to the many ways in which she will contribute to our continued growth and success.
In summary, we are the runaway market leader with our product platform and sales leadership, we have the industry's best integrations and a marquee list of growing customers along with proven leverage in our model given our powerful unit economics, we are building a generational company and even with some uncertainty created by the current economic.
<unk> environment, we are investing in a platform investing in the team and we continue to grow profitably.
Sales and marketing teams are being pushed to do more with less and the only way to actually achieve that goal is to get more out of every marketing dollar and sales resources.
Our Miss in our mission since inception has been to help companies big and small do just that with that I'll hand, it over to our Chief Financial Officer Cameron Heizer.
Thanks, Henry Q2 was another great quarter in terms of execution and growth and our outlook for the business remains strong which is leading to another increase to our top and bottom line guidance.
As of all sizes and industries continue to look for efficient ways to improve their go to market performance and there is a generational shift in sales leadership, who are looking for high quality data and insights to drive more efficient and automated go to market motion as a result, while we are seeing some evidence of elongated sales cycles driven by the <unk>.
<unk> macro environment, we continue to see strong demand for digital transformation.
We are confident that given the tremendous value, we provide to customers and our current narrow level of market penetration, we will continue to drive durable growth.
Therefore, we are raising our full year guidance for revenue to one point to $1.9 billion.
And adjusted operating income to $433 million to $437 million.
At the midpoint. This represents revenue growth of 45% relative to 2021 and an adjusted operating income margin of 40% we.
We continue to expect to deliver more than $1 per share and unlevered free cash flow in 2022.
In Q2, we delivered GAAP revenue of $267 million up 54% year over year, which implies 9% sequential growth compared to Q1 2022 as adjusted for days in the quarter excluding the.
The impact of products acquired within the last 12 months, our organic revenue growth for the quarter was 42%.
Adjusted operating income in Q2 was $107 million a margin of 40% the highest level of margin performance in the last 12 months.
We have discussed in the past, we expect to increase adjusted operating margins over time.
Turning to the balance sheet and cash flow. We ended the second quarter were $371 million in cash cash equivalents and short term investments.
Operating cash flow in Q2 was $106 million, which included approximately $6 million of interest payments.
Unlevered free cash flow was $108 million for the quarter or 101% of adjusted operating income.
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 Unlevered free cash flow conversion trending down in the back half of the year consistent with seasonal patterns.
With respect to liabilities and future performance obligations unearned revenue at the end of the quarter was $412 million and our remaining performance obligations or RPE or.
$985 million of which $764 million are expected to be delivered in the next 12 months.
We believe that calculated billings and <unk> are imprecise metrics to assess in period activity and forward momentum as a result, we focus on days adjusted sequential revenue growth and we delivered 9% days adjusted sequential revenue growth in the second quarter.
With respect to debt at the end of Q2, we carried one in a quarter billion dollars in gross debt.
With continued growth and profitability, we again drove an improvement in our leverage ratios with a net leverage ratio of two three times trailing 12 months adjusted EBITDA and one eight times trailing 12 months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements.
<unk> represents approximately a full turn improvement in leverage since Q3 2021.
Lastly, we are very pleased to be one of the first 500 companies in the United States to assign the UN global compact the world's largest corporate sustainability initiative.
Through this declaration, we further committed to focus on ethical corporate governance, environmental stewardship, and best in class diversity and inclusion.
With that I will provide our outlook for the third quarter and our increased outlook for the full year of 2020.
Before I do I would note that we are cognizant of the current macroeconomic environment and we are confident in our ability to meet or exceed our updated guidance for Q3 and the remainder of the year.
For Q3, we expect GAAP revenue in the range of 277% to $279 million and adjusted operating income in the range of $111 million to $113 million.
non-GAAP net income is expected to be in the range of 19% to 20 per share.
Our Q3 guidance implies year over year GAAP revenue growth of 41% at the midpoint and an adjusted operating income margin of 40%.
We are providing updated full year 2022 guidance as follows.
We expect GAAP revenue in the range of one point to $1 9 billion.
