Q4 2023 ZoomInfo Technologies Inc Earnings Call

Okay.

Operator: Good day, and thank you for standing by. Welcome to the ZoomInfo fourth quarter and full year 2023 financial results conference call. At this time, all participants are in a listen-only mode.

Good day, and thank you for standing by welcome to the Zoom info fourth quarter and full year 2023 financial results Conference call.

At this time all participants are in a listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.

After the speaker's presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advise your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Jerry Sosinski invest.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jerry Sisitsky, Investor Relations. Please go ahead.

Our relations. Please go ahead.

Thanks, Jamie welcome everyone to zoom into those financial results conference call for the fourth quarter and full year 2023 with me on the call today are Henry shocks founder and CEO of human film and Cameron Heizer our CFO.

Jeremiah Sisitsky: I welcome everyone to Zoominfo's financial results conference call for the fourth quarter and full year 2023. With me on the call today are Henry Schuch, founder and CEO of Zoominfo, and Cameron Heiser, our CFO. 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 and Exchange Commission.

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 and expression.

Jeremiah Sisitsky: The following are 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, as well as expressions which reflect something other than historical facts, are intended to identify forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the risk factors sections of our SEC filings. However, actual results may differ materially from any forward-looking statements.

<unk>, which reflect something other than historical facts are intended to identify forward looking statements forward looking statements involve a number of risks and uncertainties, including those discussed in the risk factors sections of our SEC filings actual results may differ materially from any forward looking statements. The company undertakes no obligation to revise or update any forward.

Jeremiah Sisitsky: 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 forward-looking statements in the slides posted on our investor relations website at ir.zoominfo.com. All metrics on this call are non-GAAP unless otherwise noted. A reconciliation can be found in the financial results press release or in the IR slides posted to our IR website. And with that, I'll turn the call over to Henry.

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 forward looking statements in the slides posted to our Investor Relations website at IR documents, so dot com.

All metrics on this call are non-GAAP unless otherwise noted a reconciliation can be found in the financial results press release or in the IR slides posted to our IR website.

With that I'll turn the call over to Henry.

Henry Schuch: Thank you, Jerry, and welcome, everyone. We ended the year on a more positive note with revenue, profitability, and cash flow that exceeded our guidance. Revenue for the fourth quarter was $316 million, and adjusted operating income was $126 million, a margin of 40%, both ahead of the guidance we provided. For the full year, we delivered $1.24 billion in revenue, generating nearly $500 million in adjusted operating income, and converting 93% of that into unlevered free cash flow. During the quarter, we purchased approximately 10 million shares of Zoominfo stock for $153 million.

Thank you Jeremy and welcome everyone. We ended the year on a more positive note with revenue profitability and cash flow that exceeded our guidance revenue for the fourth quarter was $316 million and adjusted operating income was $126 million a margin of 40%.

Ahead of the guidance, we provided for the full year, we delivered 1.24 billion in revenue generating nearly $500 million and adjusted operating income and converting 93% of that into Unlevered free cash flow.

During the quarter, we purchased approximately 10 million shares of zoom into stock for $153 million were confident that these repurchases will drive a meaningful economic return for our shareholders and we will continue to aggressively repurchase shares as we take advantage of disconnect between our share price and the intrinsic value.

Henry Schuch: We are confident that these repurchases will drive a meaningful economic return for our shareholders, and we will continue to aggressively repurchase shares as we take advantage of disconnects between our share price and the intrinsic value of our growing, profitable, and cash-flow-generative business. That being said, since early 2022, we have been managing through the challenges of a weaker macro environment, which has particularly impacted the software industry, our largest vertical. Overall, software has contracted while all other industries are growing.

You have a growing profitable and cash flow generative business.

That being said since early 2022, we have been managing through the challenges of a weaker macro environment, which is particularly impacted the software industry our largest vertical.

Overall software has contracted while all other industries are growing new businesses performed well while <unk> has declined at the pullback in the software vertical has disproportionately impacted our existing customer base, resulting in fewer up sells and more sit down cells.

Henry Schuch: New businesses performed well, while NRR declined as the pullback in the software vertical has disproportionately impacted our existing customer base, resulting in fewer upsells and more seed downsells. However, our demand and sales velocity for new business was our best ever. We closed the most new logos on record in Q4, our in-month create-and-close win rate for December was the highest we've ever had in a single month, and our median sales cycle shortened significantly year over year. Last year, I said that we would make key investments in data accuracy and data coverage by growing our contributory networks and doubling down on the AI and machine learning we use to keep data fresh and accurate. Today, 9 out of 10 times when a customer looks for a contact, we deliver a match. That's up from 7 out of 10 times at the start of 2023.

However, our demand and sales velocity for new business was our best ever would close the most new logos on record in Q4 are in months, creating close win rate for December was the highest we've ever had in a single month and our median sales cycles shortened significantly year over year.

Last year, I said that we would make key investments in data accuracy and data coverage by growing our contributory networks and doubling down on the AI and machine learning, we use to keep data fresh and accurate.

Today nine out of 10 times, a customer looks for a contact we deliver a match that's up from seven out of 10 times at the start of 2023.

Henry Schuch: Those investments resulted in a 23% year-over-year increase in our Net Promoter Score, while NPS attributed to our data asset disproportionately increased by more than 50%. Our significant investment in data quality and breadth didn't just improve customer sentiment. Q3 and Q4-23 were both our biggest win-back quarters on record, with more than 550 customers who left us returning to our platform. Sales teams are loud advocates for having the best tools to hit their quotas. And when management makes a decision to buy cheap, it is ultimately forced to buy twice. Those 550 customers who leapt to the promise of just good enough data realize that winning just one incremental deal per rep using Zoominfo is worth far more than any potential cost savings from a low-quality, low-cost provider. Another example is a marketing demand generation business that tried out a cheaper competitor hoping to save money.

Those investments resulted in a 23% year over year increase in our net promoter score well L.

N P S attributed to our data asset disproportionately increased by more than 50%.

Our significant investment in data quality and breadth didn't just improve customer sentiment Q3, and Q4, 'twenty three where both our biggest win back quarters on record with more than 550 customers, who left us returning to our platform.

Sales teams are loud advocates for having the best tools to hit their quota and when management makes a decision to buy cheap they are ultimately forced to buy twice.

Those 550 customers, who left for the promise of just good enough data realize that winning just one incremental deal per rep. Using zoom menthol is worth far more than any potential cost savings from a low quality low cost provider.

Another example is a marketing demand generation business that tried out a cheaper competitor hoping to save money.

Henry Schuch: This is a company whose entire business model is built on driving appointments, demand, and sales for technology companies. Data inputs are critical to their success. They were so dissatisfied that they came back to us just months after leaving to perform a head-to-head test of data quality.

This is a company whose entire business model is built on driving appointments demand and sales for technology companies data inputs are critical to their success.

There were so this satisfied that they came back to US just months after leaving to perform a head to head test of data quality ultimately they told us that quote.

Henry Schuch: Ultimately, they told us that, quote, "the difference was night and day, and the data quality, platform integrations, and direct dials from this provider couldn't even compare to ours. While the price was cheaper elsewhere, the actual cost of leaving Zoominfo was extraordinarily high as the customer missed out on the countless opportunities that their sales reps could have had." A publicly traded multinational MSP and provider of technology solutions turned off Zoominfo for a cheaper alternative.

The difference was night and day and the data quality platform integrations and direct out from this provider couldn't even compared to ours.

While the price was cheaper elsewhere, the actual cost of leaving zoom info was extraordinarily high as the customer missed out on the countless opportunities that their sales their sales reps could have had.

Our publicly traded multinational MSP and provider of technology solutions Turnoff zoom info for a cheaper alternative as they started preparing for the new year, they realized that they needed to fundamentally change their go to market strategy and they conducted an extensive RFP process to find the right solution. They.

Henry Schuch: As they started preparing for the new year, they realized that they needed to fundamentally change their go-to-market strategy, and they conducted an extensive RFP process to find the right solution. They came back to Zoominfo because we were able to help them with all of their key initiatives for go-to-market success, ramping up new account executives, increasing sales efficiency, driving sales and marketing alignment, and actually leveraging AI. A high-growth industrial diagnostics company switched from Zoominfo as the economic environment got more challenging. Within months, their frustrations around data quality, integrations, workflows, and sales efficiency boiled over so much that their sales leadership insisted on a change and made the easy decision to return to us. They bought them cheap, then they bought them twice.

They came back to zoom info, because we were able to help them with all of their key initiatives for go to market success ramping a new account executives, increasing sales efficiency driving sales and marketing alignment and actually leveraging AI.

Our high growth industrial diagnostics company switched from zoom mentality economic environment got more challenging within months their frustration is around data quality integrations workflows and sales efficiency boiled over so much that their sales leadership insisted on a change and made the easy decision to return to us.

They bought cheap then they bought twice.

From accurate mobile phone coverage to firm a graphic and location data to seamless integrations with CRM and workflows. When you go to market efforts necessitate necessitate demand generation at scale and doing it with a low cost low quality provider creates an immense amount of waste.

Henry Schuch: From accurate mobile phone coverage to firmographic and location data to seamless integrations with CRM and workflows, when your go-to-market efforts necessitate demand generation at scale, doing it with a low-cost, low-quality provider creates an immense amount of waste. Many of the largest and most sophisticated companies in the world are going all in on our data, insights, and automation. And in Q4, we added the most new enterprise customers since 2022. Four out of the five largest market capitalization companies in the world use ZoomInfo, and we currently have more than 60% of the Fortune 100 as customers.

Many of the largest and most sophisticated companies in the world are going all in on our data insights and automation and in Q4, we added the most new enterprise customers since 2022.

Four out of the five largest market capitalization companies in the world use zoom info and we currently have more than 60% of the fortune 100 as customers.

<unk> all teeth F. I S. Brown in Brown capital, one and Amazon are all existing enterprise customers, who expanded with six figure plus growth in the quarter. We continue to have meaningful white space within this customer set.

We also closed transactions with a diverse group of companies large and small and across all verticals, including Kraft Heinz Johnson controls first financial Bank Peachtree Hotel group open AI soul cycle nurse registry equitable advisers and Apple.

