Q1 2025 ZoomInfo Technologies Inc Earnings Call
Thank you for watching!
Speaker Change: Good day, and thank you for standing by. Welcome to the ZoomInfo First Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question in the answer session.
Speaker Change: To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised.
To a story of question, please press star one one again. [inaudible]
Speaker Change: Please be advised that today's conference is being recorded. I would now like to turn the conference over to Jerry.
Suggesting by President of Investor Relations. Please go ahead.
Speaker Change: Great, thanks Lisa. Welcome to ZoomInfo's Financial Results Conference call for the first quarter 2025. With me on the call today is we announce our financial results live from the Nasdaq Market site in Times Square, our Henry Schuck founder and CEO of ZoomInfo and Graham O'Brien, our interim CFO .
Speaker Change: Earlier today, we rang the closing bell at the NASDAQ and we announced that tomorrow morning, ZoomInfo will begin trading under the symbol GTM.
Speaker Change: 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.
Speaker Change: Ford Looking Statements involve a number of risks and uncertainties including those discussed in the risk factor sections of our SEC filings actual results made there from materially for many Ford Looking Statements. [inaudible]
Speaker Change: 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. [inaudible]
Speaker Change: by Law. For more information, please refer to the forward-looking statements.
Speaker Change: In the slides, posted to the Invest Relations website at ir.suminfo.com All metrics on this call or non-yap unless otherwise noted or reconciliation can be found in the financial results press release or in the slides posted to our IR website. And with that, I'll turn the call over to Henry.
Henry Schuck: Thank you, Jerry, and welcome everyone. We delivered another consecutive quarter of better than expected financial results, continued momentum up market and improved net retention.
Henry Schuck: We dramatically expanded the capabilities of our go-to-market intelligence platform to empower our customers to accelerate revenue growth.
ZoomInfo now includes even more sophisticated AI-powered applications and agents. [inaudible]
with the Technology, Integrations, and Intelligence for Go-to-Market Team. [inaudible]
Henry Schuck: As we continue to drive innovation in the ways, businesses, market and sell, today we announced the NASDAQ that we are changing our training symbol from ZI to GTM to reflect our commitment to building the core software platform for go to market. [inaudible]
Henry Schuck: Much like Workday is synonymous with Enterprise HR and ServiceNow for Enterprise IT, ZoomInfo will be synonymous with Enterprise go-to-market
Henry Schuck: In Q1 2025, Gap Revenue was 306 million, and adjusted operating income was 101 million, a margin of 33%, both above the high end of our guidance.
Henry Schuck: Our shift up market continued on the right path during the quarter. We now have 1868 customers with more than $100,000 in ACV, a sequential increase of one customer and a year-over-year increase of 108 customers.
Henry Schuck: This is after a period of declines and marks our fourth straight quarter of sequential improvement.
Henry Schuck: In our million-dollar cohort, we drove sequential and year-over-year growth in the Toro ACV as well as the average ACV per customer. [inaudible]
Henry Schuck: This quarter we again drove better than expected performance up market, which grew 3% year over year and now represents 71% of our business
Henry Schuck: With more than 70% of our business growing and accelerating growth, we are increasingly confident in our longer term growth aspiration.
Henry Schuck: Net revenue retention also improved in the quarter, while rounding to 87% for the second consecutive quarter. [inaudible]
Henry Schuck: Stripe is now deploying ZoomInfo co-pilot across more than 300 sellers to increase conversion, wind rates, and deal size by leveraging real-time insight.
Henry Schuck: Co-pilot will deliver better account prioritization, create more opportunities for upsell and cross-out, and help to close more deals at higher price points.
Henry Schuck: One of the largest food delivery vendors is activating our full-go-to-market intelligence platform to support their expansion efforts and extend their reach into international markets.
Henry Schuck: They have deployed thousands of ZoomInfo seats to drive account prioritization and more efficient prospecting, while our strategic account insights improve win rate. [inaudible]
Henry Schuck: And we expanded our relationship with Intuit to become a more strategic partner on their outbound sales motion.
Henry Schuck: We're helping them build durable and repeatable sales plays to mid-market accounts in helping them leverage intent data, implement advanced data tracking, integrate APIs for real-time data management, and build sophisticated audience segments for programmatic advertising.
Henry Schuck: Our attraction is powered by the increasing pace of innovation across data, intelligence and go-to-market AI. Our co-pilot product is successfully rolling out into our customer base and accelerating our expansion beyond SDR prospecting into AE and AM use cases.
Henry Schuck: This persona represents a 3X opportunity in our customer base, and Copilot has converted AEM and AEM users on the platform to be as active as our SDR prospecting users.
Henry Schuck: Earlier today, we launched GoToMarket Studio to enable revenue leaders and operators to architect their GoToMarket with intelligence and AI. Thank you for your time.
Henry Schuck: The single biggest ask from our customers is to unify all go-to-market data so teams can target, prioritize and execute in one place. Traditional CRM alone is no longer sufficient to run go-to-market.
Henry Schuck: Critical signals like product usage, marketing engagement, and voice of customer insight sit fragmented across enterprise systems.
