Q4 2024 ZoomInfo Technologies Inc Earnings Call

February 25, 2025

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Speaker Change: I'd now like to hand, the conference over to your first speaker today Gerry says, it's ski Vice President of Investor Relations. Please go ahead.

Thank you for watching!

Henry: So warm welcome to <unk> financial results conference call for the fourth quarter and full year 2024 with me on the call today are Henry <unk>, founder and CEO of human foam and Graham O'brien, our interim CFO.

Speaker Change: During this call any forward looking statements are made pursuant to the safe Harbor provisions of U S Securities laws.

Henry: <unk> of future goals, including business outlook.

Henry: Expectations for future financial performance and similar items, including without limitation expressions using the terminology may will expect anticipate and believe and expressions, which reflect something other than historical facts are intended to identify forward looking statements forward.

Forward looking statements involve a number of risks and uncertainties, including those discussed in the risk factors sections of our SEC filings.

Henry: Actual results may differ materially from any forward looking statements. The company undertakes no obligation to revise or update any forward looking statements in order to reflect events that may arise. After this conference call, except as required by law for more information. Please refer to the forward looking statements in the slides posted to our Investor Relations website at IR Dot zoom info.

I'm a man of my word, I'm a man of my word I'm a man of my word, I'm a man of my word

Henry: Dot com.

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

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

Henry: Thank you Jeremy and welcome everyone.

Henry: Zoom info is making meaningful progress and I believe we are better positioned today than ever before and.

Good day, and thank you for standing by. Welcome to the Zoom Info fourth quarter and full year 2024 Financial Results Conference call.

Henry: In Q2, we took a number of steps to set up the company for long term growth and success.

Henry: In Q3, we stabilize the business and in Q4, we drove growth across all of our key operating metrics, which resulted in better than expected financial result results achieved faster than we had anticipated.

Henry: As a result, GAAP revenue for the fourth quarter was $309 million and adjusted operating income was $116 million a margin of 37% both above the high end of guidance.

Henry: The results in Q4 represent the culmination of changes to sales product in other operations that we enacted over the past two years our.

Henry: Our execution caught up to our innovation, leading to happier and more engaged customers.

Henry: With our data and platform our customers are winning in two key ways.

Speaker Change: During this call any forward looking statements are made pursuant to the safe Harbor provisions of U S Securities laws.

Henry: They are winning with co pilot by leveraging the best go to market data AI applications and agents throughout their go to market teams co.

<unk> of future goals, including business outlook.

Speaker Change: Expectations for future financial performance and similar items, including without limitation expressions using the terminology may will expect anticipate and believe and expressions, which reflect something other than historical facts are intended to identify forward looking statements forward.

Henry: Copilot again exceeded expectations and now has over $150 million in ACB.

Henry: And our customers are winning with zoom info operations, the data foundation that enriches and strengthens their internal systems and powers their systems of record data warehouses and AI initiatives operations as the fastest growing area of our business driving accelerating growth and in Q4 was up 12%.

Speaker Change: Forward looking statements involve a number of risks and uncertainties, including those discussed in the risk factors sections of our SEC filings.

Speaker Change: Actual results may differ materially from any forward looking statements. The company undertakes no obligation to revise or update any forward looking statements in order to reflect events that may arise. After this conference call, except as required by law for more information. Please refer to the forward looking statements in the slides posted to our Investor Relations website at IR Dot zoom in for <unk>.

Henry: 7% year over year.

Henry: With the continued success and momentum of our data and operation solutions, we are well on our way to becoming the de facto provider of data and AI in the enterprise.

Henry: We think of our market in two ways.

Speaker Change: Dot com.

Henry: Market and down market and this is the framework that we will be using to talk about the business consistently moving forward.

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

Henry: Upmarket includes our enterprise and mid market businesses, where we are resourcing against the large and growing opportunity of companies with greater than 100 employees.

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

Henry: Thank you Jeremy and welcome everyone.

Henry: Zoom install is making meaningful progress and I believe we are better positioned today than ever before and.

Henry: For our upmarket customer base, we continue to add more reps and develop more datasets features and functionality for the platform.

Henry: In Q2, we took a number of steps to set up the company for long term growth and success.

Henry: We have also expanded our trial motion flexibility rebalanced account loads and double down on services to delight the customer.

Henry: Q3, we stabilized the business and in Q4, we drove growth across all of our key operating metrics, which resulted in better than expected financial result results achieved faster than we had anticipated.

Henry: And drive their success.

Henry: Upmarket is more than two thirds of our business grew 2% in 2024 and is on a path to growing mid single digits and has significantly higher margins than down market, primarily due to the difference in customer lifetime value.

Henry: As a result, GAAP revenue for the fourth quarter was $309 million and adjusted operating income was $116 million a margin of 37% both above the high end of guidance.

Henry: We expect our continued shift upmarket to drive profitability improvement as well.

Henry: The results in Q4 represent the culmination of changes to sales product in other operations that we enacted over the past two years.

Henry: We defined down market as businesses with fewer than 100 employees in this cohort, we're disqualifying more risky small business.

Henry: Our execution caught up to our innovation, leading to happier and more engaged customers.

Henry: Requiring upfront prepayments and an onboarding customers efficiently through a digital first approach.

Henry: With our data on platform our customers are winning in two key ways.

Henry: They are winning with co pilot by leveraging the best go to market data AI applications and agents throughout their go to market teams.

Henry: Down market comprises less than one third of our business declined 9% in 2024 and show signs of stabilizing to a smaller and healthier portion of the business.

Henry: Copilot again exceeded expectations and now has over $150 million in ACB.

Henry: We expect to report on this upmarket downmarket split going forward, while sharing relative size and growth rates, but I think it is important to reiterate that more than two thirds of our business is up market and strong and growing our.

Henry: And our customers are winning with zoom and fill operations the data foundation that enriches and strengthens their internal systems and powers their systems of record data warehouses and AI initiatives operations as the fastest growing area of our business driving accelerating growth and in Q4 was up 12%.

Henry: Our investments up market continue paying off and we see opportunities to drive upside to our upmarket growth. While we are aggressively managing the contribution of the lower end of the market.

Henry: 7% year over year.

Henry: With the continued success and momentum of our data and operation solutions, we are well on our way to becoming the de facto provider of data and AI in the enterprise.

Henry: The lower end of the market is going to continue to decrease as a percentage of the business and while it will be smaller it will be healthier and we will discount its contribution to guidance. So that we can minimize the potential impact of this transition.

Henry: We think of our market in two ways.

Henry: Market and down market and this is the framework that we will be using to talk about the business consistently moving forward.

Henry: And we're already seeing our investments upmarket paying off we see it in our 100 K customers our million dollar plus customers and in net revenue retention.

Henry: Upmarket includes our enterprise and mid market businesses, where we are resourcing against the large and growing opportunity of companies with greater than 100 employees.

Henry: We now have 867 customers with more than $100000 ACB, a sequential increase of 58 customers and a year over year increase of 47 customers.

Henry: For our upmarket customer base, we continue to add more reps and develop more datasets features and functionality for the platform.

Henry: We have also expanded our trial motion flexibility rebalanced account loads and double down on services to delight the customer.

Henry: We also drove sequential and year over year growth in both the ACB and the number of customers in our $1 billion cohort.

Henry: And net revenue and.

Henry: And drive their success.

Henry: And net revenue retention increased to 87% in the fourth quarter. The first sequential increase in MLR since Q1 of 2022.

Henry: Upmarket as more than two thirds of our business grew 2% in 2024 and is on a path to growing mid single digits and has significantly higher margins than down market, primarily due to the difference in customer lifetime value.

Henry: Improving our customers' perception of us and staying aligned with our customers go to market needs has been a key focus of <unk>.

Henry: We expect our continued shift upmarket to drive profitability improvement as well.

Henry: A key focus for us this year as part of that effort. We recently conducted a brand survey of more than 400 marketing and sales leaders.

Henry: We define downmarket as businesses with fewer than 100 employees in this cohort, we're disqualifying more risky small business.