Henry Schuch: Uber, Altice, FIS, Brown and Brown, Capital One, and Amazon are all existing enterprise customers who expanded with six-figure-plus growth in the quarter. We continue to have meaningful white space within this customer set. We also close transactions with a diverse group of companies large and small and across all verticals, including Kraft Heinz, Johnson Controls, First Financial Bank, Peachtree Hotel Group, OpenAI, SoulCycle, Nurse Registry, Equitable Advisors, and Apple. We are not sure when we will see the economic environment slip from a headwind to a tailwind, but we continue to build the organization to optimize for the massive long-term opportunity while But what we are sure of is this, every company that fails to invest in the highest quality go-to market intelligence will crush its own ability to win.

We are not sure when we will see the economic environment flip from a headwind to a tailwind, but we continue to build the organization to optimize for the massive long term opportunity, while maintaining industry leading levels of profitability today.

But we are but what we are sure of is this every company that fails to invest in the highest quality go to market intelligence will crush its own ability to win.

If you're a sales or marketing professional the ability to successfully and predictably hit your number month and month out is rife with roadblocks in systemic flaws territories or poorly mapped targeting as weak CRM data is incomplete and inaccurate sellers waste inordinate amounts of time researching.

<unk> marketing campaigns go out to random companies at random time, and money is spent and horribly inefficient ways.

This type of sales and marketing pain is universal.

Step out onto any sales for four without access to go to market intelligence and you'll hear a familiar chorus I don't have the right contacts at this account I keep calling disconnected number this company isn't even in my territory anymore. It got acquired the new CEO at this company use our competitor there are only 100 target both companies.

Henry Schuch: If you're a sales or marketing professional, the ability to successfully and predictably hit your number month in and month out is rife with roadblocks and systemic flaws. Territories are poorly mapped, targeting is weak, CRM data is incomplete and inaccurate, sellers waste inordinate amounts of time researching, marketing campaigns go out to random companies at random times, and money is spent in horribly inefficient ways.

Los Angeles that can't be right marketing Didnt hit their pipeline contribution this quarter.

Or worse, you'll just hear nothing.

And wonder why is the sales floor so quiet.

A lack of key signals and insights married to incomplete stellar outright inaccurate data on customers and prospects throw sand into the gears of every go to market function.

Henry Schuch: This type of sales and marketing pain is universal. Step out onto any sales floor without access to go-to-market intelligence, and you'll hear a familiar chorus. I don't have the right contacts at this account. I keep calling disconnected numbers.

It starts with quiet sales floors and leads to Miss numbers low morale lost deals careers slumps and your best reps walking out the door.

Henry Schuch: This company isn't even in my territory anymore. It got acquired. The new CEO at this company used our competitor. There are only 100 targetable companies in Los Angeles? That can't be right.

We are the biggest and most impactful innovator focused on solving this problem for go to market professionals.

And now we're introducing the next biggest innovation for them our generative AI powered co pilot that turned to every seller into your best seller.

Henry Schuch: Marketing didn't hit their pipeline contribution this year, or worse, you'll just hear nothing and wonder, "Why is the sales floor so quiet?" A lack of key signals and insights married to incomplete, stale, or outright inaccurate data on customers and prospects throws sand into the gears of every go-to-market function. It starts with quiet sales floors and leads to missed numbers, low morale, lost deals, career slumps, and your best reps walking out the door.

Co pilot enables customers to bring together their internal customer data with zoom Intel's best in class data and apply the advanced generate of AI to sift through the noise and identify inside sellers actually want that.

The best sellers focus their energy on the companies that are most likely to close they do their research crap high quality personalized engagement and stay on top of their deals to remove risks and move to close.

We have built advanced AI into our co pilot to replicate these best in class activities.

Henry Schuch: We are the biggest and most impactful innovator focused on solving this problem for go-to-market professionals. And now we're introducing the next biggest innovation for them, our generative AI-powered co-pilot that turns every seller into your best seller. CoPilot enables customers to bring together their internal customer data with ZoomInfo's best-in-class data and applies advanced generative AI to sift through the noise and identify insights sellers actually want. The best sellers focus their energy on the companies that are most likely to close. They do their research, craft high-quality, personalized engagements, and stay on top of their deals to remove risks and move to close. We have built advanced AI into our co-pilot to replicate these best-in-class activities.

Co pilot identifies ideal fit accounts by examining our customer's history of closed one versus closed lost deals.

And then running AI against our proprietary dataset to identify the characteristics of ideal fit accounts.

That includes basics like industry and company size. In addition to tens of thousands of additional sophisticated attributes that we collect like tech stack that department budgets and executive presence at.

A dense scans are proprietary buying signals to identify the accounts most likely end market to purchase <unk>.

Lastly, it will identify the next best action seller should take by pinpointing, the right buyer exactly when to reach out to them what channel to engage on and exactly what the contextual message should be.

Henry Schuch: Copilot identifies ideal fit accounts by examining a customer's history of closed deals versus closed lost deals and then running AI against our proprietary data set to identify the characteristics of ideal FIT accounts. That includes basics like industry and company size, in addition to tens of thousands of additional sophisticated attributes that we collect, like tech stack fit, department budget, and executive presence, and then scans our proprietary buying signals to identify the accounts most likely in the market to purchase. Lastly, it will identify the next best action sellers should take by pinpointing the right buyer, exactly when to reach out to them, what channel to engage on, and exactly what the contextual message should be. For example, Copilot might tell them to email the main decision maker or start a display ad campaign against the buying committee. It then uses our generative AI emailer to create a hyper-personalized message incorporating all of the context we have about an account, contact, their history, and pain points.

For example, co pilot might tell them to email the main decision maker or to start a display AD campaign against the buying committee.

And then uses our generative AI E mailer to create a hyper personalized message incorporating all of the context, we have about an account contact their history and pain points.

We have expanded our dataset to power this level of precision and personalization co pilot starts with our highly proprietary data asset, including billions of unique intent data points opportunity scoops executive promotions and job changes website visits and then towards insights from earnings call.

Transcripts websites product portfolios and press releases to identify prospects pinpoints value propositions and potential opportunities.

It's layered on top of our existing intent and opportunity scoop data for personalization.

Co pilot is currently deployed across hundreds of customers and tens of thousands of users and will be generally available in the middle of the year, we anticipate packaging copilot with our other recently innovated AI features including our AI account fit and end market scores, creating a migration and moderate creating on Mike.

Henry Schuch: We have expanded our data set to power this level of precision and personalization. Copilot starts with our highly proprietary data assets, including billions of unique intent data points, opportunity scoops, executive promotions and job changes, website visits, and then pulls insights from earnings call transcripts, websites, product portfolios, and press releases to identify prospects' pain points, value propositions, and potential opportunities. That's layered on top of our existing intent and opportunity scoop data for personalization. CoPilot is currently deployed across hundreds of customers and tens of thousands of users, and will be generally available in the middle of the year.

<unk> and monetization opportunity for every customer and seats to our new AI enabled platform.

Co pilot deepens, our already proven track record of innovating on the way revenue team's go to market and our second annual customer survey, we pulled 7000 users and more than 80 countries across a variety of sales marketing and operations position to find out how they drove growth using zoom info.

Overall, our customers report, a 52% increase in win rates.

46% improvement in marketing pipeline of 32% increase in revenue, 72% growth in quota attainment, there are 64% more productive they see at 35% reduction in customer acquisition costs and CSM saw a 34 point increase in net retention rates.

Henry Schuch: We anticipate packaging CoPilot with our other recently innovated AI features, including our AI account fit and in-market scores, creating a migration and monetization opportunity for every customer and seat to our new AI-enabled platform. CoPilots deepen our already proven track record of innovating on the way revenue teams go to market. In our second annual customer survey, we polled 7,000 users in more than 80 countries across a variety of sales, marketing, and operations positions to find out how they drove growth using Zoominfo. Overall, our customers report a 52% increase in win rate, a 46% improvement in marketing pipeline, a 32% increase in revenue, 72% growth in quota attainment, they are 64% more productive, they see a 35% reduction in customer acquisition Every business wants to make their go-to-market activities more efficient, and our customers make it abundantly clear that Zoominfo does just that for them.

Every business wants to make their go to market motions more efficient and our customers make it abundantly clear that zoom info does just that for them.

Co pilot will enhance our already strong new customer motion and provide us with another tool to drive expansion and Fi down sell and the customer base.

Finally, I want to take a moment and talk about the incredible team, we built it Jim and Phil I'm continually impressed by the level of commitment competence relentlessness and resilience exempt exhibited by every person here.

We are entrepreneurs, who are motivated to innovate and reaccelerate growth both at zoom info and for our customers.

2023 was certainly a tougher year than we anticipated as a platform that drives efficient revenue growth, we thought zoom into would be well insulated from the many layoffs and the change in growth trajectory of our technology customers.

While our new customer growth remained strong throughout the year renewals were impacted by seat down cells triggered by layoffs and fewer upsells as technology customers pause expansion or experimented with lower quality alternatives.

Henry Schuch: Copilot will enhance our already strong new customer movement and provide us with another tool to drive expansion and fight downsell on the customer base. Finally, I want to take a moment and talk about the incredible team we've built at Zoominfo. I'm continually impressed by the level of commitment, competence, relentlessness, and resilience exhibited by every person here. We are entrepreneurs who are motivated to innovate and re-accelerate growth both at Zoominfo and for our customers. 2023 was certainly a tougher year than we anticipated.

As Cameron will detail around half of our ACB is coming from verticals that were the most impacted in 2023 and yet we still delivered a year of growth profitability and free cash flow.

We continue to control the controllable while building for the long term, we're executing with efficiency innovating and delivering tremendous ROI to our customers. We are growing while others in our space are shrinking and we're driving a leading level of profitability and free cash flow, while continuing to return cash to shareholders.

The team the platform and the market opportunity that gives us confidence in our ability to win long term with that I'll turn the call over to Cameron.

Thanks, Henry and Q4, we delivered revenue of $316 million up 5% year over year.

Henry Schuch: As a platform that drives efficient revenue growth, we thought Zoominfo would be well insulated from the many layoffs and the changing growth trajectory of our technology customers. However, while our new customer growth remained strong throughout the year, renewals were impacted by seat-down sales triggered by layoffs and fewer upsells as technology customers paused expansion or experimented with lower quality alternatives. As Cameron will detail, around half of our ACV is coming from verticals that were the most affected in 2023. And yet, we still delivered a year of growth, profitability, and free cash. We continue to control the controllable while building for the long term.