Up $20 million from our prior guidance and.
And adjusted operating income in the range of $433 million to $437 million up from $421 million with the midpoint of our prior guidance.
We expect non-GAAP net income in the range of 78 to <unk> 80 per share based on 411 million diluted weighted average shares outstanding up from 76 at the midpoint previously.
For Unlevered free cash flow, we expect to generate between 438 and $446 million up from $440 million at the midpoint of our prior guidance.
Our full year guidance implies 45% GAAP revenue growth at the midpoint and.
And adjusted operating income margin of 40%.
And an unlevered free cash flow margin of 41%.
With that let me turn it over to the operator to open the call for questions.
Ladies and gentlemen, if you have a question or comment at this time. Please press star one one on your telephone keypad.
Again to ask a question at this time, please press star one one.
Please standby, while we compile the Q&A roster.
Our first question or comment comes from the line of Citi.
Great.
From Missouri Group. Your line is open Mr Panic right.
Thank you.
Thanks for taking my question.
Just one comment you made about how the zoom in for data and insights that are relevant during this.
Economic environment could you share also your past experience loss reserve and what you are seeing and also could you talk about the cross sell opportunity you're seeing now that you have workflow and other software application on top of the data that you can cross sell into the base.
Yes, thanks for the questions today, I think what we saw in the early days of Covid.
Somewhat similar we had an elongated sales cycle with larger deals, but then kind of immediately afterwards companies realize that they needed to be investing in their sales teams and their go to market effort that they needed to be investing behind digital transformation and I think kind of what we see today.
A similar we're seeing that same elongation in sales cycles on some deal.
Specifically larger deals and international deals.
But then we are also seeing companies realize that if they are going to get more out of their sales resources that they need to continue to invest in their go to market motion they need to continue to invest in software that drives productivity.
Specifically for their sales resources, specifically for their marketing resources, and we are just best position by a mile to be the provider for that.
That's great. Thank you.
Thank you all.
Our next question or comment comes from the line of.
Yeah.
Brad Zelnick from Deutsche Bank.
Im sorry.
Our next question or comment comes from the line of Mr. Michael <unk> from Wells Fargo. Your line is open Sir.
Hey, Thanks, glad I snuck with that.
The introduction was listening attentively.
Nice job on the results from the team here.
A couple of quick ones for me Henry we fielded some questions recently, just everyone's stress testing models and so you had some commentary around just the white space. That's in front of me I'm wondering just from a diversification standpoint of the business.
Anything you can add just in terms of penetration or industry exposure to be mindful of and then Cameron on the guide can you just help us understand the type of environment Youre, assuming in the back half of the year or is it something similar to what Youre seeing currently R.
Are you taking potential purchased added elongation or something else into account there. Thank you.
Yes, I think just from a penetration perspective, we still feel like we're in very very early innings I get asked often what happens if sales hiring slows and these accounts are you limited by your ability to add user seats. When the vast majority the overwhelming majority of the accounts that.
We operated inside of we're not wall to wall across the sales teams and so we have this tremendous growth opportunity within sales organization that we're executing against.
And so we still feel like we're in the.
<unk> early innings of the opportunity and so we don't feel.
Special exposure.
Across any industry or any customer size segment.
Great and then with respect to the guide.
When we develop our guidance we.
Examine a wide range of potential outcomes and set our guidance at a level that we feel confident that we will be able to meet and exceed and certainly that wide range of potential outcomes includes a macroeconomic environment that could be worse than what we're seeing today.
Thank you. Thank you.
Our next question or comment comes from Eni of Brad Zelnick from Deutsche Bank. Your line is open.
Excellent. Thank you.
Congrats guys on the results and weathering a tough environment in particular crossing the 30000 customer mark or at least disclosing that you have.
Henry I just wanted to follow up on the comments that you made about the tough environment and how well you guys are navigating and in particular seeing some sales cycles elongate and I think in the earlier question you said in larger and international deals.
But with that in mind, what if anything are you doing in terms of your own go to market to adapt to a more uncertain environment.
Yes, I think what we're focused on is making sure that our sellers are enabled to sell through this environment that they understand.