The survey found that 99% of respondents said their perception of zoom info has improved or stayed the same in the last six months with the majority of those saying it improved.

Henry: Requiring upfront prepayments and an onboarding customers efficiently through a digital first approach.

Down market comprises less than one third of our business declined 9% in 2024 and show signs of stabilizing to a smaller and healthier portion of the business.

Henry: During the quarter, we closed transactions with Costar, Athena health, Careerbuilder, Cedric and struggles Cox media Getty images, Highgate hotels and the AICPA.

Henry: We partnered with lumen technologies, a global telecommunications company to equip a thousand of their sales and customer support reps with co pilot to improve retention and up sell.

Henry: Copilot as being deployed to drive sales productivity combat competitive pressures and drive revenue growth. The company also plans to leverage zoom info labs are white glove services arm to prioritize leads within their marketing team and delivering them directly to sellers within co pilot.

Henry: Our investments upmarket continue paying off and we see opportunity to drive upside to our upmarket growth. While we are aggressively managing the contribution of the lower end of the market.

Henry: We partnered with a leading digital marketing company to completely transform the way they go to market as they transition from product led growth to sales led growth and move more upmarket, we're providing them with the complete zoom info go to market intelligence platform.

Henry: And we're already seeing our investments upmarket paying off we see it in our 100 K customers our million dollar plus customers and in net revenue retention.

Henry: From our marketing solution and call recording and transcription to enriching data and using co pilot, we are helping them execute account based marketing strategies for new logo acquisition and driving cross sell and upsell as they expand up market.

Henry: We now have 867 customers with more than $100000 ACB, a sequential increase of 58 customers and a year over year increase of 47 customers.

Henry: We also used our newly released trial motion for co pilot to grow a 100 seat proof of concept at one of the largest job search engine more than tenfold.

Henry: We also drove sequential and year over year growth in both the ACB and the number of customers in our $1 billion cohort.

Henry: And net revenue.

Henry: And net revenue retention increased to 87% in the fourth quarter. The first sequential increase in MLR since Q1 of 2022.

Henry: Our successful trial allowed us to prove that we can deliver more connects build more pipeline and drive better conversion for their reps.

Henry: Improving our customers' perception of us and staying aligned with our customers go to market needs has been a key focus of <unk>.

Henry: One of the key drivers of this quarter's success started two years ago. When we embarked on a journey to up level, our product organization with AI and platform leaders, who have dramatically accelerated our pace of innovation.

Henry: It's a key focus for us this year as part of that effort. We recently conducted a brand survey of more than 400 marketing and sales leaders.

Henry: From listening to thousands of client calls and meeting with hundreds of customers. It is clear that go to market leaders are all looking for success across four key areas.

Henry: The survey found that 99% of respondents said their perception of zoom info has improved or stayed the same in the last six months with the majority of those saying it improved.

Henry: They want to grow new logos expand their customer base improve rep productivity and leverage AI, so that they do not fall behind.

Henry: During the quarter, we closed transactions with Costar, Athena health, Careerbuilder, Cedric and struggles Cox media Getty images, Highgate hotels and the AICPA.

Henry: To deliver on that for our clients, we start with the highest quality <unk> data in the world.

Henry: In Q4, we created new data products that get our customers in front of prospects precisely when they are in market for their products and services.

Henry: We partnered with lumen technologies, a global telecommunications company to equip a thousand of their sales and customer support reps with co pilot to improve retention and up sell.

Henry: We enhanced our intense solution by introducing persona level web site identification, allowing sellers to pinpoint high intent buyers within specific roles.

Henry: Copilot as being deployed to drive sales productivity.

Henry: Combat competitive pressures and drive revenue growth. The company also plans to leverage zoom info labs are white glove services arm to prioritize leads within their marketing team and delivering them directly to sellers within co pilot.

Henry: Expanding beyond account level indicators to person level data has led to a 15% lift in action rates are.

Henry: Our copilot interface allowed us to activate this data innovation directly into the workflows of tens of thousands of users.

Henry: We partnered with a leading digital marketing company to completely transform the way they go to market as they transition from product led growth to sales led growth and move more upmarket, we are providing them with the complete zoom info go to market intelligence platform.

In the quarter, we generated proprietary signals and accelerated deals for more than two thirds of the active opportunities for our upmarket customers. Those customers would have missed out on two thirds of the deals in their pipeline without zoom info.

Henry: We continued our pace of innovation by expanding our co pilot AI agents that automate core parts of the seller's workflow.

Henry: By synthesizing live buyer interactions our agents create dynamic always up to date account plans that capture relevant signals the moment they surface.

Henry: We also used our newly released trial motion for co pilot to grow a 100 seat proof of concept at one of the largest job search engine more than tenfold.

Henry: These AI agents automatically identify deal risks and recommend ways to expand buying groups.

Henry: All of this runs on our enterprise grade AI governance, and customization framework already deployed within some of the largest go to market organizations in the world ensuring they can adapt.

Henry: Our successful trial allowed us to prove that we can deliver more connects build more pipeline and drive better conversion for their reps.

Henry: These capabilities to high highly complex and specialized sales motions.

Henry: We're also expanding key use cases beyond sales development representatives and other top of the funnel prospecting use cases.

Henry: From listening to thousands of client calls and meeting with hundreds of customers. It is clear that go to market leaders are all looking for success across four key areas.

Henry: We're now gaining traction among account executives account managers and customer success managers, our user base more than three times larger than STR.

Henry: They want to grow new logos expand their customer base improve rep productivity and leverage AI, so that they do not fall behind.

Henry: Account executives and account management teams are adopting co pilot for automated account planning account expansion and deal acceleration.

Henry: To deliver on that for our clients, we start with the highest quality <unk> data in the world.

Henry: We are seeing strong product market fit with co pilot activating the first cohorts of Aes in Aam's at noodles at utilization levels comparable to a core SDR user base.

Henry: In Q4, we created new data products that get our customers in front of prospects precisely when their end market for their products and services.

Henry: I'm confident we'll continue to automate and move an increasing share of mission critical go to market workflows onto the zoom info platform.

Henry: We enhanced our intense solution by introducing persona level web site identification, allowing sellers to pinpoint high intent buyers within specific roles.

Speaker Change: I would also like to take a moment to thank Ali <unk> done our former Chief Technology Officer, who is transitioning engineering leadership to our senior VP of engineering, Philip Popovic Ali.

Henry: Expanding beyond account level indicators to person level data has led to a 15% lift in action rates are.

Henry: Our copilot interface allowed us to activate this data innovation directly into the workflows of tens of thousands of users.

Speaker Change: Ali played an important role in helping us build the enterprise processes and infrastructure here and we wish him all the best in his next endeavors.

Henry: In the quarter, we generated proprietary signals and accelerated deals for more than two thirds of the active opportunities for our upmarket customers. Those customers would have missed out on two thirds of the deals in their pipeline without zoom info.

Speaker Change: We're excited about Phillips expanded role and are confident that he will continue to accelerate our pace of innovation and serve as a strong partner to our customers and as internal counterparts throughout the company.

Speaker Change: I also want to thank Patrick Mccarter, who after nearly eight years of partnership and board directorship is moving on from the Zoom Info Board Patrick is someone that I respect deeply and who has been at the table for every strategic decision over nearly a decade here.

Henry: We continued our pace of innovation by expanding our co pilot AI agents that automate core parts of the seller's workflow.

Henry: By synthesizing live buyer interactions our agents create dynamic always up to date account plans that capture relevant signals the moment they surface.

Speaker Change: His knowledge and engagement and experience will be missed and we wish him the best as well.

Henry: These AI agents automatically identify deal risks and recommend ways to expand buying groups.

Speaker Change: I'm also excited about the recent additions of Kt Rooney and Rob Julia to our board of Directors Kt has decades of experience in finance operations strategy and corporate development.

Speaker Change: Was recently named CFO at <unk>, the world's largest virtual health platform for women and families.

Henry: These capabilities to high highly complex and specialized sales motions.