Annualized revenue based on 92 days in Q4 was one $255 billion of zero.

0.8% sequentially.

We are pleased to have delivered better than expected revenue with improving sequential annualized revenue growth relative to Q3.

Adjusted operating income was $126 million better than guidance and represented a margin of 40%.

GAAP net loss was $5 million and GAAP EPS was a loss of one cents per share.

non-GAAP EPS was <unk> 26 per share.

For the full year revenue was $1 two $4 billion up 13% compared to 2022.

Adjusted operating income was $499 million margin of 40%.

And Unlevered free cash flow was $463 million.

We were again.

GAAP profitable for the year.

With net income of $107 million and GAAP EPS of <unk> 27 per share non-GAAP EPS was $1.01 per share.

Cameron Heiser: We are executing with efficiency, innovating, and delivering tremendous ROI to our customers. We are growing while others in our space are shrinking, and we are driving a leading level of profitability and free cash flow while continuing to return cash to shareholders. We have the team, the platform, and the market opportunity that gives us confidence in our ability to win long term. With that, I'll turn the call over to Henry.

We are initiating guidance for 2024 with revenue growth of 2% to 3% as an implied and an implied operating adjusted operating margin of just over 39%.

For 2024, we expect to deliver $455 million of Unlevered free cash flow at the midpoint of guidance.

While the operating environment is curtailed growth currently we continue to believe that there is an extremely large opportunity to transform the way businesses go to market, which gives us confidence in our ability to accelerate revenue growth over the long term.

Cameron Heiser: In Q4, we delivered revenue of $316 million, up 5% year-over-year. Annualized revenue based on 92 days in Q4 was $1.255 billion, up 0.8%. We are pleased to have delivered better-than-expected revenue with improving sequential annualized revenue growth relative to the previous year. The adjusted operating income was $126 million, better than guidance, and represented a margin of $40,000. The gap net loss was $5 million, and the gap EPS was a loss of one cent per share.

Given uncertainty in the economic environment in the subscription nature of our business, we have not incorporated these potential tailwind in the guidance for 2024.

When we do realize higher levels of potential growth, we would expect to realize additional operating leverage in the business drove higher margins in the future.

Net revenue retention was 87% for the year with mid market companies, particularly those in software and technology space being most challenged.

The outsized down cells from customers most impacted by the economic environment exceeded the net upsell that we generated from other customers in 2023, creating a drag on net retention.

In the near term, we expect to maintain customer churn at levels, we experienced over the last few years.

Cameron Heiser: Non-GAAP ETFs were 2016. For the full year, revenue was $1.24 billion, up 13% compared to 2012. Adjusted Operating Income was $499 million dollars, a margin of 40%, and Unlevered Free Cash Flow of $463 million. We are again Gap Profitable for the Year, with net income of $107 million and GAAP EPS of $0.27 per share.

We anticipate additional downside pressure in Q1, as we are still lapping a peak of negativity from last year and working through the long tail of multi annual contracts that were most recently transacted in a very different operating environment.

Our expectation is that as we move through the year, we will see opportunities to stabilize net retention and begin to return to structurally higher levels.

Our guidance prudently assumes that for 2024 net revenue retention does not meaningfully get better in at the low end of the range of guidance. It assumes that retention declines for the full year.

Cameron Heiser: Non-GAAP EPS was $1.01. We are initiating guidance for 2024 with revenue growth of 2-3% and an implied adjusted operating margin of just over $30 million. For 2024, we expect to deliver $455 million of unmoved free cash flow at the mid-point of. While the operating environment has curtailed growth currently, we continue to believe that there is an extremely large opportunity to transform the way businesses go to work, which gives us confidence in our ability to accelerate revenue growth over the long term. Given uncertainty in the economic environment and the subscription nature of our business, we have not incorporated these potential tailwinds into guidance for When we do realize higher levels of potential growth, we would expect to realize additional operating leverage in the business to drive higher margins. Net Revenue Retention was 87% for the year, with mid-market companies, particularly those in the software and technology space, being most interested. The outsized downsells from customers most impacted by the economic environment exceeded the net upsell that we generated from other customers in 2020. Creating a Dragon Network.

We now have 1800 20 customers with more than $100000 in HCV.

That metric declined by 49 in the quarter that belies our success expanding with larger customers as average revenue for this quarter cohort has increased.

Our investments have helped drive the enterprise portion of our business to record highs, while mid market customers have fallen out of this cohort.

Enterprise ACB overall now represents just under 40% of the overall business up approximately 10 points over the last three years.

We also continue to see success with advanced functionality, which contributes roughly a third of our overall HCV with particular strength from operations or <unk>, which now contributes more than 10% of our ACD.

From an industry perspective, our software and technology customers were particularly challenged in 2023.

Software, our largest vertical now represents less than 33% of our ECB and was down on an absolute basis year over year as layoffs drove down sells among customers.

ACB from non technology industry has increased as a percent percentage of overall HCV as we continue to see growth and opportunities for greater penetration.

As part of our business grew approximately 15% in Q4 relative to last year.

Write offs continue to impact us in Q4 as many of our smallest customers remains a challenge and their ability to pay.

Cameron Heiser: In the near term, we expect to maintain customer return at levels we experienced over the last few years. We anticipate additional downsell pressure in Q1, as we are still lapping a peak of negativity from last year and working through the long tail of multi-annual contracts that were most recently transacted in a very different operating system. Our expectation is that as we move through the year, we will see opportunities to stabilize that retention and begin to return to structurally higher levels. Our guidance prudently assumes that for 2024, net revenue retention does not meaningfully get any better... And at the low end of the range of guidance, it assumes that retention declines for the... We now have 1,820 customers with more than $100,000 in these.

In addition to the increase in bad debt associated with write offs, we've experienced a similarly sized impact to revenue.

Our expectation is that the impact from write offs will attenuate over time as our mix of revenue continues to shift to enterprise customers and we roll out more product functionality for smaller customers, which is paid at checkout.

Operating cash flow in Q4 was $129 million, which included approximately $6 million of interest payments.

In December we completed another repricing of our term loan at par, where we reduced the interest rate by 60 basis points from Sofa, plus $2 85 to sofa plus $2 25.

This will result in annual interest payments savings of approximately $3 5 million.

Unlevered free cash flow for the quarter was $126 million, representing 100% of adjusted operating income.

Cameron Heiser: While that metric declined by 49% in the quarter, it belies our success expanding with larger customers, as average revenue for this cohort has increased. Our investments have helped drive the enterprise portion of our business to record highs, while mid-market customers have fallen out of it. Enterprise ACV overall now represents just under 40% of the overall business, up approximately 10 points over the last three years.

We ended the year with $529 million in cash cash equivalents and short term investments and we carried approximately 1.24 billion in gross debt all of which has fixed or hedged interest rates.

During the fourth quarter, we repurchased approximately 10 million shares of zoom info stock at an average price of $15 43 per share.

In 2023, we reported we repurchased $400 million in zoom info stock retiring all 22 6 million shares repurchased representing over 5% of the total fully diluted shares outstanding.

Cameron Heiser: We also continue to see success with Advanced Functionality, which contributes to roughly a third of our overall ACI, with particular strength from Operations OS, which now contributes more than 10% of it. From an industry perspective, our software and technology customers were particularly challenged. Software, our largest vertical, now represents less than 33% of our ACV and was down on an absolute basis year over year as layoffs stripped down sales a month. ACD from non-technology industries increased as a percentage of overall ACD as we continue to see growth and opportunities for greater financial.

Our net leverage ratio is one four times trailing 12 months adjusted EBITDA and $1 three times trailing 12 months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements.

With respect to liabilities and future performance obligations unearned revenue at the end of Q4 was $442 million and the remaining performance obligations or IPO were 1.15 billion of which $856 million are expected to be delivered in the next 12 months.

With that let me turn to guidance for Q1.

We expect revenue in the range of $307 million to $310 million.

Adjusted operating income in the range of $115 million to $117 million and non-GAAP net income in the range of 23 to <unk> 24 per share.

Cameron Heiser: In this part of our business, we're approximately 15% and 2.4 million customers. Write-offs continue to impact us in Q4 as many of our smallest customers remain challenged in their ability to. In addition to the increase in bad debt associated with write-offs, we've experienced a similarly sized impact from write-offs. Our expectation is that the impact from write-offs will attenuate over time as our mix of revenue continues to shift to enterprise customers and we roll out more product-led functionality for smaller customers, which is data-driven. Operating cash flow in Q4 was $129 million, which included approximately $6 million of. In December, we completed another repricing of our term loan at par, where we reduced the interest rate by 60 basis points from SOFR plus 285 to SOFR plus 225. This will result in annual interest payment savings of approximately $3.5 million. A moderate free cash flow for the quarter was $126 million, representing 100% of adjusted operating income.

For the full year of 2024, we expect revenue in the range of 1.26 to $1 two 8 billion.

And adjusted operating income in the range of $492 million to $502 million.

We expect non-GAAP net income in the range of 99 to $1 <unk> per share based on 399 million weighted average diluted shares outstanding.

We expect Unlevered free cash flow in the range of $445 million to $465 million.

Our full year guidance implies 2% to 3% revenue growth and an adjusted operating margin just over 39%.

For the year, we would expect capex in the range of 4% to 5% of revenue as we anticipate an additional $25 million to $35 million in capital expenditures relative to 2023, driven by facilities build outs, where we have outgrown certain offices with expiring leases.

We continue to expect free cash flow conversion in the low 90 percents as a percentage of.

Adjusted operating income.

Our non-GAAP tax rate for 2024 is expected to be 15%.

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

As a reminder to ask a question. Please press star one one on your telephone.

For your name to be announced to withdraw your question. Please press star one again, please be sure to limit to one question and one question only please standby we compile the Q&A roster.