<unk>.
Talk track the narrative to share with customers that they give them.
The material and collateral that they need to sell internally around continuing to increase efficiency of the headset youre keeping on the street.
So we're very focused on enablement and really.
Advancing the ability of our sales teams our account management teams I think that's a big one.
And look we're looking to continue to invest in our go to market motion, especially in areas of incredibly high efficiency will continue to hire and invest in those in those areas.
Thanks, maybe just a follow up for Cameron Cameron, it's good to see and are are steady, but are there any changes to gross retention in any specific customer segment.
Worth calling out or expectations for how retention might trend just given the visibility in what you can see today.
Yes.
There isn't anything worth calling out in terms of specific segments or or anything else I do think as we look forward.
Yes.
Macroeconomic headwinds could create some pressure with respect to net retention, but we're still seeing.
Our customers continue to want to invest into.
Yes, really enabling and creating a better environment for their sellers. So I think.
What we're seeing today gives us even more confidence in our ability to drive towards that two 2 billion dollar run rate revenue target that we've set for ourselves and continue to see retention over the long term continue to improve.
And Brian I would add one thing there too.
What <unk> heard from other companies that have already reported.
What <unk> heard from other companies that have already reported is that theyre looking to rationalize and re prioritize spend but the one place where there continues.
<unk> to look at to look to invest is within sales and within go to market. I mean, we are the best most enterprise grade platform to help go to market teams get better and better outcome and so theyre not messing with this part of their business. The part of the business that drives demand and that closes that demand is that what you are hearing from them is they will continue to invest behind those areas.
Very very clear thank you.
Thank you.
Our next question or comment comes from the line of Mark Murphy from Jpmorgan. Mr. Murphy. Your line is open.
Yes, Thank you very much and congrats on raising the guide for the year.
So Henry.
Say that many software companies now are slowing the pace of their hiring they are cutting back on some of the lower priority investments. There. They are doing that is provisional step due to all the recession headlines is that something that you're contemplating doing as well or would you need to see a bigger change in the environment.
And then I have a quick follow up.
Sure, maybe I'll I'll jump into that I think we've.
We've consistently focused on efficiency within all of our investments historically.
So yes, I think we're always looking for what are the best places to put incremental resources are invested incremental dollars and so yes, I don't think that we have the same pressure.
To cut back on certain things that maybe werent performing in the way that they they had I think as we continue to grow we're going to continue to invest in the business and like we have historically continue to focus our investments with respect to sales and marketing capacity as well as R&D.
<unk>, but also continue to invest in all of the underlying infrastructure to support growth as we move forward.
Okay understood and then as a quick follow up could you, possibly update us on what portion of the revenue stream is C based.
Versus the portions that might be database or API base or just based on something else that I know.
Henry you touched on this a bit but we're just trying to understand how much of a swing factor you might see when the employment cycle ebbs and flows a little bit for some of your customers.
Yes.
Our model.
Is set up so that we have customers that pay.
A platform fee to start out with them then we scale up with our customers based on.
The number of seats that they deploy as well as the amount of data that they might be integrating into our systems and obviously as they're taking on more and more functionality all of that.
It gets placed in there as well.
Yes, I think when we go back and disaggregate that and there is probably a little bit more art than science, but when we go back and disaggregate that for to just look at seats versus platform or data or additional functionality the seats or less than half of the revenue stream overall.
Excellent. Thank you very much.
Yes.
Thank you. Our next question or comment comes from the line of Kash Rangan from Goldman Sachs standby.
I'm just a random your line is open.
Okay can you hear me now.
Yes, Sir yes, okay wonderful. Thank you. Thank you so much hendry and cameras.
It looks like everybody is going through some level of termination dissipation in sales cycles.
It's evident in your <unk>, if you look at the sequential rates of change.
You can see it.
More interested in finding out what is happening to the deals that have been put on hold or postpone what are customers, saying that they need to see in order to come back and Reengage with you guys on those deals.
Firstly and secondly, it looks like your acquisitions are doing better than expected you seem to have very good synergies in your distribution.