Speaker Change: Rob is currently chief customer officer of Canberra, and previously was chief customer officer at hotspot and Chief marketing Officer at Dock design.

Henry: We're also expanding key use cases beyond sales development representatives and other top of the funnel prospecting use cases.

Speaker Change: At hub spot he oversaw the flywheel organization, the marketing sales services and revenue new operations team Rob.

Henry: We're now gaining traction among account executives account managers and customer success managers, our user base more than three times larger than STR.

Speaker Change: Rob also spent 11 years in senior marketing and sales leadership roles at Adobe.

Speaker Change: We are incredibly excited about the fresh perspective, and long history of successful operating experience, we add to the boardroom with these additions.

Henry: Account executives and account management teams are adopting co pilot for automated account planning account expansion and deal acceleration.

Speaker Change: In closing, we have always had a history of disciplined financial and operational execution and now more than ever our innovation engine is creating a tailwind on top of our data moat.

Henry: We have seen strong product market fit with co pilot activating the first cohorts of Aes in Aam's at noodles at utilization levels comparable to our core SDR user base.

Henry: I'm confident we'll continue to automate and move an increasing share of mission critical go to market workflows onto the zoom info platform.

Speaker Change: We have taken the necessary steps to drive improved operating performance and set the company on a path to growth, while driving industry, leading profitability expanding free cash flow per share and defining the future of go to market with innovative solutions that drive customer delight.

Henry: I would also like to take a moment to thank Ali <unk> done our former Chief Technology Officer, who is transitioning engineering leadership to our senior VP of engineering, Philip Popovic Ali.

Speaker Change: We have a large untapped addressable market our strong innovation in data mode, and we are winning the opportunity to be the go to market data and AI partner for upmarket customers.

Henry: Ali played an important role in helping us build the enterprise processes and infrastructure here and we wish him all the best in his next endeavors.

Henry: We're excited about Phillips expanded role and are confident that he will continue to accelerate our pace of innovation and serve as a strong partner to our customers and as internal counterparts throughout the company.

Graham: With that I'll turn the call over to Graham.

Graham: Thanks, Henry and Q4, we delivered $309 million in revenue and adjusted operating income of $116 million a.

Henry: I also want to thank Patrick Mccarter, who after nearly eight years of partnership and board directorship is moving on from the Zoom Info Board Patrick is someone that I respect deeply and who has been at the table for every strategic decision over nearly a decade here.

Graham: A margin of 37%.

Graham: Our investments moving up market are yielding results as we delivered meaningfully better than expected performance, resulting in sequential revenue growth of one 8%.

Graham: The business risk model deployed in Q2 is working as intended resulting in an improving write off and collection trends with.

Henry: His knowledge and engagement and experience will be missed and we wish him the best as well.

Graham: With the new risk model in place and the additional operational improvements we've implemented we were able to onboard better quality customers continue our move up market and focus more on delivering customer success and value, which resulted in a two point sequential improvement in net revenue retention ending the year at 87%.

Henry: I'm also excited about the recent additions of Kt Rooney and Rob Julia to our board of Directors Kt has decades of experience in finance operations strategy and corporate development.

Henry: Was recently named CFO at Nathan the world's largest virtual health platform for women and families.

Graham: With more and more companies are realizing they need a strong data foundation to take advantage of AI, we saw demand for our operations business increase again as a result in the fourth quarter, our operations business increased 27% year over year five points higher than last quarter.

Henry: Rob is currently chief customer officer of Camber, and previously was chief customer officer at hotspot and Chief marketing Officer at Dock design.

Henry: At hub spot he oversaw the flywheel organization, the marketing sales services and revenue operations team Rob.

Graham: Taken together with our success driving copilot advanced functionality increased to 44% of the overall business up more than 10 points since the start of the year.

Henry: Rob also spent 11 years in senior marketing and sales leadership roles at Adobe.

Speaker Change: We are incredibly excited about the fresh perspective, and long history of successful operating experience, we add to the boardroom with these additions.

Graham: As of today copilot has more than $150 million in HCV and we continue to see similar uplift uplift levels on a per seat basis in Q4 as we have historically.

Graham: The majority of Copilot HPV is coming from new to the franchise customers.

Graham: Though with our recently released functionality that allows existing customers to trial co pilot on a team by team or user by user basis, we expect to drive a larger volume of migrations over the course of 2025 and 2026.

Graham: Turning to share repurchases for the full year, we retired $46 8 million shares at an average cost of $12 representing more than 12% of total shares outstanding and as of year end, there were 342 million shares outstanding.

Graham: In Q1, the board approved an additional $500 million share repurchase authorization on top of the $138 million remaining in existing authorizations entering 2025.

Graham: With that I'll turn the call over to Graham.

Graham: Thanks, Henry and Q4, we delivered $309 million in revenue and adjusted operating income of $116 million a margin of 37%.

Graham: We look at repurchases as a meaningful way to drive shareholder value and we will continue to opportunistically take advantage of dislocations in share price balanced with our cash generation and cash on hand.

Graham: Our investments moving up market are yielding results as we delivered meaningfully better than expected performance, resulting in sequential revenue growth of one 8%.

Graham: Operating cash flow was $109 million in Q4, and Unlevered free cash flow for the quarter was $94 million a margin of 30%.

Graham: The business risk model deployed in Q2 is working as intended resulting in an improving write off and collection trends with.

We also remain committed to driving shareholder value by growing levered free cash flow per share.

Graham: To that end Unlevered free cash flow for 2024 was $447 million.

Graham: Our margin of 37% and cash interest for 2024 was $44 million.

Graham: We delivered significantly more than one dollar and levered free cash flow per share for the full year based on 377 million diluted weighted average shares outstanding and we expect to grow that meaningfully over the long term.

Graham: We ended the year with $140 million in cash and cash equivalents and we carried 124 billion in gross debt.

Graham: Taken together with our success driving copilot advanced functionality increased to 44% of the overall business up more than 10 points since the start of the year.

Graham: Our net leverage ratio is two four times trailing 12 months adjusted EBITDA and two two times trailing 12 months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements.

Graham: As of today copilot has more than $150 million in HCV and we continue to see similar uplift uplift levels on a per seat basis in Q4 as we have historically.

Graham: With respect to liabilities and future performance obligations unearned revenue at the end of the year was $478 million and remaining performance obligations or <unk> were $1 6 billion.

Graham: The majority of Copilot HPV is coming from new to the franchise customers.

Graham: Of which $850 million are expected to be delivered in the next 12 months.

Graham: Before I jump into guidance, let me share some additional context.

Graham: Q1, 2025 has two fewer days in Q4, 2024, and one fewer day than Q1, 2024, which should be considered when comparing sequential and year over year revenue growth and margins.

Turning to share repurchases for the full year, we retired $46 8 million shares at an average cost of $12 representing more than 12% of total shares outstanding and as of year end, there were 342 million shares outstanding.

Graham: Also Q1 margins are impacted by payroll tax and other benefit resets.

Graham: Additionally, 2024 is not a good proxy for 2025 seasonality due to the operational improvements we introduced in Q2 2024 and the change in accounting estimates in that same period.

Graham: In Q1, the board approved an additional $500 million share repurchase authorization on top of the $138 million remaining in existing authorizations entering 2025.

Graham: In 2025, we expect adjusted operating income and margins to increase sequentially as we move through the year.

Graham: Q4, 2024 was more weighted to up market customers and we expect Q1 2025 to have a seasonally lower mix of upmarket explorations.

Graham: Operating cash flow was $109 million in Q4, and Unlevered free cash flow for the quarter was $94 million a margin of 30%.

Graham: We are discounting downmarket contributions to our guidance. However, we are on a path back to durable growth faster than expected and we are optimistic about our momentum heading into 2025.

Graham: We also remain committed to driving shareholder value by growing levered free cash flow per share.

Graham: To that end Unlevered free cash flow for 2024 was $447 million.

Graham: With that let me turn to guidance for Q1.

Graham: We expect GAAP revenue in the range of $294 million to $297 million.

Graham: Our margin of 37% and cash interest for 2024 was $44 million.