Henry Schuck: Revenue teams need this data to effectively target, prioritize and execute revenue campaigns.
Henry Schuck: There are only two ways to solve this problem in modern GTN. [inaudible]
Henry Schuck: Either by building a complete in-house solution with a massive engineering investment, which is inaccessible to nearly all organizations.
Henry Schuck: or by deploying ZoomInfo's Best in Class Data Platform which was trained on billions of messy data problems and applying it to solve a customer's internal go-to-market environment. [inaudible]
Henry Schuck: To launch GTM Studio, we expanded our data asset into core enterprise operations use cases running on our technology platform built through the successful integration of our acquisitions of ring lead for data management, chorus .
Henry Schuck: conversation intelligence for unstructured go-to-market data and set sail from CRM Attribution.
Henry Schuck: This positions us as the only vendor with natively integrated data, orchestration, AI, and frontline execution.
Henry Schuck: GTM Studio is the revenue leader and operator solution to run go-to-market
Henry Schuck: And then co-pilot is the front line activation that turns campaigns into revenue execution.
Henry Schuck: Over the last two years, we have been fixated on making every sales rep more productive, every campaign more targeted, and every workflow more intelligent.
Henry Schuck: This is resulted in record levels of NPS scores these last two quarters with Enterprise NPS up more than 6.0 over year and Q1.
Henry Schuck: In our pursuit of this vision, ZoomInfo has become so much more to our customers than just the provider of company and contact lookup information.
Henry Schuck: Our go-to-market intelligence platform Superchargers CRM, giving our customers a living, breathing view of who's in market and where sales resources should be allocated across the entire total addressable market.
Henry Schuck: Beyond sales, we continue expanding across the entire revenue cycle, increasing the number of and types of go-to-market professionals that use our platform every day.
Henry Schuck: ZoomInfo Marketing now generates 80% of its revenue upmarket and plays a key role in bringing sales and marketing into tighter, more strategic alignment on the go-to-market intelligence platform.
Henry Schuck: With expanded workflow management, we're embedding our intelligence deeper into our customers' ecosystems, making their operations more connected, more creative, and more powerful.
Henry Schuck: Our innovation is giving revenue teams the advantage they need to move faster, harder, self smarter, and win bigger.
Henry Schuck: Our trading symbol change reflects our creation of a new category, go-to-market intelligence. This isn't just a name change, it's a commitment to building the best go-to-market engine for all companies [inaudible]
Henry Schuck: We are very pleased with our execution and how that has translated a strong financial result. We continue to reallocate resources upmarket where we are accelerating the transition as we successfully drive better growth and profitability outcome. [inaudible]
Henry Schuck: Today 71% of our business is growing and accelerating growth with demonstrably better profitability than our down market business. We are being very intentional with the down market portion of our business as we continue to move our business up market and develop solutions that are defining the future of go to market. [inaudible]
Henry Schuck: ZoomInfo now does what no other software company does. We unify first and third party data, insights and automation.
Henry Schuck: and Execution to serve the entire go-to-market organization, not just sales, not just marketing, not just rev-up. That's what GTM means. It's not a department, it's the entire revenue engine. [inaudible]
Henry Schuck: and go to market intelligence aligns and activates the whole engine in real time. [inaudible]
Henry Schuck: Over the last two years, this is a vision we've been relentlessly focused on, and it's the future of go-to-market. With that, I'll turn over the call to Graham. [inaudible]
Graham O'Brien: Thanks, Henry. Q1 gap revenue was $306 million and the justice operating income was $101 million, a margin of 33% above the guidance ranges we provided.
Graham O'Brien: Annualized sequential revenue growth of the quarter was 1.1%, and as Henry indicated, net revenue retention improved in the quarter while still rounding to 87%.
Graham O'Brien: We delivered strong results in the quarter, and while we remain as optimistic as ever about the projectories of business and have not seen any impact to customer behavior in the current environment, we are including an incremental layer of caution in our guidance, raising the low end of our four-year revenue guidance and rehydrating our AOI and cashflow guidance.
Graham O'Brien: Over the past year, we've transformed the business from higher volumes of transactional new business to a place now where our growth foundation is rooted in more durable, upmarket customer relationships. [inaudible]
Graham O'Brien: This transition was notably evident in the first quarter as our upmarket growth of 3% year-over-year accelerated. While we intentionally continued on the path toward a smaller and healthier version of our downmarket business, with downmarket declining 10% year-over-year.
Graham O'Brien: In Q1, we lacked a significant volume of down-market transactions from last year that predated the introduction of our new business risk model in Q2 2024. So as we progress further into 2025, a greater percentage of our first year expiring population will experience more rigorous qualifications during their initial purchase in 2024, potentially leading to better renewal outcomes.
Graham O'Brien: We see continued opportunity to drive upside in our off-market business while continuing to it, continuing to aggressively manage the contribution from the down market. [inaudible]
Graham O'Brien: In Q1, we drove an acceleration in upmarket growth, leading to a 1-point shift in upmarket mix from 70% to 71% of the business.