Something is obviously working maybe the certification of submit for Julie at work here.
Curious to get your thoughts on the slipped deals where you stand with them and what is your assumption assuming these deals come back and close 40 basis Q3 or Q4 next year.
Yeah. Thanks, Kash I think what we're seeing is just an elevated level of scrutiny in those deals and so those deals end up with an extra level of approvals at the C suite, an extra level of approvals and procurement and finance.
And so those are a long gating those cycles I can tell you that a number of deals both on the new business and retention side that were slated to close in June have already come in in July .
In early Q3, so we feel good about those deals getting to completion.
But there is just more scrutiny, especially as deals get larger and on international deals where.
The cycle is a long gaining but the conversations are not change the value proposition has not changed and I think where companies are are realizing is that when you are looking to deploy something thats quick time to value.
We are the most obvious solution to deploy your buy on a Monday, you are fully up and running on a Friday in many cases and this is in the hands of your sales team driving immediately immediate efficiency and action ability and so companies are not looking for a multi year multi year projects our software deployment, they're looking for quick time, but.
<unk> and we can deliver that with the menthol, but we are jumping through the same hoops are the same additional hoops that every other software company has to get through today.
Got it so just follow up to that have you. Thank you. So much they take this could be just another U shaped recovery as customers.
Factoring in the higher cost of interesting.
Whatever inflation et cetera, and we get some kind of recovery either this year or next year or is it that these pressures could create a permanently lower but still attractive organic growth rates in your markets. That's coming thank you.
So I think that's a great question I think.
As you.
As we look forward in the future I think there's certainly the potential that.
We will be able to recover reasonably quickly.
That being said.
Our crystal ball isn't that much clearer than a number of other people.
As people are continuing to look at overall economic growth.
If that is kind of.
Relatively lower for a longer period of time, I think that that will impact just the number of companies that are continuing to invest in their growth prospects overall.
Thank you.
Our next question or comment comes from the line of Keith Weiss from Morgan Stanley . Mr. <unk>. Your line is open.
Hi, This is elizabeth quarter on for Keith Congratulations on the strong quarter I just wanted to double click on the longer sales cycles.
Location for those advanced functionality.
As these can drive larger deals that can be a bit more complicated. So what are you seeing in terms of the uptake specifically for advanced functionality versus earlier this year and how should we think about the ramp in adoption for advanced functionality.
It budgets come under a little bit more.
Clearly there is a need to drive efficiency. Thank you.
Yes.
Yes, I think a couple of things here I think number one we have the only consolidation play in the market and so our ability to go into an account and have them consolidate numerous different platforms onto the <unk> platform that is happening we thought all across our SMB customers, we saw it across our enterprise.
Customers, where they were consolidating either multiple sales intelligence vendor then a conversation intelligence vendor and a sales automation vendor into <unk> I think you see that with engage going upmarket. We have three acts more deals in the midmarket and enterprise with engage our sales automation solution.
With nearly tripled the growth rate of course and to our customer base ring lead doubled and those are all consolidation plays that we're able to bring with our data foundation at its core and so I would say.
One thing that every company cares about right now is making sure that they are prioritizing investments in areas that drive sales growth.
And that get more out of the heads that they have on the street and then the second thing that Theyre looking at is making sure that they're that they're working with strategic vendors and if there are opportunities to consolidate and repackage and provide a package that makes consolidation.
Yes.
Our lucrative then I think that those are customers are stepping up to that and we provide a great opportunity for them to do so.
Yes, I would actually add Elizabeth.
In terms of the rate of change in terms of the growth rate of.
Advanced functionality, it's actually accelerated.
In the first half of this year relative to what we saw at the end of last year. So that's a really exciting thing that we're focusing on is continuing to drive.
That advanced functionality that ultimately drives better retention with our customers that delivers them more value and it enables even more and more of those consolidation discussions.
Throughout the base.
Great that's great to hear and then just as a quick follow up I was wondering if you could provide some context for how new business performed in the quarter.