Graham: We expect adjusted operating income in the range of <unk> $96 million to $99 million.

Graham: And non-GAAP net income in the range of 22 to 23 per share.

Graham: For the full year 2025, we expect to deliver GAAP revenue in the range of $1 185 to $1 $205 billion.

Graham: We ended the year with $140 million in cash and cash equivalents and we carried 124 billion in gross debt.

Graham: Representing negative one 6% annual growth at the midpoint of guidance and.

Graham: And adjusted operating income in the range of $426 million to $436 million, representing a 36% margin at the midpoint of guidance.

Graham: With respect to liabilities and future performance obligations unearned revenue at the end of the year was $478 million and remaining performance obligations or <unk> were $1 6 billion of which $850 million are expected to be delivered in the next 12 months.

We expect non-GAAP net income in the range of 95 to <unk> 97 per share based on 362 million weighted average diluted shares outstanding.

Graham: And we expect Unlevered free cash flow in the range of $420 million to $440 million.

Graham: And for modeling purposes for the year, we would expect capex in the range of 5% of revenue.

Graham: Before I jump into guidance, let me share some additional context.

Graham: Q1, 2025 has two fewer days in Q4, 2024, and one fewer day than Q1, 2024, which should be considered when comparing sequential and year over year revenue growth and margins.

Graham: And the non-GAAP tax rate to be approximately 13%.

Graham: Now I will turn it over to the operator to open the call for questions.

Speaker Change: Thank you at this time, we will conduct a question and answer session.

Graham: So Q1 margins are impacted by payroll tax and other benefit resets.

Speaker Change: A reminder to ask a question you will need to pass skyline, one on your telephone and wait for your name to be announced.

Graham: Additionally, 2024 is not a good proxy for 2025 seasonality due to the operational improvements we introduced in Q2 2024 and the change in accounting estimates in that same period.

Speaker Change: We ask that you. Please limit to one question to withdraw your question. Please press star one again, please standby, while we compile the Q&A roster.

Graham: In 2025, we expect adjusted operating income and margins to increase sequentially as we move through the year.

Speaker Change: Our first question comes from the line of Alex Zukin with Wolfe Research. Your line is now open.

Graham: Q4, 2024 was more weighted to up market customers and we expect Q1 2025 to have a seasonally lower mix of upmarket explorations.

Alex Zukin: Hey, guys. Congrats on a solid quarter I guess, maybe just Henry for first one for you just a sense for for trends in both the SMB and the enterprise as we kind of exit the year in the pipelines that you are seeing.

Alex Zukin: Maybe tech sales hiring and also.

Graham: With that let me turn to guidance for Q1.

Alex Zukin: Maybe just from a financials perspective, how we should think about the growth rates of the two segments embedded in the guide differ.

Graham: We expect GAAP revenue in the range of $294 million to $297 million.

Alex Zukin: Differently for the coming year.

Graham: We expect adjusted operating income in the range of <unk> $96 million to $99 million.

Alex Zukin: I'll, let Graham take the second part I think the first part is we're seeing strength in the upmarket, particularly as we go in and sell our operations and co pilot products into <unk>.

Graham: As non-GAAP net income in the range of 22 to <unk> 23 per share.

For the full year 2025, we expect to deliver GAAP revenue in the range of $1 185 to $1 $205 billion.

Alex Zukin: Into the upmarket and the SMB.

Graham: Representing negative one 6% annual growth at the midpoint of guidance and.

Alex Zukin: We saw stabilization in the SMB and Dot group or in the down market that group of customers is becoming a healthier but smaller portion of our business and we are discounting its contribution to our growth and our guidance going forward, we expect that that where there can be.

Graham: And adjusted operating income in the range of $426 million to $436 million, representing a 36% margin at the midpoint of guidance.

We expect non-GAAP net income in the range of 95 to <unk> 97 per share based on 362 million weighted average diluted shares outstanding.

Alex Zukin: Upside it'll be in our execution in the up market, where we're seeing good demand great product market fit within co pilot in our.

Graham: And we expect Unlevered free cash flow in the range of $420 million to $440 million.

Alex Zukin: Operations business.

Alex Zukin: And I'll pass it over to Graeme for the second part of that sure. The the growth trajectories that we are.

Graham: And for modeling purposes for the year, we would expect capex in the range of 5% of revenue.

Graham: And the non-GAAP tax rate to be approximately 13%.

Alex Zukin: Model in for 2025, and the guidance that we mentioned earlier in the call upmarket.

Speaker Change: Now I will turn it over to the operator to open the call for questions.

Alex Zukin: Mid single digit growth, we're on the path that and then down market. We were down 9% in 2024. So we're we did see signs of stable stabilization. There in Q3 and Q4, we're discounting that stabilization we're expecting.

Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to put skyline. One on your telephone and wait for your name to be announced.

Speaker Change: We ask that you. Please limit to one question to withdraw your question. Please press star one again, please standby, while we compile the Q&A roster.

Alex Zukin: That 9% to be a little bit worse in 2025, and while we still believe downmarket as a quality business. We're just not going to rely on growth in the down market to hit our targets were discounting the downmarket contribution to our guidance reallocating the resources up market, which provides us the flexibility to accelerate our shift up market issues.

Speaker Change: Our first question comes from the line of Alex Zukin with Wolfe Research. Your line is now open.

Alex Zukin: Hey, guys. Congrats on a solid quarter I guess, maybe just Henry first one for you just a sense for for trends in both the SMB and the enterprise as we kind of exit the year and the pipelines that you're seeing.

Alex Zukin: Just add that we think there's an opportunity here for us to become the de facto partner for enterprise data and AI in the upmarket with our customers and on go to market team and that's why we're resource yet.

Speaker Change: And maybe on that I mean with everybody talking about AI agents, particularly on the go to market side. I think you guys talked about how it led to increase in close rates for you maybe just give us your perspective on kind of the state of the state of the World right now and how key role you play in that ecosystem increasingly as we as we see.

Speaker Change: Maybe.

Speaker Change: Tech sales hiring and also.

Speaker Change: Maybe just from a financials perspective, how we should think about the growth rates of the two segments embedded in the guide differ.

Speaker Change: Differently for the coming year.

Speaker Change: I'll, let Graham take the second part I think the first part is we're seeing strength in the upmarket, particularly as we go in and sell our operations and co pilot products into.

Alex Zukin: Here.

Speaker Change: Yes, I think the key thing about AI agents and building AI for go to market is it's very different than when you build the AI for support or services, where if you are building an AI agent for support all of the data that you need for the AI to understand lives inside your knowledge base.

Speaker Change: And to the upmarket and the SMB.

Speaker Change: We saw stabilization in the SMB and Dot group.

Speaker Change: Down market that group of customers is becoming healthier, but smaller portion of our business and we are discounting its contribution to our growth and our guidance going forward, we expect that that where there can be upside it'll be in our execution in the up market, where we're seeing good.

Speaker Change: <unk> and lives inside the customer support tickets that you already have it's all first party data and you only need first party data to build a great AI agent for customer support that is completely different when you're trying to build an AI agent for go to market teams that relies first on third party data.

Speaker Change: Demand great product market fit within co pilot in our.

Speaker Change: It needs your first party data, but in order for our go to market AI agent to be successful and needs data and need accurate data on company. They need accurate data on contact those data points are constantly changing and then needs to be surrounded with a with a tremendous amount of signal data, whose whose grow.

Speaker Change: Operations business.

Speaker Change: And I'll pass it over to Graeme for the second part of that sure. The the growth trajectories that we are.

Speaker Change: Modeling for 2025, and the guidance that we mentioned earlier in the call up market mid single digit growth. We're on the path that and then down market. We were down 9% in 2024. So we're we did see signs of stable stabilization. There in Q3 and Q4, we're discounting that stabilization we're.

Speaker Change: <unk>, who is shrinking whose hiring whose hiring who's laying people off who is researching certain solutions in the market who's on your website. These signals are critical and they don't live anywhere inside of your first party data. So when we think about the success of go to market <unk> AI agent our data asset that we built.