Cameron Heiser: We ended the year with $529 million in cash, cash equivalents, and short-term investments. We carried approximately $1.24 billion in gross debt, all of which is fixed or has. During the fourth quarter, we repurchased approximately 10 million shares of Zoominfo stock at an average price of $15.43 per share. In 2023, we repurchased $400 million of Zoominfo stock, retiring all 22.6 million shares repurchased, representing over 5% of the total fully diluted share value. Our net average ratio is 1.4 times trailing 12 months adjusted EBITDA and 1.3 times trailing 12 months cash EBITDA, which is defined as consolidated EBITDA on our currency. With respect to liabilities and future performance obligations, unearned revenue at the end of Q4 was $442 million, and remaining performance obligations, or RPO, were $1.15 billion, of which $856 million are expected to be delivered in the next. With that, I'll be turning to guidance for Q1.

And our first question.

Comes from the line of Mark Murphy with Jpmorgan. Your line is open.

Thank you very much.

So it looks like layoffs are continuing in tech.

It looks like over 100 tech companies have announced layoffs 34000.

Workers, so far this year.

Excuse me.

I believe the snap and Doc you sign in pure storage, where all analysis in the past week is that trendy long gating.

Beyond what you might have expected or do you still look back and think that 12 months ago was likely the peak layoff period, and then I have a quick follow up.

Yeah. Thanks Martin.

What we're seeing is that the layoffs.

First of all the.

The total amount of layoffs youre seeing right now is meaningfully less than we saw a year ago and I think the type of layoffs that are happening in or around tech are much more surgical than they were a year ago, a year ago. The layoffs work somewhat panic driven.

And Werent thoughtful I think what youre seeing today.

Much more surgical approach to layoffs and so.

Cameron Heiser: We expect revenue in the range of $307 to $310 million; Adjusted Operating Income in the range of $115 to $117 million; Non-Gap Net Income in the range of $0.23 to $0.24. For the full year 2024, we expect revenue in the range of $1.26 to $1.28 billion and adjusted operating income in the range of $492 to $502 million. We expect non-GAAP net income in the range of $0.99 to $1.01 per share, based on the $399 million weighted average the Wooded Shares Oversight Program provides.

I think the overall amount is down the surgical nature of the layoffs.

Is protecting account executives and many people when they go to market function that are driving growth for companies and dose are our customers.

Yes, thank you for that Henry.

And then my second question is on the co pilot product it sounds like an attractive value prop and I believe you said that it is a migration and monetization opportunity for every seat out there can you shed a little light on how you're thinking about pricing.

The product in other words is it going to be a per user per month do you think you'll be using credits in <unk> and <unk>.

And just at a high level, if you could sketch out how broadly you might picture the adoption there across your user base. If we were to think about it. This is several years down the road.

Thank you.

We're in market right now testing a number of different models for pricing and packaging of this I think what I can tell you is that if you stretch this out for.

Cameron Heiser: We expect unlevered pre-castral in the range of 445 to 465. Our 4-year guidance implies 2-3% revenue growth and an adjusted operating margin just over $39,000. For the year, we would expect CapEx in the range of 4-5% of revenue, as we anticipate an additional $25-35 million in capital expenditures relative to 2023, driven by facility build-outs where we have outgrown certain offices with expiring leases. We continue to expect free cash flow conversion in the low 90s as a percentage of adjusted operating costs. Our non-GAAP tax rate for 2024 is expected to be $15.

If you think about this in terms of years, we expect every one of our customers to be on our AI enabled platform.

When you think of it in terms of years, we're going to go out.

In the back half of the year and believe there is an opportunity to begin migrating our customers and the nice thing about co pilot is it lands just as well with our enterprise customers as it does with our SMB customers and so we have the opportunity across the board to run this migration and monetization motion that is emotion that in the history.

<unk> zoom info, we've run very successfully.

At least two times before when we made the acquisition of ranking in 2017, and the acquisition of Zoom and fell in 2019. Shortly thereafter, we migrated all of our customers onto new platforms that we had built those were very successful motions for us that we expect to repeat here.

Operator: With that, let me turn it over to the operator to open the call. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please be sure to limit your question to one and only one question.

We have a playbook for us.

Thank you very much.

One moment for our next question.

And our next question comes from Koji Ikea with Bank of America. Your line is open.

Mark Murphy: Please stand by as we compile the Q&A roster. And our first question comes from the line of Mark Murphy with J.P. Morgan. Your line is open. Thank you very much.

Yeah, Hey, guys. Thanks for taking the question wanted to ask on free cash flow and free cash flow generation for this year. When we look at the guidance it looks like about 30%, 36% on the free cash flow margins. So just trying to better understand the levers to drive upside to free cash flow. This year is it a function of upside of revenue.

Mark Murphy: So it looks like layoffs are continuing in tech. You know, it looks like over 100 tech companies have announced layoffs of 34,000 workers so far this year. Excuse me.

Henry Schuch: And I believe Snap, DocuSign, and True Storage were all announced in the past week. Is that trend elongating beyond what you might have expected, or do you still look back and think that 12 months ago was likely the peak layoff period? And I have a quick follow-up. Yeah, thanks Mark. I think what we're seeing is that the layoffs, first of all, the total amount of layoffs you're seeing right now is meaningfully less than we saw a year ago. And I think the type of layoffs that are happening in or around tech are much more surgical than they were a year ago. A year ago, the layoffs were somewhat panic-driven and weren't thoughtful.

Leverage within the organization better collections, I mean, any sort of help there would be helpful. Thank you.

Sure.

Thanks for your question Koji.

Certainly we do face some headwinds with the Capex being up and obviously that's a.

Dependent on the timing of different leases, so that will last through this year and the beginning of next year and then start to fall off.

But certainly as we think about cash flow, it's largely a conversion rate against adjusted operated income and so.

That conversion rate would actually improve as growth improves going outward and thats a function of our customers that pay us upfront having more of those.

Henry Schuch: I think what you're seeing today is a much more surgical approach to layoffs. And so I think the overall amount is down. The surgical nature of the layoff is protecting account executives and many people in the go-to-market function that are driving growth for companies, and those are: Thank you for that, Henry. And then my second question is about the CoPilot product.

As a percentage of the adjusted operating income will ultimately drive that improvement and otherwise we are very focused on improving our collections and reducing write offs, which.

Should over time improve as well.

Got it thanks, Ken Thank you so much.

Yes.

Henry Schuch: It sounds like an attractive value proposition, and I believe you said that it is a migration and monetization opportunity for every seed out there. Can you shed a little light on how you're thinking about pricing the product? In other words, is it going to be per user per month?

And our next question comes from the line of Kash Rangan with Goldman Sachs. Your line is open.

Alright, Thank you very much congrats.

All of the.

The impairments you've taken to regain your customers back Henry.

Henry Schuch: Do you think you'll be using credits and tokens? And, just at a high level, if you could sketch out how broadly you might picture the adoption of this across your user base if we were to think about it several years down the road? I think if you look, we're in the market right now testing a number of different models for pricing and packaging of this. I think what I can tell you is that if you stretch this out for, if you think about this in terms of years, we expect every one of our customers to be on our AI-enabled platform when you think about it in terms of years. We're going to go out in the back half of the year and believe there's an opportunity to begin migrating our customers, and the nice thing about CoPilot is it lands just as well with our enterprise customers as it does with our SMB customers. And so we have the opportunity across the board to run this migration and monetization motion. That is a move that, in the history of Zoominfo, we've run very successfully at least two times before when we made the acquisition of Ranking in 2017 and the acquisition of Zoominfo in 2019.

Can expand on that you talked about a flurry of.

A win backs when do you think that trend becomes a little bit more pronounced so the compounding effect of.

New business and improved retention can have a material impact to the growth of the company. Thank you so much and congrats.

Thanks, Kash I think look we are we still have meaningful.

Retention headwind in Q1 that were managing through and so I wouldn't expect it fully.

Fully attenuate in this quarter.

But I think as our customers are out there and actually experiencing lower quality solutions. They are realizing that what you get from zoom info is very different than what you get from the competitive set that's out there.

And so we are seeing that happen and then we're running.

More specific wind back motions against customers that went elsewhere to bring them back in and as those two as we get through the quarter and that went back motion continues to pick up steam I think youll see.

Henry Schuch: Shortly thereafter, we migrated all of our customers onto new platforms that we had built. Those were very successful moves for us that we expect to repeat. Thank you very much.

I think we expect to see that improving.

All the best for this March quarter. Thank you so much thank.

Thank you.

And our next question comes from the line of surrender thin with Jefferies. Your line is open.

Koji Ikeda: One moment for our next question, and our next question comes from Koji Ikeda with Bank of America. Your line is open.

Thank you.

In terms of just the.

The distribution around the <unk> at this point as you look forward. How would you have there is just pure churn at the SMB level versus maybe what youre seeing in terms of reductions at the larger clients just any color around the differences in terms of the maintenance needs.

Koji Ikeda: Yeah, guys, thanks for taking the question. Um, wanted to ask about cash flow and pre-cash flow generation for this year. When we look at the status, it looks like about 30% 36% on the pre-cash flow. So just trying to better understand the levers to drive up free cash flow. Is it a function of increased revenue, leverage within the organization, better collections, I mean, any of that helps.

Sure so.

Our <unk>.

Churn levels have actually remained fairly stable in 'twenty three there are a little down from what we saw in 'twenty, two but not meaningfully. So obviously that part of the equation is largely driven by.

Cameron Heiser: Sure. Thanks for your question, Koji. Currently, we do face some headwinds with CapEx speeding up, and obviously that's... Yeah, it's dependent on the timing of different leases, so, you know, that'll last through this year and the beginning of next year and then start to fall off. But certainly, you know, as we think about cash flow, it's largely a conversion rate against adjusted operating income.

The lower end of the market and so while we do see pressure on smbs, particularly around write offs and some down sells and kind of.

Price requirements, we don't see a meaningfully increase in the churn that we're seeing where we have seen a much bigger impact on net retention has been particularly in the mid market and the lower end of enterprise, where we've seen down sell and if you look at our customers that are.

Cameron Heiser: And so, you know, that conversion rate would actually improve as growth improves going outward, and that's a function of our customers that pay us up front. Having more of those as a percentage of the adjusted operating income will ultimately drive that improvement. And otherwise, you know, we are very focused on improving our collections and reducing write-offs, which, you know, should, over time, improve as growth improves. And our next question comes from Kasthuri Rangan with Goldman Sachs. Your line is open. Thank you very much. Congratulations. Reagan.