Last quarter, there are some comments about the new customers team hitting new records and just given the macro and uncertainty has changed a bit any color you can provide on how that new customer segment is performing now would be super helpful. Thank you.
Yes, so the new sales team continues to perform well they were right at the same level as what we did last quarter just slightly below.
So I think we're excited about.
Yes that that capability and certainly the best second quarter that we've ever had in terms of sales.
Sales to new customers.
Great. Thank you.
Thank you.
Our next question or comment comes from the line of Koji Ikeda from Bank of America. Mr. <unk>. Your line is open.
Yeah, Hey, guys. Thanks for taking the questions.
Wanted to kind of shift gears, a little bit and ask you a question on on some of the new executive hires that we've been kind of saying through the press releases, so kind of really focusing on compliance and security earlier. This year you brought on Simon Macdougal as the Chief compliance Officer, and we got to hear him speak a lot about compliance at the analyst day, and then last week.
Our new Chief Security Officer, Tom Brugger Shiny was brought and so we of course are very appreciative of the increased leadership in compliance and security, but it also just kind of brings up. The question is the reason for these hires because it's just becoming a really challenging sustaining compliance and be as secure as the company continues to grow and I'm just really curious to hear your thoughts on there.
Reasons for some of these big executive.
Executive hires on compliance and security. Thank you.
Hello.
We're always looking to scale and build a world class team around us I think that what you're seeing US do is invest in areas that are important to our customers and customers care about security customers care about privacy and so when we have an opportunity in the marketplace to bring in a world class leader.
<unk> to step into those roles, we know that that's important for our customers and we are willing to invest behind those areas and I think thats, what youre seeing us do with Simon at the beginning of the year and then tomer tomer today.
Got it got it thanks, Henry and then just one follow up if my if I may here, just kind of thinking about the future levers for growth. It sounds like there's two kind of big picture opportunities here the consolidation of other tools that these enterprises consolidating offices in info and then new spend just with new strategic sales optimization.
Initiatives, So I guess thinking about the two levers where is the growth coming from or how are you expecting that growth from the split between those two to really drive the growth here for the next 12 to 18 months. Thanks guys.
Yes, so I think consistent with what we've seen historically and continue to see.
Yes.
Throughout the year, new sales continues to be a really strong driver of growth in those more than half of the growth that we see.
I think we.
We're in such early innings in terms of the penetration of the overall market ultimately every business that sell into another business.
Can and should use zoom info to do a better job of that and we have 30000 customers. Today. There are over 700 potential customers that we can go out and get so we have a lot of excitement about our ability to go out and continue to bring on new customers and help them be successful at.
At the same time within our existing customers I think the consolidation play is an important lever that we can continue to use but there's also a tremendous amount of white space expansion within those customers, whether it's adding on new users to go wall to wall, whether it's helping their data teams.
Really get to higher quality data or honestly a lot of the advanced functionality that we offer is still relatively nascent out in the market and there are a number of large enterprise customers, where we can.
Double triple quadruple the amount of.
The revenue that we're getting in our white space way as opposed to consolidating other spend thats out there and I think.
In a challenging macroeconomic macroeconomic environment that replacement might be the easiest thing for us but over the long term there is a lot more opportunity for the for the white space opportunity within our existing customers as well.
Got it thanks Cameron Thanks, Henry Thanks for taking the questions.
Hi, Todd.
Yes.
Thank you. Our next question or comment comes from the line of Alex Zukin from Wolfe Research.
Your line is open.
Hey, guys. Thanks for taking the question. So I guess, maybe I'll ask the question everybody is asking a different way. It definitely seems like you guys are seeing a combination of headwinds and <unk> in the current macroeconomic environment. I think you mentioned sales cycles lengthening headwinds in large enterprise accounts in Europe , but.
Then tailwind from your times ROI versus other enterprise software solutions and even other.
Sales solutions.
Is quite quite low in terms of the pilot takes to deliver ROI and youre seeing those consolidation deals where more companies are buying more of the suites. So what's the net effect of those cross currents are you seeing is this environment.
Year to sell into because because of those factors were a little bit difficult more difficult and I got a quick follow up.