Speaker Change: <unk>.

Speaker Change: That 9% to be a little bit worse in 2025, and while we still believe downmarket as a quality business. We're just not going to rely on growth in the downmarket to hit our targets for discounting the downmarket contribution to our guidance reallocating the resources up market, which provides us the flexibility to accelerate our shift upmarket I should just add that we think there is.

Speaker Change: Is a necessary component to that I think that's why we're seeing more uptake on our operations business. That's why we're seeing customers come to us with their first party data and say this is not enough for us to build AI and go to market with AI and go to market. We need this to be married to and surrounded by third party data for us to be successful.

Speaker Change: An opportunity here for us to become the de facto partner for enterprise data and AI in the upmarket with our customers and on go to market team and that's why we're resource.

Speaker Change: So I think we are a key input into any go to market AI agent built.

Speaker Change: Very clear congrats guys.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Elizabeth whether with Morgan Stanley. Your line is now open.

Speaker Change: Great. Thank you so much.

Speaker Change: Key role you play in that ecosystem increasingly as we.

Speaker Change: First wanted to ask on a copilot ACB and he mentioned a lot of that is on the new customer side and the focus to transitioning the installed base over is going to come more in fiscal 'twenty five 'twenty six I was wondering if you could just help us understand kind of that path to migration. What do you see more pushed upgrades at renewal are often and upgrades.

Speaker Change: As we sit here.

Speaker Change: To help us get a sense for how quickly the installed base can start moving over to the new platform.

Speaker Change: And lives inside the customer support tickets that you already have it's all first party data and you only need first party data to build a great AI agent for customer support that is completely different when you're trying to build an AI agent for go to market teams that relies first on third party data.

Speaker Change: We are in the midst of migrating our customers over to co pay we are doing it off cycle. So outside of a renewal day. We're also doing it at renewal time, we're still seeing a strong double digit strong double digit growth on migration when we move those customers over.

Speaker Change: I need your first party data, but in order for our go to market AI agent to be successful and needs data indeed accurate data on companies they need accurate data on contact those data points are constantly changing and then needs to be surrounded with us with a tremendous amount of signal data.

Speaker Change: We want to drive pricing discipline on our teams as they migrate over to co pilot.

Speaker Change: We released this quarter, our customer impact report that showed that our customers, particularly when they are in co pilot are getting a tremendous ROI and value out of the solution and we're happy to stand behind the pilot and so in the.

Speaker Change: Who's growing whose shrinking whose hiring whose hiring who'd laying people off.

Speaker Change: One of the examples that I talked about we took a 100 person pilot to over 1000.

Speaker Change: Whose researching certain solutions in the market who is on your website. These signals are critical and they don't live anywhere inside of your first party data. So when we think about the success of go to market <unk> AI agent our data asset that we built is a necessary component to that I think that's why we're seeing more uptake.

Speaker Change: Person deployment at one of the largest job search engines in the world and we're comfortable letting our customers try co pilot see the value and then monetizing that value and ROI either as part of a renewal of our as part of an off cycle upsell, we are going at it in both ways, but we want them.

Speaker Change: On our operations business, that's why we're seeing customers come to us with their first party data and say this is not enough for us to build AI and go to market with AI and go to market. We need this to be married to and surrounded by third party data for us to be successful. So I think we are a key input into any go to.

Speaker Change: Maintain pricing discipline.

Speaker Change: And for the value that we're delivering our customers with co pilot.

Speaker Change: Got it and then just as a follow up I wanted to touch on the NRI and prevent really encouraging to see that that take us to 87 from 85 over the last couple of quarters. So.

Speaker Change: <unk> AI agent built.

Speaker Change: So could you just unpack some of the drivers from the gross retention side versus the expansion side and how we could think about that playing out in calendar 'twenty five as we start to get the benefit from migrations and lapping the new business risk model. Thank you.

Speaker Change: Very clear congrats guys.

Thank you.

Speaker Change: Our next question comes from the line of Elizabeth whether with Morgan Stanley. Your line is now open.

Elizabeth: Great. Thank you so much.

Speaker Change: Sure.

Speaker Change: I'll talk about some of the inputs to the retention improvements as a reminder, we had retention stable at 85% for the last three quarters. We saw the two point sequential improvement in Q4 that was our first sequential improvement since Q1 of 2022, our gross retention has held in pretty well over that period.

Speaker Change: First wanted to ask on a copilot ACB and you mentioned a lot of that is on the new customer side and the focus to transitioning to install base silver is going to come more in fiscal 'twenty. Five in 2006 I was wondering if you could just help us understand kind of that path to migration, what do you see more pushed upgrades at renewal or opt in and upgrades.

Speaker Change: I'll split this up into kind of upmarket and Downmarket statements.

Elizabeth: To help us get a sense for how quickly the installed base can start moving over to the new platform. Thanks.

Speaker Change: Market churn is about the same but we've had <unk>.

Speaker Change: Significant improvements is shifting back into an upsell opportunity instead of kind of more of a defensive downhill opportunity and then in the down market we saw.

We saw retention stepped down.

Speaker Change: Certainly during the first two quarters in 2024, we saw that stabilize in Q3 and Q4.

Speaker Change: We want to drive pricing discipline on our teams as they migrate over to co pilot. We released this quarter our customer impact report that showed that our customers, particularly when they are in co pilot are getting a tremendous ROI and value out of the solution and we're happy to stand behind the pilot and so in the.

Speaker Change: But beyond that it's really been a.

Speaker Change: Mitigating down sell lots more opportunity to upsell up market.

Speaker Change: Got it thank you.

Speaker Change: Thank you.

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

Speaker Change: One of the example that I talked about we took a 100 person pilot to over 1000.

Tyler Radke: Hi, Thanks for the question. This is actually on for Tyler just wanted to ask about the uptick in hundred K customer count could you provide a little bit more color on what drove the uptick and maybe comment on the mix of <unk> versus expansions and do you expect this pace of addition can be sustained going forward.

Speaker Change: Person deployment at one of the largest job search engines in the world and we're comfortable letting our customers try co pilot see the value and then monetizing that value and ROI either as part of a renewal of our as part of an off cycle upsell and we are going at it in both ways, but we want to <unk>.

Yeah, I can cover that one so really there is four ways that the logo count that cohort and change we can go out and acquire new customers at a price point above 100, K, we can upsell customers spending below a 100 K up above 100, K and then to lose customers we can.

Speaker Change: Entailed pricing discipline.

Speaker Change: And for the value that we're delivering our customers with co pilot.

Speaker Change: Got it and then just as a follow up wanted to touch on the MLR improvement really encouraging to see that take us.

Tyler Radke: Customers are spending 100, K down sell or full churn.

Speaker Change: 87% to 85 over the last couple of quarters. So.

Tyler Radke: We don't even in the year, plus where we saw a sequential decrease in that cohort it usually wasn't day.

Speaker Change: So could you just unpack some of the drivers from the gross retention side versus the expansion died and how we could think about that playing out in calendar 'twenty five as we start to get the benefit from migrations and lapping the new business risk model. Thank you.

Tyler Radke: All on churn so.

Tyler Radke: So what we're really seeing is improvement in the other three areas, we've got opportunity to upsell and much more success up selling existing customers up and above 100, K, we are losing way more way fewer customers down below that 100, K cohort from a downhill and then will be.

Speaker Change: Sure.

Speaker Change: Talk about some of the inputs to the retention improvements as a reminder, we had retention was stable at 85% for the last three quarters. We saw the two point sequential improvement in Q4 that was our first sequential improvement since Q1 of 2022, our gross retention has held in pretty well over that period.

Tyler Radke: With most of our successful going out and actually acquiring upmarket customers at that 100 K or above.

Speaker Change: I'll split this up into a kind of upmarket and Downmarket statements upmarket churn is about the same but we've had significant.

Tyler Radke: <unk> levels, so really its customer acquisition renewed all cell opportunity and.

Tyler Radke: Less downside exposure that we had seen previously.

Speaker Change: Significant improvements and shifting back into an up sell opportunity instead of kind of more of a defensive downhill opportunity and then in the down market we saw.