Most impacted.

By the economic environment, which tend to be those that are.

That down so has been really meaningful impact in fact outstripped.

The upsell that we've seen in other customers and so that has been the biggest impact this past year in 2023, and I think so we look at least the first quarter I think we still see some pressure with respect to those down cells.

But as we look forward there is an opportunity for that.

Kasthuri Gopalan Rangan: It's kind of odd that you talked about a flurry of... and Brad Hynes. Thank you. So............ and Tom Porting of Tech Talk have a material impact. Thanks, Kath.

Hopefully stabilize and we'll see that.

Potentially improve going forward.

Thank you.

Speaker Change: Our next question comes from the line of D. J Hynes with Canaccord Genuity. Your line is open.

Henry Schuch: I think, look, we still have a meaningful retention headwind in Q1 that we're managing through, and so I wouldn't expect it to fully attenuate in this quarter. But I think as our customers are out there and actually experiencing lower quality solutions, they are realizing that what you get from Zoominfo is very different than what you get from the competitive set that's out there. And so we are seeing that happen. And then we're running more specific win-back motions against customers that went elsewhere to bring them back in as those two, as we get through the quarter and that win-back motion continues to pick up steam, I think you'll see. I think we expect to see that.

Hey, guys. Thanks for taking the question.

To go back to <unk> question on the win backs, obviously, it's an impressive number.

If we look at it.

Hey, good economic basis like for like are those customers coming back on staying more or are they paying less of the paying the same as they did prior to leaving I'm just curious around.

On a broader implications.

On pricing in this space and kind of read throughs that we can derive from those folks.

And I think that.

What you see is that the experience is kind of across the board you do see customers that.

Go and try something else realize what they're missing in there and then.

Henry Schuch: All the best for that, Mark. And our next question comes from the line of Sorender Zind. So, Jeffreys, your line is open.

Leanne and even more for much bigger ticket sizes and rolling that across their entire.

David E. Hynes: Thank you. In terms of just the distribution around the NRR at this point, as you kind of look forward, how much of there is just pure churn at the SMB level versus maybe what you're seeing in terms of reductions at the larger clients? Just any color on the differences in terms of the magnitudes.

University, we also see customers that down sold.

That probably would've down sold any ways. They went with a lower price competitor and then they rolled out.

It came back to zoom info on the smaller.

Amount of spend that they might have gotten too so.

Cameron Heiser: Sure. So, you know, our Turn levels have actually remained fairly stable. In 23, they're a little down from what we saw in 22, but not meaningfully so.

I'd say that the.

Yes, it's really more customer dependent than it is anything else in terms of what they're kind of.

Where there are natural spot, where they thought they should've been and then.

Cameron Heiser: Obviously, that part of the equation is largely driven by the lower end of the market. And so while we do see pressure on SMBs, particularly around write-offs, and some downfills in... We don't see a meaningful increase in the churn that we're seeing. Where we have seen a much bigger impact on net retention has been particularly in the mid-market, in the lower end of enterprise, where we've seen down-sell, and if you look at our customers that are most impacted by the economic environment, which tend to be those that are in technology or software-related spaces, that down-sell has been really meaningful and has, in fact, upstripped the up-sell that we've seen in other customers, and so that has been the biggest impact this past year in 2023, and I think if we look at least the first quarter, I think we still see some pressure with respect to those down-sells, but as we look forward, there is an opportunity for that to.., hopefully stabilize and we'll see that, you know, potentially improve. Thank you. Our next question comes from the line of D.J. Hynes with Canaccord Genuity.

To some extent how bad of an experience they had with the <unk>.

With a lower price solution.

Therefore willing to spend more with some info.

Yes, Okay and.

And then Henry maybe I could follow up with you just competitive implications of hub spot clear bit.

Particularly at the low end of your business I realize those guys don't play much in the enterprise, but curious if you have any thoughts there.

Yeah look we've always been paying attention to this but we haven't seen clear bet or hub spot come across as a competitor in any of our recent deals how does that seem to be talking fundamentally about enriching company level data and not prospector contact level data.

Before the acquisition of unclear, but clear bit wasn't a competitor that was meaningfully on our radar anywhere and post the acquisition, we havent seen them come up in sales processes.

Makes sense, okay. Thank you guys.

Our next question comes from the line of Brian Peterson with Raymond James Your line is open.

David E. Hynes: Your line is open. Hey guys, thanks for taking the question. I will go back to Cassie's question on the windbacks. Obviously, it's an impressive number. But if we look at it...

Hi, guys. Thanks for taking my question. So I know you mentioned that medium sales cycles shortening in the quarter wanted to understand maybe when that started to materialize. How we're thinking about the linearity into January and February is that kind of broad in SMB and enterprise software non software how do you guys thinking about that thanks.

David E. Hynes: Right, like for like. Are those customers coming back? Are they paying more? Are they paying less?

David E. Hynes: Are they paying the same as they did prior to leaving? I'm just curious about the kind of broader implications on pricing in the space and the kind of read-throughs that we can derive from those folks. And I think that what you see is that the experience is kind of across the board. You do see customers that, you know, go and try something else, realize what they're missing, and then, you know, lean in even more for, you know, much bigger ticket sizes and rolling that across their entire universe. You also see customers that downsold or that, you know, probably would have downsold anyways. They went with a lower-priced competitor, and then they rolled out, you know, came back to Zoominfo on the smaller amount of spend that they might have gotten to.

Brian I think the way that we've thought about that.

We've just it's a stat that we track across the board medium sales cycles on our new business sales and year over year across the board. We've seen those median sales cycle times shorten.

We're also making a.

And investment behind P. L G.

It will allow customers to <unk>.

Wow users to become customers in a self service.

No friction no connect with a salesperson way down.

That will obviously impact at sales cycles for us as well.

But overall in our new business sales team year over year, we've seen a meaningful.

A meaningful impact in sales cycles.

David E. Hynes: So, yeah, I'd say that the... Yeah, it's really more customer-dependent than it is anything else in terms of what their kind of natural spot is, you know, where they thought they should have been. And then, to some extent, how bad of an experience they had with a lower price solution and, therefore, willing to spend more with. Okay, and then Henry, maybe I could follow up with you on the competitive implications of HubSpot Clearbit. If you're at the low end of your business, I realize those guys don't play much in the enterprise, but I'm curious if you have any thoughts.

Great. Thank you.

Mizuho: Our next question comes from the line of city <unk> with Mizuho. Your line is open.

Thanks for taking my question I wanted to ask you about the enterprise business that is a record quarter I remember.

Last year, you talked about.

Going top down selling winning mindshare of C suite, so help us understand the progress you have made on that.

Changes in our go to market side, that's helping you at all.

Yes, we've made a.

Hi.

We've made an intentional focus on the enterprise business, both from a new business perspective, where we segmented the way that we go to market and so that we have enterprise specific reps on new business and in our customer base, where we've segmented our customer base. So.

Henry Schuch: Look, we've always been paying attention to this, but we haven't seen Clearbit or HubSpot come across as a competitor in any of our recent deals. HubSpot seems to be talking fundamentally about enriching company-level data and not prospect or contact-level data. Before the acquisition of Clearbit, Clearbit wasn't a competitor that was meaningfully on our radar anywhere, and post the acquisition, we haven't seen them come up in sales. It makes sense,

So that our enterprise reps, who are tenured enterprise sellers now.

Are.

The right account loads and the right accounts to drive growth.

And then we have the strongest product market fit in the enterprise, where our investments from a data quality and data accuracy perspective, but also our investments from a data privacy perspective.

David E. Hynes: Okay, thank you guys. Our next question comes from the line of Brian Peterson with Raymond James. Your line is open. Hi guys.

It put us in a position to win across the enterprise and that's a place where we see almost no competition and so it's an area that we're really investing behind and we're seeing traction and the customer base and on the new business side.

Tyler Maverick Radke: Thanks for taking the question. So I know you mentioned that the median fill tick was shortened in the quarter. I wanted to understand maybe when that started to materialize, and what we're thinking about the linearity into January and February.

The team is new but off to a pretty good start.

Thank you.

Our next question comes from the line of Elizabeth quarter with Morgan Stanley. Your line is open.

Henry Schuch: And is that kind of broad on S&P and enterprise, software and non-software? What how do you guys think about that? Thanks. But I think the way that we've thought about that, it's just a step that we track across the board, median sales cycles on our new business sales. And year over year across the board, we've seen those median sales cycle times shortened. We're also making an investment behind PLG that'll allow customers to allow users to become customers in a self-service, No friction, no connect with a salesperson way. That will obviously impact sales cycles for us as well. But overall, in our new business sales team, year over year, we've seen a meaningful, A Meaningful Impact on Sales Life. A great deal. Thank you. Our next question comes from the line of Siti Panigrahi with Mizzio.

Great. Thank you very much I wanted to ask a little bit on the non software side, Yes, I believe last quarter, you mentioned growth had moderated in Q3. So I was just wanted to get a sense for how growth trended in Q4, I know you mentioned it remained healthy, but any sort of qualification on Q4 versus Q3 and outlook into fiscal 'twenty four.

Thank you.

It remained consistent maybe down a little versus where we were in Q3, but it kind of mid teens growth.

Sure.

Area of the business.

As we look forward.

<unk>.

Speaker Change: Yes, I think that we're expecting.

Net retention overall stays.

Pretty consistent.

That interaction between the technology businesses.

Siti Panigrahi: Your line is open. Thanks for taking my question. I wanted to ask you about the enterprise business that is a record quarter. I remember early last year you talked about, you know, going top down selling winning a mine share of the C-Suite.

And the non kind of technology.

Allergy businesses that we serve will likely be impacted by.

Just how the Mac.

Speaker Change: The macroeconomic situation unfolds more than anything else.

But yes, I think we see some good stability there we still see a lot of opportunity in terms of new customers coming in because we're just so underpenetrated with respect to those industries that I do think that while we haven't built it into our expectations.

Henry Schuch: So help us understand the progress you have made on that, you know, changes on the go to market side that's helping you now. Yeah, we've made a we've made an intentional focus on the enterprise business, both from a new business perspective, where we segmented the way that we go to market and so that we have enterprise specific reps on new business, and in our customer base, where we've segmented our customer base, so that our enterprise reps, who are tenured enterprise sellers now, are, have the right account loads and the right accounts to drive growth, and then we have the strongest product market fit in the enterprise where our investments from a data quality and data accuracy perspective, but also our investments from a data privacy perspective, put us in a position to win across the enterprise.