Yes, I think the way to think about that Alex we're pretty well.
We feel pretty good about the quarter, we put up.
This quarter, we've been right the quarter, we put up a rule of 94 quarter and we raised our full year guidance and so we feel pretty good about our ability to continue to execute in this environment.
Yes.
With.
Yes.
Hey, guys diesel there Alex.
Yes, yes, Sir.
The follow up I guess Cameron for you would be during Covid. There was also some flexibility around payment terms with certain customers and we're excited to hear that from other companies in enterprise software to the extent that that that is either happening already or potential.
Situations do you anticipate any kind of headwind to free cash flow margins from from payments from flexibility and then any.
I'm, a recessionary playbook perspective any.
I would say incremental focus either on margins or maybe less M&A or more opportunity for our strategic capital allocation.
So with respect to the free cash flow part of the question. We are certainly here to help our customers be more successful.
And while they're there could be some opportunities for us.
Be more flexible with payment terms, it's nowhere near what we've seen.
Back in 2020, it's just a completely different discussion in terms of.
How we would approach that so I'd say.
Really modest, but not a ton of potential with respect to the free cash flow in the second half of the year on that and then as we think about.
A recessionary playbook, if you want to call it that.
We've always operated a tremendously efficient.
Company I think if you talk to a lot of other software companies that are.
Fast growing companies, it's really hard to get to that 40% margin level and that's something that we've always focused on so we're going to continue to run the company in a way where we're going to focus on the most.
Most positive.
<unk> that we can that are creating the best ROI in terms of helping to drive growth and maintain efficiency.
And I think as as we've demonstrated in the past as growth moderates when we're growing off a larger and larger base out in the future we will see margins naturally increase through <unk>.
For operating leverage in.
Less requirements for that upfront costs around sales and marketing capacity and client service capacity to bring on.
Clients that are at a higher level.
Perfect.
Thank you guys congrats again.
Thanks.
Thank you our next question or comment comes from the line of Brian Peterson from Raymond James.
Peterson Your line is open.
Oh, great. Thank you and thanks for taking my question. So just one for me on linearity. We've heard some comments on sales cycles, extending also some really strong execution on M&A I'd just be curious.
The linearity throughout the quarter or did things get better or did things get worse.
If we compare it to the month of July it anything that you can say in terms of the third quarter and then how the linearity is progress.
Yes, I think.
Throughout the quarter it was pretty stable.
I think relatively early on we started talking about the.
The.
No obligation of some sales cycles and part of that is that we're just really close to our sales cycles are short the short to begin with and we're.
Instrumented to really focus on those I think as we've seen in July .
Pretty much the same environment that we saw throughout the second quarter.
I think we feel really good about continuing to be able to execute and particularly as <unk>.
One of the things that I've talked to some people about before is oftentimes. It's the rate of change that causes a problem. So when people are surprised by the macroeconomic environment.
They tend to make decision plus quickly as we see stability in that macroeconomic environment I actually view that as.
A modest tailwind for us.
Thank you.
Thank you. Our next question or comment comes from the line of Raimo <unk> from Barclays. Mr. Lynch. Your line is open.
Thank you.
Hey, Congrats from me as well as by the way great execution of this environment.
Can you talk a little bit about the European expansion that you have planned for this year.
We see in the macro environment are you shifting resources in terms of like focusing on other areas.
Sure.
<unk> of our geographies, maybe that's a great question. One question. Two is like what are you seeing in terms of uptake on the newer products in the in the more mid market accounts is that kind of.
On the enterprise side I get it on the mid market side, what's the progress there.
Thank you.
Yeah.
So on the European expansion, we will continue to invest into our European office and continue to drive capacity. There I think we're really excited about the opportunity long term in Europe .
Yes, there may be some short term crosswinds, but I think having the right capacity to drive.
To drive series.
Serious growth there over the long term is the right.
The right path for us.
And then with respect to the advanced functionality I think in the mid market, we see great opportunity there and there are a number of clients that are.
Really stepping up to.
Drive better and better go to market motions realistically the.