Tyler Radke: Thank you.

Speaker Change: We saw retention step down.

Speaker Change: One moment for our next question. Our next question comes from the line of Brian Peterson with Raymond James Your line is now open.

Speaker Change: Certainly during the first two quarters in 2024, we saw that stabilize in Q3 and Q4.

Speaker Change: But beyond that it's really been a.

Speaker Change: Hey, Thanks for taking the question. This is Jonathan Mccarry on for Brian.

Speaker Change: Mitigating down sell lots more opportunity to upsell up market.

Speaker Change: I guess just getting into 2025 got it another way I know you gave some commentary I mean are already here, but.

Speaker Change: Got it thank you.

Speaker Change: Or do you have built into the outlook there how much of that is still reliant on mid market as the primary swing factor for NR versus potential upside for migrations.

Speaker Change: Thank you.

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

Speaker Change: Yes.

Speaker Change: Hi, Thanks for the question. This is actually on for Tyler just wanted to ask about the uptick in hundred K customer count could you provide a little bit more color on what drove the uptick and maybe comment on the mix of <unk> versus expansions and do you expect this pace of addition can be sustained going forward.

Speaker Change: The way, we're thinking about up market growth is that we're going to you know we're on a path back to mid single digit growth and as a reminder, mid market is our enterprise plus our mid market.

Speaker Change: Segment last year, we had talked about mid market kind of being a drag on growth specifically with the software vertical that experienced a couple of years of downhole pressure.

Speaker Change: Yes, I can cover that one so really there's four ways that the logo count in that cohort and change we can go out and acquire new customers at a price point above 100, K, we can upsell customers spending below 100, K up above 100, K and then to lose customers we can.

Speaker Change: I think the framework within upmarket is that we are <unk>.

Speaker Change: Accelerating our enterprise opportunity and that we are kind of on the upswing after.

Speaker Change: In mid market. After we had headwinds there for a couple of years.

Speaker Change: Customers are spending 100, K down sell or full churn.

Speaker Change: Got it and then and then on the on our co pilot uptake on those it's good to hear the new commentary on the ACB. There. What are you seeing in terms of penetration with new lands. As you said, that's mostly new customers is it how close is that to a 100% attach rates when when you win a new deal.

Speaker Change: We don't even in this year, plus where we saw a sequential decrease in that cohort usually wasn't a.

Speaker Change: On churn so.

Speaker Change: So what we're really seeing is improvement in the other three areas, we've got opportunity to upsell and much more success upselling existing customers up and above 100, K, we are losing way more way fewer customers down below that 100, K cohort from a downhill and then we're being.

Speaker Change: Yes, I can take that one too it's.

Speaker Change: Vast majority of our new customer ACB is on co pilot. So I think early on we went up to about 90% I think that's.

Speaker Change: The right number that it's about 90% plus of HCV that of new franchises coming on co pilot.

Speaker Change: We have much more successful going out and actually acquiring upmarket customers at that 100 K or above.

Speaker Change: Thanks.

Speaker Change: Level, so really its customer acquisition renewed upsell opportunity and.

Speaker Change: Thank you.

Parker Lane: Our next question comes from the line of Parker Lane with Stifel. Your line is now open.

Speaker Change: Less downside exposure that we had seen previously.

Parker Lane: Yeah. Good afternoon, guys, you've got Jack Mcshane on for Parker. Thanks for taking the question today.

Thank you.

Speaker Change: Thank you.

Parker Lane: I'd be curious to hear your guys' thoughts on deep six potential impact to your business. It was reported that you guys are leveraging VR one model within co pilot. So I'd be curious to hear how that may change things either on the cost side of the equation.

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

Speaker Change: Hey, Thanks for taking the question. This is Jonathan the carry on for Brian.

Parker Lane: Or maybe you could.

Speaker Change: I guess just getting into 2025 got it another way I know you gave some commentary on the NR already here, but.

Parker Lane: Essential performance per events as a result.

Speaker Change: What do you have built into the outlook there how much of that is still reliant on mid market as the primary swing factor for <unk> versus potential upside from migrations.

Parker Lane: Yes.

Parker Lane: Wasn't reported that we were using it inside of co pilot, we have tested deep seek internally and I think that what we're most excited about.

Speaker Change: Yes.

Speaker Change: The way, we're thinking about up market growth is that we're going to we're on a path back to mid single digit growth and as a reminder, mid market is our enterprise plus our mid market.

Parker Lane: With deep seek in the ecosystem is its potential to drive price down across other LLM providers.

Parker Lane: We have always had a model internally at zoom info, where we use the model with the highest efficacy in the lowest price and we're constantly testing different models for outcomes. What we expect deep seek to do in this ecosystem is continue to drive down prices.

Speaker Change: Segment last year, we had talked about mid market kind of being a drag on growth specifically with the software vertical they experienced a couple of years of downhole pressure.

Speaker Change: I think that the.

Speaker Change: The framework within upmarket is that we are.

Parker Lane: With the model providers and what we've seen to date is an exponential decrease in cost across the models that we're using across co pilot the deep sea because not a production L. O N that we're using.

Speaker Change: Celebrating our enterprise opportunity and that we are kind of on the upswing after.

Speaker Change: Mid market. After we had headwinds here for a couple of years.

Speaker Change: Got it and then and then on the on our co pilot uptake on those it's good to hear the new commentary on the ACB. There what are you seeing in terms of penetration with new lands.

Speaker Change: Got it understood and then one more quick one I'd be curious to hear the characteristics of the 100 kg cohort and you know what.

Speaker Change: You said, that's mostly new customers is it how close is that to 100% attach rates when you land a new deal.

Im kind of parsing up sell versus maybe you see growth how does that 100 K plus cohort.

Speaker Change: Yes, I can take that one too it's the <unk>.

Speaker Change: Kind of compare to the rest of your guys' customers.

Speaker Change: Fast majority of our new customer ACB is on co pilot. So I think early on we went up to about 90% I think thats.

Speaker Change: Yes. Good question, it's heavily up market as you would imagine.

Speaker Change: The right number that it's about 90% plus of <unk> that of new franchises coming on co pilot.

Speaker Change: And when we talk about vectors to.

Speaker Change: Take existing customers and expand them.

Speaker Change: Into that cohort, we've got seed opportunities not in not just in our kind of more traditional space, but we've got expansion opportunities into AE.

Speaker Change: Thanks.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Parker Lane with Stifel. Your line is now open.

Speaker Change: CSM Rev Ops use cases with co pilot, we've got cross sell additional functionality so.

Speaker Change: Yes, good afternoon, guys, you've got Jack Mcshane on for Parker. Thanks for taking my question today.

Speaker Change: Curious to hear your guys' thoughts on deep six potential impact to your business. It was reported that you guys are leveraging VR what model within copilot. So Q.

Speaker Change: Operations, OLS selling that to co pilot and legacy sales.

Speaker Change: Customers. So we do have feet product price levers.

Speaker Change: <unk> to hear how that may change things either on the cost side of the equation or maybe.

Speaker Change: Levers to upsell into the 100 K cohort.

Speaker Change: Understood. Thank you.

Speaker Change: Thank you.

Speaker Change: Potential performance improvements as a result.

Speaker Change: Yes.

Michael Barrett: Our next question comes from the line of Michael Barrett with Wells Fargo. Your line is now open.

Speaker Change: Wasn't reported that we were using it inside of co pilot, we have tested deep seek internally and I think that what we're most excited about.

Michael Berg: Hey, Thanks for taking my question, Michael Berg on for Michael turn here.

Speaker Change: With deep seek in the ecosystem is its potential to drive price down across other LLM providers.

Michael Berg: I just wanted to double click on the MLR in particular with regards to the <unk> dynamic you talked a lot about upselling.

Michael Berg: Ops and co pilot.

Speaker Change: We have always had a model internally at zoom info, where we use the model with the highest efficacy in the lowest price and we're constantly testing different models for outcomes. What we expect deep seek to do in this ecosystem is continue to drive down prices.