The kind of natural usage of AI in those.

And those non technology businesses is pretty low and our ability to really push insights to those sellers I think.

<unk> is probably pretty exciting with respect to those customers.

Great. Thank you.

Okay.

Our next question comes from the line of Brad Zelnick with Deutsche Bank. Your line is open.

Great. Thank you so much for taking my questions first of all you Henry the changes that you made last year to flatten. The sales organization. You also moved some key people around what if any tweaks are you, making now into the new year, just wanted to revisit that to make sure you feel you have the right players out on the field and in the right configuration and I just had a.

Henry Schuch: That's a place where we see almost no competition, and so it's an area that we're really investing in, and we're seeing traction in the customer base, and on the new business side, the team is new but off to a pretty good start. Thank you. Our next question comes from the line of Elizabeth Porter with Morgan Stanley. Your line is open. Great, thank you very much. I wanted to ask a little bit about the non-software side.

Quick follow up for Cameron as well.

Yes. Thanks for the question, Brad I feel really great about the team that's around me.

The team that we brought to gather firm our product and engineering perspective from a go to market perspective, I feel like we have really great I have really great partners across the business today.

Elizabeth Porter: I believe last quarter you mentioned growth had moderated in Q3, so I just wanted to get a sense for how growth trended in Q4. I know you mentioned it remained healthy, but any sort of qualification on Q4 versus Q3 and the outlook for fiscal 24? Thank you.

And they are they have an opportunity now to execute across the business and we're expecting a lot from them.

Okay cool, thank you and Cameron as it relates to the write offs is it still contains to SMB customers.

How has that been playing out relative to expectations in the reserves you have been taking and lastly, what are you assuming in 2024 guidance for bad debt. Thanks, very much guys.

Cameron Heiser: It remains consistent, you know, it's maybe down a little versus where we were in Q3, but at, you know, kind of mid-teens growth, that's pretty healthy for that, you know, period of business. Yeah, as we look forward. And I think that we're expecting that net retention overall stays pretty consistent. How that interacts between the technology businesses and the non-technology businesses that we serve will likely be impacted by just how the macroeconomic situation unfolds more than anything else. But yeah, I think we see some good stability there.

So it has been playing out largely as we've expected it is.

Almost entirely smbs.

And I think Thats, where you expect it to say it tends to be kind of the lowest spending folks that we have which for us we're really focused on getting as many of those customers into a product led motion, where we're collecting either an ECA.

Payment or sales payment upfront.

Avoiding the need to go chase those customers or see them fallout later on.

Elizabeth Porter: We still see a lot of opportunity in terms of new customers coming in because we're just so underpenetrated with respect to those industries. And I do think that while we haven't built it into our expectations, the kind of natural usage of AI in those uh, in those non-technology businesses is pretty low, and you know our ability to really push insights to those sellers is probably pretty exciting. Great, thank you. Our next question comes from the line of Brad Zelnick with Deutsche Bank. Your line is open. Great Thank you so much for taking the time to answer my questions. First for you, Henry, the changes that you made last year to flatten the sales organization, you also moved some key people around. What if any tweaks are you making now into the new year?

For our.

Expectations in 2024, we're expecting.

A similar level of write off activity.

Which.

Currently it might be a slightly lower absolute number in terms of bad debt is theres not as much to catch up on from previous periods. As we've had as we had in 2023.

Very helpful. Thanks.

Our next question comes from the line of Michael <unk> with Wells Fargo Securities. Your line is open.

Okay, great. Thanks, I appreciate you taking the question I wanted to go back to just some of the segmentation commentary.

On the software side, we've spent.

In the past talking about just the renewal cycle in Q4 Q1 seasonal impacts given its mid February and anything you can do to just help level set where you are in terms of those renewal discussions and if the combined fleet base. There is at all stabilizing relative to the step down you saw over the prior year and maybe camera.

Brad Zelnick: Just wanted to revisit that to make sure you feel you have the right players out on the field and in the right configuration. And I just had a quick follow-up for Cameron. Yeah, thanks for the question, Brad. I feel really great about the team that's around me, the team that we brought together from a product and engineering perspective, from a go-to-market perspective. I feel like we have really great partners across the business today. And they have an opportunity now to execute across the business. And we're expecting a lot. Okay, cool. Thank you. And Cameron, as it relates to the write-off, is it still limited to SMB customers, and how has it been playing out relative to expectations from the research you've been taking? And lastly, what are you assuming is the 2024 guidance for bad debt? Thanks very much.

If you could just add any commentary around how the visibility coming into this year compares to prior periods given it sounds like there are signals some of the pressures are moderating, but the guidance still assumes what sounds like stable to potentially declining retention rates in the coming year, just further commentary on the feedback.

And what's happening there is helpful. Thanks.

Sure.

I'll just start out Michael.

To add some color, but certainly in terms of visibility coming into the year I think we do feel that the.

The trend that we've seen coming out of Q3 and Q4 as you know.

Much more stable and that our customers are being more surgical in terms of how they're thinking about their investments and where they're putting seats and those sorts of things. So I think that that makes us feel.

Henry Schuch: So it has been playing out largely as we've expected. It is almost entirely SMBs. And I think that's where we expect it to stay. It tends to be the lower spending folks that we have, which for us, we're really focused on getting as many of those customers into a product-led movement where we're collecting either an ECH payment or a sales payment up front, avoiding the need to go chase those customers or see them fall out later on. For our expectations in 2024, we're expecting a similar level of write-off activity, which ultimately might be a slightly lower absolute number in terms of bad debt, as there's not as much to catch up on from previous periods. Our next question comes from the line of Michael Cairn with Wells Fargo Security. Your line is open. Hey, great, thanks, I appreciate you taking the question. I want to go back to just some of the segmentation commentary.

Good about our visibility and frankly.

I think it's prudent for us to think about the fact that the world could get worse in the retention because they get worse.

As we develop guidance and think about it.

I'll, let Henry jump in on any other color.

I would just say.

Our customers continue to have budgetary constraints and they are scrutinizing every dollar of spending and so we're still managing through that inside of the customer base.

That hasn't against the back half of 2023 that hasnt changed in any material way.

Got it thank you.

And our next question.

It comes from the line of Brent bracelet with Piper Sandler Your line is open.

Hi, good afternoon, a lot of the questions have been asked and answered on the demand I wanted to double click into operations OS I think you flagged that at 10% of revenue mix now Henry are there any levers to drive broader adoption, particularly in the enterprise space, what's the attach rates.

Cameron Heiser: And on the software side, we've spent time in the past talking about just the renewal cycle and Q4, Q1 seasonal impact, given it's mid-February, anything you can do to just help level-set where you are in terms of those renewal discussions, and if the combined feet base there is at all stabilizing relative to the step-downs you saw over the prior year, and maybe Cameron, if you can just add any commentary around how the visibility coming into this year compares to prior periods, given it sounds like there are signals some of the pressures are moderating, but the guy still assumes what sounds like stable to potentially declining retention rates in the coming year. Just further commentary on the fee base and what's happening there is helpful. Thanks.

Okay.

Yeah. Thanks for the question.

Operations OIS, our das product that fits inside of operations OIS continues to be one of our fastest growing products, particularly in the enterprise.

There is still a tremendous amount of white space not just in accounts that we haven't gotten operations OS in das into but also accounts that are using a small piece of operations OS or data as a service.

Michael Cairn: Sure, I'll just start out, Michael, and then let Henry add some color, but, you know, certainly in terms of visibility coming into the year, I think we do feel that the... The trend that we've seen coming out of Q3 and Q4 is much more stable. And our customers are being more surgical in terms of how they're thinking about their investments and where they're putting seats and those sorts of things. So I think that makes us feel good about our visibility. And frankly, I think it's prudent for us to think about the fact that the world could get worse and that retention could get worse as we kind of develop guidance and things. All the hymns are up there, I don't know.

And every account.

That is looking to do something real with generative AI from a go to market perspective. The first thing that theyre struggling with is how do I get my data up to date and accurate and then keep it that way and we're the most obvious solution to that problem and so our sellers across the enterprise are taking that message into.

Their customers, there's still that continues to be an area that we're in.

Immensely focused on and have put together a really strong team around and think thats going to be a meaningful grower in our portfolio. This year.

Okay.

Helpful color. Thank you.

Our next question comes from the line of.

Cameron Heiser: I would just say that our customers continue to have budgetary constraints, and they're scrutinizing every dollar of spending, and so we're still managing through that inside us, and we have it against the back half of 2023. Got it, thank you. And our next question comes from the line of Brent Graceland with Piper Sandler. Your line is open. Good afternoon. A lot of questions have been asked and answered on demand. I wanted to double-click into the operations OS.

Yes.

Alex Zukin with Wolfe Research your line is open.

Hey, guys. Thanks for taking my question apologize.

Let me allow place, but maybe just the first one can you maybe unpack.

Verticals that you saw the pockets of strength that you saw in the quarter and in the pipeline operable vertical and geographic perspective and have a quick follow up.

Sure so from a vertical perspective.

Tends to be all of those things outside of technology and it services and software. So financial services continues to see strength manufacturing continues to see strength.

Henry Schuch: I think you have flagged that at 10% of the revenue mix now. Henry, are there any levers to drive broader adoption, particularly in the enterprise space? What's the attach rate today? Could you just double-click on what is driving the makeshift operations OS and how much potential is there for that segment to be an upside level this year? Yeah, thanks for the question. Operations OS, our DAS product that fits inside of Operations OS, continues to be one of our fastest growing products, particularly in the enterprise. There's still a tremendous amount of white space, not just in accounts that we haven't gotten Operations OS and DAS into but also in accounts that are using a small piece of Operations OS or data as a service. In every account that is looking to do something real with generative AI, from a go-to-market perspective, the first thing that they're struggling with is, how do I get my data up to date and accurate and then keep it that way?

Transportation and logistics retail.

Kind of all of those.

Our traditional industries.

Areas, where we are.

Continuing to build and frankly, they're all in the.

Either teams or in some cases 20 plus percent growth areas.