The real focus of our efforts historically have been to develop and acquire advanced functionality that's <unk>.
Similarly, easy to use as our core data platform and so it's really easy for our clients to step into core us or step into.
Engage and really drive value very quickly, whether you're a small business or a midsize business or an enterprise client and I think we've seen really good uptake.
Throughout the spectrum.
Yes, I think what we talked about is in engage we actually saw compared to Q2 of 2021 three times as many deals for engage inside the mid market and enterprise than we saw last year, where we kind of rolled engage out to the SMB did a bunch of learning continue to get the product to parity with competitors in the market and the.
Now, we're seeing a real uptake in the mid market I think what you'll also continue to see us do the areas as we integrate engage more closely into the core platform that we rolled out significant functionality to do just that it becomes easier and easier for our companies to continue to take on new products as it sits centrally inside of the core platform there.
You used to using.
Okay makes sense. Thank you congrats.
Thanks, Rob Okay.
Thank you. Our next question or comment comes from the line of Terry Tillman from Truest competent.
Your line is open.
Great. This is Robert on for Terry Thanks for taking the question just one from me Cameron in the past I believe you've mentioned that a little over half of sales comes from the Companys inbound motion has that been fairly consistent over time and anything you can share about trends in that statistic this quarter. Thanks.
Yes, that's definitely been consistent over time, and we continue to see <unk>.
<unk> growth in terms of that inbound pipeline was pretty consistent in Q2. So we're continuing to invest both in the inbound capacity and demand generation as well as our outbound motion as well to continue to drive new sales on attack that really large market that's out there.
Thanks, Congrats on the quarter.
Thank you. Our next question or comment comes from the line of Richie Deloria from RBC capital markets. Mr. <unk>. Your line is open.
Wonderful. Thanks, so much for taking my questions and the interest of time I'll make it one question, which is you talked about how important this offer vertical is right I think 45% of the business got some softer companies, mostly larger ones definitely not in <unk>, but we are seeing.
Software companies, putting on hiring freezes or at the very least slowing down hiring including at the sales level can you maybe just help us understand as we said thank you your growth algorithm, specifically, especially within that vertical.
Given the slowing down of hiring how should we think about the impact there or is there just still so much greenfield opportunity with sales reps, even within your existing customer base that that is not too much of an issue. Thank you.
Let me take it from a high level unsafe Cameron wants to chime in I think the first point there is the overwhelming majority of our customers are not deployed wall to wall across their sales teams and so we have this land and expand motion, where we land in an incredibly efficient way upfront and then we grow those accounts on the account.
<unk> side and so we are.
Almost never going wall to wall, when when we sign a customer and then we look to get sort of more and more incremental seats as we prove our value and they become customers.
The next thing that I would say is of any industry software today is the one where go to market efficiency and better unit economics are more focused than they've ever been.
And because we run arguably the most efficient go to market motion more and more more and more software companies are coming to us asking us how we do it that gives us a great opportunity to put <unk> front and center.
Yes, I don't have much to add although I do think it might be worth noting that software continues to grow well, we still have a number of customers that are continuing to grow but in almost every other industry is growing much faster because we're less penetrated so actually think your 45% number is a little outdated I think.
We're below 40% today in terms of.
Software concentration and we continue to see.
While that continues to grow all of the other industries are growing even more quickly and we will continue to become a bigger portion of the bonds.
Alright wonderful thank you so much.
Thank you. Our next question or comment comes from the line of DJ Hynes from Canaccord Genuity. Mr. <unk>. Your line is open.
Hey, Thanks, guys congrats on the results.
Just one from me so with the introduction of all the additional advanced functionality and the new persona I'm wondering have you seen any material change in the timeline to the typical customers first follow on sale in other words like are they are they getting a flavor for zoom info and coming back and transacting any faster now.
Yes, I don't think we've seen any material change into and how fast they transact with US again I think there are a number of examples of customers signing on for our sales out West and then immediately adding on engage our core us, but I don't think the overall met.
<unk> changed overtime, yes got it thank you.
Thank you. Our next question or comment comes from the line of Tyler Mcginnis from UBS. Mr. <unk>. Your line is open.