Michael Berg: Is the environment looking in I guess in particular.

Michael Berg: The difference in the up market versus down market.

Michael Berg: As part of that equation.

Michael Berg: Well I think first in a down market.

Michael Berg: Think about a customer that has call. It 25 employees and five salespeople, we're going to be 100% penetrated across that seat count as you move up market, where more we're much less penetrated and so in an enterprise customer with 10000 employees and 5000 salespeople, we might be only penetrated across.

Speaker Change: With the model providers and what we've seen to date is an exponential decrease in cost across the models that we're using across copilot, but deep sea because not a production LLM that we're using.

Speaker Change: Got it understood and then one more quick one I would be curious to hear the characteristics of the 100 K cohort and.

Michael Berg: 1000 of those sales reps and so there continues to be a large expansion opportunity in the upmarket I think the thing that we're most excited about as it relates to co pilot is our ability to sell outside of persona is where we have historically sold and so instead of only selling the top of the funnel prospector we've now.

Speaker Change: What im kind of parsing up sell versus maybe you see growth how does that 100, K plus cohort kind of <unk>.

Speaker Change: Compared to the rest of your guys' customers.

Speaker Change: Yes, good question.

Expanding into account managers customer success managers, who are using copilot to get in front of risks turn rats risk to no signals happening in their accounts to know when the right time is to call in to upsell to know.

Speaker Change: Heavily up market as you would imagine.

Speaker Change: And when we talk about vectors to take existing.

Speaker Change: <unk> customers and expand them.

Speaker Change: Into that cohort, we've got seed opportunities not in not just in our kind of more traditional space, but we've got expansion opportunities into AE.

Michael Berg: To build an account plan on the fly and to have all of that data at their fingertips. So that they can be making better decisions and so that persona expansion expand how many seats, we can sell into but across the enterprise. It's very rare that we're fully penetrated across all of the sales seats that we can sell to.

Speaker Change: CSM Rev Ops use cases with copilot, we've got cross sell additional functionality so.

Speaker Change: Operations, OLS selling that to copilot and legacy sales.

Michael Berg: Helpful. Thank you.

Speaker Change: Customers. So we do have feeds product price.

Speaker Change: Thank you.

Brent baseline: Our next question comes from the line of Brent baseline with Piper Sandler Your line is now open.

Speaker Change: <unk> to upsell into the 100 K cohort.

Speaker Change: Understood. Thank you.

Speaker Change: Thank you good afternoon, Henry I wanted to go back to kind of the 100 K cohort customer I think you added 58 net new customers. This quarter. That's the most we've seen in two years one read outside looking in is that maybe the worst of the churn.

Speaker Change: Thank you.

Michael Barrett: Our next question comes from the line of Michael Barrett with Wells Fargo. Your line is now open.

Michael Berg: Hey, Thanks for taking my question, Michael Berg on for Michael turn here.

Brent baseline: For those software traditional customers is behind you.

Michael Berg: I just wanted to double click on the MLR in particular with regards to the <unk> dynamic you talked a lot about upselling.

Brent baseline: Is that is that a fair characterization and I say that because a small software company it could actually spend well north of $100000 on the data because there is such a dependency around.

Michael Berg: Ops and co pilot well was the seat environment looking in I guess in particular, if there is any difference in the up market versus down market.

Brent baseline: Landing new customers, so walk us through that outside looking in thesis is that correct or how would you frame the momentum youre seeing on that new.

Michael Berg: As part of that equation. Thanks.

Michael Berg: Well I think first in a down market. If you think about a customer that has call. It 25 employees and five salespeople, we're going to be 100% penetrated across that seat count as you move upmarket. We're more we're much less penetrated and so in an enterprise customer with 10000.

Brent baseline: Yeah look I think that across our 100 kg cohort the vast majority of customers in 900, K cohort are in our up market segment.

Brent baseline: And so.

Brent baseline: I think we are.

Brent baseline: We have gotten in trouble in the past is when you take a small customer in a <unk> environment and they spend $100000 on on zoom info, where that might be the right decision in a <unk> environment not the right decision today, and we've been really prescriptive about making sure that our customers in a down market and in the upmarket.

Michael Berg: Employees and 5000 salespeople, we might be only penetrated across 1000 of those sales reps and so there continues to be a large expansion opportunity in the upmarket I think the thing that we're most excited about as it relates to co pilot.

Michael Berg: Is our ability to sell outside of persona is where we've historically sold and so instead of only selling the top of the funnel prospector. We've now expanded into account managers customer success managers, who are using co pilot to get in front of risks turn rats risk to no signal is happening in their accounts to know when the right time is to <unk>.

Brent baseline: Getting the right packages for their business and so youre not seeing sort of a small software companies spend upwards of $100000.

Brent baseline: <unk>.

Brent baseline: $100000 with new menthol Youre seeing the vast vast majority of our upmarket.

Brent baseline: Of the 100 K cohort in our upmarket business.

Michael Berg: Calling to upsell to know.

Speaker Change: Helpful. Color last question for me is on pricing any delta relative to pricing in that market versus pricing in the SMB. Just wondering I know F&B is pricing has been aggressive for a while are you seeing some of the aggressive pricing leak into mid market or that is just not happening.

Brent baseline: Okay.

Brent baseline: I would view them separately I think in the down market.

Michael Berg: Helpful. Thank you.

Brent baseline: We view that as.

Michael Berg: Thank you.

Brent baseline:

Brent baseline: An efficient customer acquisition.

Michael Berg: Our next question comes from the line of Brent baseline with Piper Sandler Your line is now open.

Brent baseline: And then up market.

Brent baseline: I said earlier, we've got a few different pricing models.

Brent baseline: Thank you good afternoon, Henry I wanted to go back to kind of the 100 K cohort customer I think you added 58 net new customers. This quarter. That's the most we've seen in two years one read outside looking in is that maybe the worst of the churn.

Brent baseline: And we haven't been the nature of our pricing that market hasn't really changed.

Brent baseline: Thank you.

Speaker Change: Our next question.

Speaker Change: Our next question comes from the line of Jackson Ader with Keybanc capital markets. Your line is now open.

Brent baseline: For those software traditional customers is behind you is that is that a fair characterization and I say that because a small software company it could actually spend well north of $100000 on the data because there is such a dependency around.

Speaker Change: Great. Thanks. This is titled the Alon project later.

Speaker Change: Maybe just two quick ones when.

Speaker Change: When we think about the competition upmarket are there any different puts and takes you guys.

Speaker Change: Good call out.

Speaker Change: That you are seeing further and further up market versus even maybe the mid market and particularly with those co pilot first deals.

Brent baseline: Landing new customers, so walk us through that outside looking in thesis is that correct or how would you frame the momentum youre seeing on net new.

Speaker Change: Because we move up market, what we're seeing is that our our product market fit and our differentiation is meaningfully stronger upmarket than what you see down market and so we're in a in an incredible place to compete and win upmarket.

Brent baseline: Yes look I think that across our 100 kg cohort the vast majority of customers in 900, K cohort are in our upmarket segments.

Brent baseline: And so.

Brent baseline: I think we've gotten in trouble in the past is when you take a small customer in a <unk> environment and they spend $100000 on on zoom info, where that might be the right decision in a <unk> environment not the right decision today, and we've been really prescriptive about making sure that our customers in a down market and in the.

Speaker Change: Much differently.

Speaker Change: Much differently than down market, and we have great product market fit where resources properly we have the right products and that market segment presents the largest growth opportunity for us.

Brent baseline: Upmarket are getting the right packages for their business and so youre not seeing sort of a small software companies spend upwards of $100000.

Speaker Change: When I.

Speaker Change: I think about the durable competitive advantage that we have there are several aspects that combine to form that advantage first the breadth depth and accuracy of our data the velocity of updates to that data are highly value additive data types like intent data that directly drive revenue.

Brent baseline:

Brent baseline: $100000 with new menthol Youre seeing the vast vast majority of our upmarket.

Brent baseline: Of the 100 K cohort in our upmarket business.