Geographically.

It tends to be a little bit more U S centric still I don't think we've seen.

Our European businesses kind of pick up they continue to grow but they are much slower penetration area.

So.

Yes, I would say that we don't see the same sort of acceleration internationally as we've seen historically.

Perfect and then maybe in terms of the guide for the year from a revenue perspective as we go through this.

Let's call it attenuating hopefully period of macro uncertainty it looks like the back half and maybe Q4 sets up for.

Henry Schuch: And we're the most obvious solution to that problem. And so our sellers across the enterprise are taking that message to their customers. That continues to be an area that we're immensely focused on and have put together a really strong team around, and think that's going to be a meaningful grower in our portfolio. Careful color, thank you.

Mild reacceleration, but just maybe help bridge, how we should think about the exit rate for growth in Q4.

As we think about some of those potential sources of upside.

In the guidance.

Yeah. So certainly our expectation is that Q1.

We will continue to be tough.

Certainly the.

Alex Zukin: Our next question comes from the line of... Alex Zukin, with Wolf Research, your line is open. Hey, guys, thanks for taking the questions. Apologize, I'm in a slightly loud place.

We expect to see some downside pressure.

<unk> in Q1, as we are lapping.

The peak negativity is still I think if you build out a model you'll end up with.

Q4 exit.

Alex Zukin: But maybe just the first one, can you maybe unpack verticals that you saw, pockets of strength that you saw in the corridor and in the pipeline, from a vertical and geographic perspective, and then have a quick follow-up? Sure, so from a vertical perspective, it tends to be all those things outside of technology and IT services and software. So, you know, financial services continues to see strength, manufacturing continues to see strength, transportation, logistics, retail, you know, kind of all of those more traditional industries are areas where, you know, we've, you know, continued to build. And frankly, they're all in either teams or, you know, in some cases, 20 plus percent growth areas. Um... Geographically, it tends to be a little bit more U.S. centric still.

Growth rate relative to Q4 of this year and the <unk>.

Low to mid single digits obviously.

The mid would be much more at the high end of the range and.

Low would be at the low end of the range. So as you get further out into the year, yes.

As we are.

As we think about guidance.

Perfect. Thank you guys congrats on great quarter.

Our next question comes from the line of Tyler Radke with Citi. Your line is open.

Thanks, so much for taking the question.

To unpack the strength in the quarter, you know the slightly better revenue <unk> seen over the last couple of quarters was it primarily driven by the strength in the <unk>.

And close business or could you just talk about linearity of the quarter and then specifically to the create and close business did that strength continue into January and the first part of February. Thank you.

Cameron Heiser: I don't think we've seen our European businesses kind of pick up. They continue to grow, but they're a much lower penetration area. Yeah, I'd say that we don't see the same sort of acceleration internationally as we have seen. And then maybe, Sam, in terms of a guide for the year from a revenue perspective, as we go through this, you know, what's called an attenuating hopefulness period of macro uncertainty, it looks like the back half and maybe Q4 set up for a mild re-acceleration, but maybe help bridge how we should think about the exit rate for growth in Q4. And as we think about, you know, some of those potential sources Yeah, so certainly our expectation is that Q1 will continue to be tough.

Yes linearity in the quarter was reasonably good I would say yes.

Maybe a little stronger towards the end of the year.

<unk> than what we saw in October although.

Honestly a lot of that has to do with the mix of what different businesses come in so we do tend to see that December tends to be more enterprise weighted and that is where we're seeing the most traction with customers right now so I think that improvements certainly certainly.

Hopes that enterprise business does not tend to be create and close within weeks.

Much more of the enterprise motion that we're we're going with.

As we think about how that's continued into.

Q1.

Cameron Heiser: And certainly, we expect to see some downfall pressure continue in Q1 as we're lapping peak negativity still. I think if you build out a model, you'll end up with a Q4 exit growth rate relative to Q4 of this year in the low to mid-single digits. Obviously, the mid would be much more at the high end of the range, and the low would be at the low end of the range.

For better or worse Q1 does tend to be a.

More SMB focused renewal timeframe and it tends to be one of our biggest expiring quarters. So while.

In this.

Segment by segment, we've seen continuation.

Ration of what we've.

What we experienced in Q4, the mixed shift makes it.

Alex Zukin: So as you get further out into the year, Yeah, that spread widens a little. Thanks for watching. God bless you.

Q1, actually a little tougher.

Tyler Maverick Radke: Perfect. Thank you, Max. Congratulations on your... Our next question comes from the line of Tyler Radke with Citi. Your line is open. Thanks so much for taking the question. If you were to unpack the strength in the quarter, you know, the slightly better revenue beat that you've seen over the last couple quarters, was it primarily driven by the strength in the create and close business? Or could you just talk about the linearity of the quarter?

And then given what we saw in Q4.

That's helpful and then.

Quick follow up on the co pilot product.

Just a clarification question when you talk about doing these upgrades are you.

Yes.

Is it going to be a price tailwind as you perform these upgrades or is it possible that co pilot just kind of gets folded into the base level of offerings. So I guess is it are you are you going to be charging and upsell at this point as you think about that that upgrade path.

Tyler Maverick Radke: And then specifically to create and close business, did that strength continue into January and the first part of February? Thank you. Yeah, so my linear idea for the quarter was reasonably good, I would say, you know, maybe a little stronger towards the end of the year, you know, in December than what we saw in October, although, you know, honestly, a lot of that has to do with the mix of what different businesses come in. So we do tend to see that December tends to be more enterprise-weighted, and that is where we're seeing the most traction with customers right now. So I think that improvement certainly helps. That enterprise business does not tend to be created and close within weeks.

Yes, we are anticipating monetizing the upgrade path.

Okay. Thanks very much.

Our next question comes from the line of Joshua Reilly with Needham and company. Your line is open.

Joshua Reilly: Hi, yes, thanks for taking my question.

I believe the singles single seat SKU was released either last quarter or early into Q4 can you just give us a sense of how widely that's has now been deployed to customers or prospects and then are you seeing any impact positively in terms of customer retention on the very low end from.

This single SKU. Thank you.

Henry Schuch: That's much more of the enterprise motion that we're going with. As we think about how that's continued into Q1. You know, for better or worse, Q1 does tend to be a more F&B-focused renewal timeframe, and it tends to be one of our biggest expiring quarters. So, while... In this segment-by-segment breakdown, we've seen a continuation of what we experienced in Q4. The mixed shift makes Q1 actually a little tougher, then you will respond.

Yeah, we really released the single seats SKU and AR in Q4 of last year early Q4 or late Q3.

And we've seen the number of customers and the revenue associated with them tick up every month since we released it. So we feel good about that but it's still super early on on that on the single speed SKU, which you can only buy through a P. L. G motion.

And so it's really early but the trajectory is really positive.

Tyler Maverick Radke: That's helpful. And then a quick follow-up on the CoPilot product, just a verification question. When you talk about doing these upgrades, are you, you know, I guess, Is it going to be a price tailwind as you perform these upgrades, or is it possible that Co-Pilot just kind of gets folded into the base level of offerings? I guess, you know, are you, you know, are you going to be charging an upsell at this point as you think about that upgrade path? Yeah, we are anticipating monetizing the upgrade. Okay, thanks very much. Our next question comes from the line of Joshua Riley with Needham & Company. Your line is open. Yeah, thanks for taking my question. I believe the single seat SKU was released either last quarter or early into Q4.

And one moment for our next question.

Our next question comes from Taylor Mcguinness with UBS. Your line is open.

Hi, Meredith.

Okay, all right. Thanks for taking my question.

Thanks for all the color so far on that retention lines across there a little more.

We assume that NRI remains the same in 2024 at 87%.

Find new customers.

And then most single digits from a decline last year.

One of the things that you mentioned with record new customer bookings could you comment what you saw in <unk> that would get comfort on the outlook and maybe what.

Meanwhile, go cloud.

That can help guests.

Yes.

Yes.

The.

Joshua Riley: Can you just give us a sense of how widely this has now been deployed to customers or prospects? And then, are you seeing any impact positively in terms of customer retention on the very low end from the single-seat SKU? Thank you. We really released the single-seat SKU in Q4 of last year, early Q4 or late Q3.

Joshua Reilly: Yeah.

I'll start camera.

Throughout the year.

<unk> to the customer base, new business demand and close stayed Ah.

Strong we saw that continue throughout the year and then at the end of <unk>.

The year, we brought on the most new logos, we've had in a quarter, we had a great metrics around the new sales motion.

Henry Schuch: We've seen the number of customers and the revenue associated with them pick up every month since we released it, so we feel good about that. But it's still super early on the single speed skew, which you can only buy through a PLG motion.

And then we had many customers who had left to come back to us as well.

So we feel pretty good about our ability to.

Henry Schuch: And so it's really early, but the trajectory is really positive. And one moment for our next question. Our next question comes from Taylor McGinnis with UBS. Your line is open. Hi there, this is Claire Brady with ZonforTeller.

<unk>.

The forecast demand on the new business side.

And see it continuing strength throughout 2024.

Go ahead Karen.

Yes, and then I think the other dynamic that.

Taylor McGinnis: Thanks for taking the question. Thanks to all the callers so far on that retention one, to press there a little more. If we assume that NRR remains the same in 2024 at 87%, then that would imply new customers, I believe have to grow in the mid-single digits, one of the declines last year.

That is interesting is that.

Based on the market and what we've done with them the company our mix of ramps.

As you know.

Up significantly from where it was during the course of 'twenty three.

So I think we are seeing.

One of our strongest players in the field.

Stay with us they have a.

Henry Schuch: One of the things that you mentioned was record new customer bookings. Could you comment on what you saw in 4Q that would give a comforting outlook and maybe what level of new logo growth you saw that could help give visibility for the year? Yeah, that's a little upbeat.

Good Q4, as Henry mentioned earlier in his remarks, and I think seeing that continue as <unk>.

Something that we're excited about.

Great. Thank you.

Our next question comes from the line of Raimo <unk> with Barclays. Your line is open.

Cameron Heiser: I'll start the camera. Throughout the year, relative to the customer base, new business demand and close stayed. We saw that continue throughout the year, and then at the end of the year, we brought on the most new logos we had in a quarter. We had great metrics around the new sales motion, and then we had many customers who had last come back to us as well. So we feel pretty good about our ability to forecast demand on the new business side and see it continuing to grow strongly throughout 2020. Go ahead, camera.