Yes.
Hi, Thanks, so much for taking my question on Cameron you mentioned earlier that flexible payment terms aren't having much of an impact at the moment and I know billings can be noisy metric, but it looks like calculated billing have declined have declined sequentially. These past two quarters and I think this quarter, what about some benefit from <unk>.
Comparatively and dogpatch.
Anything you can just add on what might be impacting that metric if theres any co terming or anything like that and if theres any read through here to a lighter free cash flow range relative to operating income.
Yes, So I think as you said billings and bookings can be emphasized metrics realistically to really compare you need to look back not just over the last quarter, but everything that was happening before that and if you remember, yes really the first half of 2021.
<unk> got a real benefit from a billings perspective, because of the payment flexibility that we provided to customers in 2020.
So I would be again careful with that and certainly focus much more on the.
The sequential revenue growth in terms of thinking about in period activity.
As we think about Unlevered free cash flow certainly we look at a wide range of potential outcomes.
Those outcomes would include some incremental flexibility that we're not seeing yet but.
Need to provide to customers and certainly that influence our unlevered free cash flow guidance as well.
Great. Thanks, so much.
Yes.
Thank you. Our next question or comment comes from the line of Parker Lane from Stifel. Mr. Lane. Your line is open.
Yeah, Hi, guys. Thanks for taking the question curious if you could provide some context on the recent growth of the community addition user base.
You'd expect that to trend in a recession and then lastly, just.
If that does slow down what impact does that have on the company's ability to expand the core data asset. Thank you.
Yes look the community addition is just one of many different data sources that we use to build out the data asset we've seen pretty consistent results of community members.
And so we don't we don't anticipate that slowing down or changing.
That.
There are a number of additional data sources that come together with the community addition to deliver the data in our platform.
And so it's pretty much a big mosaic of data that comes together no. One data source is a majority of the data that comes into our platform.
Understood. Thanks again.
Okay.
Thank you. Our next question or comment comes from the line of Brent <unk> from Piper Sandler.
Mr. <unk> your line is open.
Thank you good afternoon, Henry I wanted to go back to the the new ACB build particularly coming from the new products you called out the momentum around chorus and engage in <unk> and marketing.
What's what's driving that as an offset to potential.
Headwinds on the sales OS our seat side is it.
Change in sales incentives.
Just kind of driving kind of improvement.
<unk> is it just resonating externally with customers and how sustainable is that that new new HCV build from from these new products looking out over the next six to nine months.
Yes, I think when we go out to either make an acquisition or build a new product line. One of the things that we're really focused on is is this a product line that the vast majority of our customers are going to want is this a product or a piece of software that is critical to our go to market motion and when do you think.
[noise] about engage and you think about <unk>.
Course with conversation intelligence when we built engage when we acquired <unk> and integrated into the product. We had tremendous conviction that these were software platform that every sales team was going to need to use in a relatively.
Near future and so when we add those products what youre seeing is that actually just come to fruition. When a company makes an investment and sales intelligence. Another core sales out west platform. The next thing that they want to do is to activate that data and they are using gauge to do that and the next thing they're going to want to do is to optimize the middle of the funnel on the.
The bottom of the funnel and they are using <unk> to do just that and so we have a lot of conviction around the products, we bring to market, we use them internally, where the first alpine data customer and so once we get in the hands of our sales reps.
They're able to take it to market in an incredibly effective way and youre seeing that in our numbers with those products and those are even in earlier inning than sort of the core sales intelligence platform that we're selling.
Helpful color. Thank you.
Thank you.
Im showing no additional questions in the queue at this time I would like to turn the conference back over to Mr. Henry <unk> for any closing remarks.
Great. Thank you I know that a number of technology companies have been in the news lately about their hiring plans, but if people are out there and looking for opportunities. We are growing we are hiring we are a great place to work and you should visit <unk> dot com backflash careers come join our winning team lending team.
Thanks for everyone to everyone's Tonight.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day speakers standby.
The conference will begin shortly to raise your hand during Q&A you can dial one one.
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