Speaker Change: Helpful. Color last question for me is on pricing any delta relative to pricing in that market versus pricing in the SMB. Just wondering I know smbs pricing has been aggressive for a while are you seeing some of the aggressive pricing leak into mid market or that is just not happening.

Speaker Change: Calm in the upmarket are industry, leading regulatory and compliance posture is incredibly important and then our pace of innovation around AI and go to market, that's what's driving our wins upmarket and its also whats driving our durable competitive advantage as well, it's all of those things coming together.

Brent baseline: I would view them separately I think in the down market.

Speaker Change: Okay, Great and then maybe one for you I think that you kind of called out a couple of times here the discounting of the Dallas market for 25 and the guidance.

Speaker Change: We view that as.

Speaker Change:

Speaker Change: An efficient customer acquisition.

Speaker Change: And then up market.

Speaker Change: Said earlier, we've got a few different pricing models.

Speaker Change: What about as we think about 25, just overall, maybe how the fourth quarter play out from a macro perspective.

Speaker Change: And we haven't been the nature of our pricing that market Hasnt really changed.

Speaker Change: And kind of what youre anticipating when you're putting together the guy from a macro perspective with more attention towards the mid market enterprise.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Our next question comes from the line of Jackson Ader with Keybanc capital markets. Your line is now open.

Speaker Change: Yes. Good question you know I don't I don't think we saw the macro change in Q4 from where it was prior and I don't really think we have an expectation that it gets better or worse in the guide.

Jackson Ader: Great. Thanks. This is titled deal Amberjack later.

Speaker Change: Maybe just two quick ones.

Jackson Ader: When we think about the competition upmarket are there any different puts and takes you guys.

Speaker Change: Q4 was a.

Speaker Change: A really strong quarter for us and we're pretty optimistic about carrying that momentum into 2025.

Jackson Ader: Good call out.

Jackson Ader: That you are seeing further and further up market versus even maybe the mid market and particularly with those co pilot first deals.

Speaker Change: Great. Thank.

Speaker Change: Thank you one moment for our next question.

Jackson Ader: As we move up market, what we're seeing is that our our product market fit and our differentiation is meaningfully stronger upmarket than what you see down market and so we're in a in an incredible place to compete and win upmarket you much.

Speaker Change: Our next question comes from the line of Rishi Galeria with RBC capital markets. Your line is now open.

Speaker Change: Hi, This is Chris found on for Rishi. Thank you for taking my question I wanted to ask about the down market disqualification of new business policies that you implemented I believe in the past you mentioned it was leading to a $2 million a month headwind does that amount changed from Q3 and are you expecting any changes to that level in 2025.

Jackson Ader: Friendly.

Jackson Ader: Much differently than down market, and we have great product market fit where resource properly we have the right products and that market segment presents the largest growth opportunity for us.

Speaker Change: Yes.

Speaker Change: That hasnt changed we don't anticipate any changes to that.

Jackson Ader: When I.

Jackson Ader: I think about the durable competitive advantage that we have there are several aspects that combine to form that advantage first the breadth depth and accuracy of our data the velocity of updates to that data are highly value additive data types like intent data that directly drive revenue outcome.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Our next question comes from the line of Patrick well rated and Swiss Citizen Bank. Your line is now open.

Speaker Change: Okay.

Jackson Ader: <unk> in the upmarket are industry, leading regulatory and compliance posture is incredibly important and then our pace of innovation around AI and go to market, that's what's driving our wins upmarket and its also whats driving our durable competitive advantage as well, it's all of those things coming together.

Austin Cole: Hey, there this is Austin coal on for Pat Walraven Depreciate, you guys, taking the questions here.

Austin Cole: I wanted to ask I guess related to the upmarket.

Austin Cole:

Austin Cole: We've seen just kind of some continued layoffs out there in the market in Q1 just.

Austin Cole: Given your commentary of being on that path to mid single digits can you just give us kind of a sense of.

Speaker Change: Okay, Great and then Greg maybe one for you I think that you kind of called out a couple of times here the discounting of the down market for 25 and the guide.

Austin Cole: The durability of that of that path and kind of what what gives you confidence and then as a quick follow up just what what might kind of accelerate that growth kind of.

Speaker Change: What about as we think about 25, just overall, maybe how the fourth quarter play out from a macro perspective.

Austin Cole: Even further beyond and strengthening that upmarket, so maybe kind of double digits. What are the drivers there. Thank you.

Speaker Change: Kind of what Youre anticipating when youre, putting together the guide from a macro perspective with more attention towards the mid market enterprise.

Austin Cole: Look I think what you are seeing in our enterprise.

Austin Cole: And our upmarket growth is slow and steady and focused execution on that.

Austin Cole: Segment, we have resource it for growth, we have driven product.

Austin Cole: Innovation for that segment.

Speaker Change: Q4 was.

Speaker Change: Really strong quarter for us and we're pretty optimistic about carrying that momentum into 2025.

Austin Cole: We have.

Austin Cole: Continue to stay focused on that segment from a services perspective, and so I don't view. This adds one timing or that at all sort of came out. Once this has been a steady drumbeat of getting a little bit better and a little bit better and a little bit better in the enterprise and I think as a result, we're seeing improvement across all of the metrics.

Speaker Change: Great. Thank you. Thank you thank.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of Rishi Galeria with RBC capital markets. Your line is now open.

Austin Cole: In the up market and we think that is momentum that's going to continue into 2025.

Austin Cole: I think when you think about how do you accelerate that growth I think it's I think it's a couple of things.

Austin Cole: It's co pilot and it's our operation business and with co pilot, our sellers are becoming more and more.

Speaker Change: Yeah.

Speaker Change: That hasnt changed we don't anticipate any changes to that.

Austin Cole: Enabled to take copilot to their customers they are more and more confident because they are using co pilot internally for their own operations. They now have a persona expansion opportunity within our large accounts.

Speaker Change: Thank you.

Speaker Change: Our next question.

Austin Cole: And so there's a lot of confidence that we'll be able to accelerate the growth of both copilot and operations within the enterprise.

Speaker Change: Our next question comes from the line of Patrick <unk> with citizens Bank. Your line is now open.

Austin Cole: Great. Thank you.

Speaker Change: Okay.

Speaker Change: Hey, there this is Austin coal on for Pat Walraven Depreciate, you guys, taking the questions here.

Austin Cole: Thank you.

Speaker Change: I am showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Speaker Change: I wanted to ask I guess related to the upmarket.

Speaker Change:

Speaker Change: We've seen just kind of some continued layoffs out there in the market in Q1 just.

Speaker Change: Given your commentary of being on that path to mid single digits can you just give us kind of a sense of.

Speaker Change: The durability of that of that path and kind of what what gives you confidence and then as a quick follow up just what what might kind of accelerate that growth kind of.

Speaker Change: Even further beyond and strengthening that upmarket, so maybe kind of double digits. What are the drivers there. Thank you.

Speaker Change: Look I think what youre seeing in our enterprise.

Speaker Change: And our up market growth is slow and steady and focused execution on that.

Speaker Change: Segment, we have resource it for growth, we have driven product.

Speaker Change: Innovation for that segment.

Speaker Change: We have.

Speaker Change: Continue to stay focused on that segment from a services perspective, and so I don't view. This adds one timing or that it all sort of came out. Once this has been a steady drumbeat of getting a little bit better and a little bit better and a little bit better in the enterprise and I think as a result, we're seeing improvement across all of the metrics.

Speaker Change: In the up market and we think that is momentum that's going to continue into 2025.

Speaker Change: I think when you think about how do you accelerate that growth I think it's I.

Speaker Change: I think it's a couple of things.

Speaker Change: It's co pilot and it's our operation business and with co pilot, our sellers are becoming more and more.

Speaker Change: Enabled to take co pilot to their customers there are more and more confident because they are using co pilot internally for their own operations. They now have a persona expansion opportunity within our large accounts.

Speaker Change: And so there's a lot of confidence that we'll be able to accelerate the growth above copilot and operations within the enterprise.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Speaker Change: I am showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

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