Hi, This is breakout for <unk> I wanted to ask one on the margin guide how should we think about the puts and takes in the full year guide and are you assuming any change to rep productivity or the mix of defense functionality. There. Thank you.

So with respect to margins, we are continuing to invest heavily into the.

And to the AI functionality that we've.

<unk>.

Factor, where we can deliver value for our customers going forward.

Frankly between the engineering investment there as well as the actual infrastructure investment that includes.

Cameron Heiser: Yeah, and then I think the other dynamic that is interesting is that, based on the market and you know, what we've done within the company, our mix of ramp, AES is up significantly from where it was during the course of 23. So I think we are seeing kind of our strongest players in the field. Stay with us. They had a good Q4, as Henry mentioned earlier in his remarks, but I think seeing that continue is something that we're excited about. Great, thank you. Our next question comes from the line of Raymo Linschow of Barclays. Your line is open. Hi, this is Frank up for IMO.

Our models and so forth that is.

Probably a few hundred basis points of margin most of that we've identified other areas in the business, where we feel we can be more efficient and drive.

To drive value that way.

So yes I'd.

I'd say that that is the kind of biggest focus as the particularly as we're early on with the co pilot.

<unk>, yes.

There is a.

That grows we'll be able to harvest operating leverage against us.

And one moment for our next question.

Our next question comes from Rishi Galeria with RBC capital markets. Your line is open.

I wanted to call. Thanks, so much for taking my question.

Frank: I wanted to ask one on the margin guide. How should we think about the puts and takes in the full-year guide, and are you assuming any change to rep productivity or the mix of events functionality there? Thank you. So with respect to margins, you know, we are continuing to invest heavily in the AI functionality that we've put out there. And we think that that's really important., D.J.

I just wanted to go back to the comments made on maybe wanted to embrace more self service and PLT I guess part one when we have.

Talked about this in the past you've said the unit economics on self service just wouldn't work themselves out it looks like there is maybe a little bit.

Shifting talent around that what has changed and what sort of investments do you need to make and whether it's pricing and packaging or product.

Cameron Heiser: Young,,,,,,,,,,, LLM Models, and so forth. That is probably a few hundred basis points of margin. Most of that, we've identified other areas in the business where we feel we can be more efficient and drive value that way. So I'd say that that is the kind of biggest focus, particularly as we're early on with the CoPilot platform. Yeah, there's a... There's an investment cost related to that, but then, you know, as that grows, we'll be able to harvest operating profits. And one moment for our next question. Our next question comes from Rishi Jalleria with RBC Capital Markets. Your line is open.

And maybe alongside that at least when we've gone through the trial.

You still can't get public pricing and you're still going to go through salespeople to get Mako. So I'm, assuming that that's still a work in progress maybe if you could just walk us through what that progress looks like and where you intend to get to.

Great. Thanks, Rishi I think.

Today the than the no touch no salesperson motion is alive. It is just opened up to a certain a certain set of traffic to our website. So not every person who shows up on the website.

Rishi Jalleria: I'm going to go back to the comments made on maybe wanting to embrace more self-service and PLG. I guess, part one, you know, when we've talked about this in the past, you said the unit economics on self-service just wouldn't work themselves out. It feels like there's maybe a little bit of a shift in tone around that.

As guided through the <unk> motion.

Treating that as a.

As a lead nurture model. So if a lead can't get to a sales rep because of the score the score of that lead being below a certain threshold, we will put that into the self service motion and it's limited to certain geographies and certain sizes and industries as it exists today as we learn more about the motion and learn more.

Henry Schuch: What has changed, and what sort of investment do you need to make in whether it's pricing and packaging, or product to get that? And maybe alongside that, you know, at least when we've gone through the trial of it, you still can't get public pricing, and you still have to go through salespeople to get on Zoominfo. So, I'm assuming that it's still a work in progress. Maybe you could just walk us through what that progress looks like and where you intend for it to get to. Thanks. Great. Thanks, Rishi.

The conversion rates will continue to increase the traffic into.

And to that specific motion.

And so that's.

Probably why youre not seeing it.

Yeah.

But we've had a number of transactions.

That our self service that have come through since we launched this in Q4 those transactions are increasing and so we continue to see good trajectory there and we're easing our way into a more fulsome <unk> motion it's less about.

Building the product there in fact, our DIY product that you would gain access to and the emotion has had one of the highest NPS scores across all of our products, it's more about releasing more and more traffic and users into that specific motion and away from a sales led motion.

Henry Schuch: I think today the no-touch, no-salesperson motion is wide. It has just opened up to a certain set of traffic to our website. So not every person who shows up on the website is guided through the PLG motion. We're treating that as a lead-nurture model. So if a lead can't get to a sales rep because of the score, the score of that lead being below a certain threshold, we'll put that into the self-service mode. And it's limited to certain geographies and certain sizes and industries as it exists today.

Got it thank you so much.

Our next question comes from the line of Pat Wall Ravens with JMP Securities. Your line is open.

Great. This is Austin call on for Pat.

I wanted to ask a more product related question with co pilot I understand it's powered by Anthropic wanted.

Henry Schuch: As we learn more about the motion, learn more about the conversion rates, we'll continue to increase the traffic to that specific motion, probably why you're not seeing it. But we've had a number of transactions that are self-service that have come through since we launched this in Q4. Those transactions are increasing, and so we continue to see a good trajectory there. And we're easing our way into a more fulsome TLG motion. It's less about building the product there. In fact, our DIY product that you would gain access to in that motion has one of the highest MPS scores across all of our products. It's more about releasing more and more traffic and users into that specific motion and away from a sales-led motion. Alright, I got it. Thank you so much. Our next question comes from the line of Pat Walravens with J&P Securities. Your line is open. Great, this is Austin Cole on FURSPAT.

I wanted to ask about.

There is there anything you can tell us about the architecture. How you guys are connecting your data to anthropic. How you guys are getting context is there a vector database as part of the architecture.

Any detail there would be helpful. Thank you.

Yes.

The product does not.

Not fully operated by Anthropic Anthropic is one of our AI partner, that's plugged into a variety of different insights and motions that were running with co pilot. We've also built our own internal our O&M LLM that we're leveraging we're also leveraging open AI and a number of different places and so we are.

We internally have certain.

Certain things that we run against our own LLM certain things will run against anthropic certain things, we run against open AI and we're constantly balancing across those three different places.

Austin Cole: I wanted to ask a more product-related question about Copilot. I understand it's powered by Amster Optics? Wanted to ask you about the architecture, how you guys are connecting your data to Anthropic, how you guys are getting contacts, is there a vector database as part of the architecture, any detail that would be helpful. Thank you. Yeah, the product is not fully operated by Anthropic. Anthropic is one of our AI partners that's plugged into a variety of different insights and motions that we're running with Copilot. We've also built our own internal LLM that we're leveraging. We're also leveraging OpenAI in a number of different places. And so we are; internally, we internally have certain things that we've run against our own LLMs, certain things we've run against Anthropics, certain things we've run against OpenAI, and we're constantly balancing across those three different places.

And so so far.

We feel pretty good about that structure and leveraging each one and its respective area.

Okay I appreciate that clarification. Thank you.

Our next question comes from the line of Terry Tillman with Trust. Your line is open.

Well I'll make it is I'll just ask one question and thanks for fitting me in maybe camera and in terms of the topline growth for the year that the low end to the high end.

What is baked in in terms of having meaningful success.

Co pilot upgrade path.

And then secondly, I mean, it's really in the second half if youre going to have successor traction would it be backend loaded more fully in <unk>. Thank you.

And certainly we're not planning to make copilot generally available until the till the middle of the year. So certainly any success that we would have would be backend loaded.

Realistically, we did not incorporate.

Kind of a meaningful success from co pilot.

Anywhere in the guidance range I think I think the guidance range is more the world gets worse it gets.

Henry Schuch: And so, so far, we feel pretty good about that structure and leveraging each one in its respective area. Okay, I appreciate that clarification. Thank you. Our next question comes from the line of Terry Tillman with Trist. Your line is open. Well, I'll make it easy. I'll just ask one question.

Closer to the bottom and obviously, we're not able to impact that through co pilot at the top end of the range I think it's the oil kind of stays consistent to its.

Yes, slightly better based on some of the other factors thats people not down selling as much given that they've.

Terry Tillman: Thanks for fitting me in. Maybe, Cameron, in terms of the top line growth for the year, the low end to the high end, what is baked in terms of having meaningful success on the co-pilot upgrade path? And then secondly, I mean, it's really in the second half. If you're going to have success or traction, would it be back-end loaded more fully in 4Q? Thank you. And certainly, we're not planning to make CoPilot generally available until the middle of the year. So certainly, any success that we would have would be back-end loaded.

<unk> is down sold historically as well as our mix of business is starting to.

Create a little bit of a tailwind for us in terms of larger customers tend to renew better.

So I.

I wouldn't peg much if anything even within the range on <unk>.

Meaningful success with copilot obviously.

If it helps a little that will push us closer to the top of the range but.

We haven't said that it's going to be a big driver.

Thank you that's helpful.

And Im showing no further questions at this time. This concludes today's conference call. Thank you all for participating you may now disconnect.

Cameron Heiser: Realistically, we did not incorporate meaningful success from CoPilot anywhere in the guidance range. I think the guidance range is more important as the world gets worse. It gets closer to the bottom, and obviously, we're not able to impact that through CoPilot. At the top end of the range, I think it's the world kind of stays consistent with it's slightly better based on some of the other factors. That is, people not downselling as much, given that they've downsold historically, as well as our mix of businesses starting to create a little bit of a tailwind for us in terms of larger customers tending to renew better. So I wouldn't peg much, if anything, even within the range of meaningful success with CoPilot. Obviously, if it helps a little, it'll push us closer to the top of the range. You haven't said that it's going to be a big...

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Okay.

Yeah.

Cameron Heiser: Thank you, that's helpful. And I'm showing no further questions at this time. This concludes today's conference call. Thank you all for participating. You may now disconnect. EEEEEEEEEEE, The Ultimate Parody Site! Thank you for watching!

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Okay.

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