Graham O'Brien: We are seeing returns from shifting resources upmarket while qualifying risk out of our downmarket revenue, evident in decreasing write-off activity, efficient cash collections, and more reasonable bad debt expenses.
Graham O'Brien: As we expand more upmarket that gives us more opportunities to expand margins, while still resourcing for growth.
Graham O'Brien: Zenithal Copilot showed continued traction in the quarter as good operations.
Copilot continues to attract new to the franchise customers, while we continue to achieve uplift on a per seat basis via our customer migration motion and we have an exciting product roadmap to finish out the year.
Graham O'Brien: Our operations business is growing double digits and continues to be one of the fastest areas of growth within zoom Enzo.
Graham O'Brien: We expect that the launch of go to market studio will further support that momentum in the back half of the year.
Graham O'Brien: Within operations, our data as a service solution is showing strong traction with new logos up 24% year over year and average ACB per customer up approximately 10% year over year.
Graham O'Brien: Performance was consistent across verticals retention in our software vertical improve sequentially for the fourth quarter in a row.
Graham O'Brien: A macro perspective, we continue to monitor verticals to better understand any potential impacts from tariffs and if theres any measurable impact from the evolving economic environment and while we do think businesses are looking for more clarity on the economic environment, we have not seen meaningful changes to the way our customers operate.
Graham O'Brien: Turning to share repurchases in.
Graham O'Brien: In Q1, the company repurchased $8 6 million shares of common stock at an average price of $11 five.
Graham O'Brien: For an aggregate $95 million.
Graham O'Brien: With the board of directors approving an incremental $500 million share repurchase authorization in February as of the close of Q1, there was $543 million in remaining share repurchase authorizations.
Graham O'Brien: As you will see in our 10-Q filing following the close of the quarter, we have already deployed another $50 million plus.
Graham O'Brien: And cash towards repurchases in Q2.
Graham O'Brien: We used the dislocation in share price created over the past month to retire nearly 7 million shares of stock at an average price of $8 27 per share.
Graham O'Brien: To date, we have retired approximately 85 million shares of common stock through share repurchases and one of the factors contributing to our expected growth in adjusted net income per share.
Graham O'Brien: Turning to cash flow operating cash flow was $119 million in Q1, and Unlevered free cash flow for the quarter was $125 million.
A margin of 41% we expect to.
Graham O'Brien: To continue to primarily use of cash flow, we generate to retire shares of zoom info as we believe that will generate the best possible return for shareholders. As we continue on our path to Reaccelerate revenue growth.
Graham O'Brien: We ended the quarter with $143 million in cash cash equivalents and investments and we carried 124 billion in gross debt.
Graham O'Brien: Our net leverage ratio is two five times trailing 12 months adjusted EBITDA and two three times trailing 12 months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements.
Graham O'Brien: With respect to liabilities and future performance obligations unearned revenue at the end of the quarter was $484 million and remaining performance obligations or RPI for $1 3 billion.
Graham O'Brien: Of which $837 million are expected to be delivered in the next 12 months.
Graham O'Brien: Before I move to guidance, while our strong operating performance continues to underpin our confidence in the promising trajectory of the business given the unique current economic environment, we thought it prudent to add an incremental layer of caution into the guide.
Graham O'Brien: With that let me turn to guidance for Q2.
Graham O'Brien: We expect GAAP revenue in the range of $295 million to $298 million.
Graham O'Brien: We expect adjusted operating income in the range of $101 million to $104 million and non-GAAP net income in the range of 22 to 24 cents per share.
Graham O'Brien: For the full year 2025, we are raising the low end of our revenue guidance and with share count reductions from repurchase activity year to date, we now expect higher adjusted net income per share.
Graham O'Brien: For the full year 2025, we expect to deliver GAAP revenue in the range of $1 195 to $1 $205 billion.
Graham O'Brien: Representing negative one 2% annual growth at the midpoint of guidance and adjusted operating income in the range of $426 million to $436 million.
Graham O'Brien: Representing a 36% margin at the midpoint of guidance.
Graham O'Brien: We expect non-GAAP net income in the range of <unk> 96 to <unk> 98 per share based on 352 million weighted average diluted shares outstanding and.
Graham O'Brien: And we expect Unlevered free cash flow in the range of $420 million to $440 million.
Graham O'Brien: Now I will turn it over to the operator to open the call for questions.
Speaker Change: Thank you and as a reminder, if you would like to ask a question. Please press star one on your telephone.
Speaker Change: We also ask that you limit yourself to one question and wait for your name a company to be announced before proceeding with your question. One moment. Please while we compile the Q&A roster.
Speaker Change: The first question today will be coming from the line of Alex Zukin of Wolfe Research. Your line is open.
Alex Zukin: Hey, guys. Thanks for taking my question and congrats on navigating.
Speaker Change: Macro environment so maybe.
Henry Schuck: Henry just the first question why now.
Speaker Change: They change.
Henry Schuck: Round.
Speaker Change: The ticker the category, what's making right now the moment to kind.
Henry Schuck: Go.
Speaker Change: Go double down on this motion and maybe what are you seeing from the change in conversations that youre, having with customers that youre renewing, particularly up market, that's driving the acceleration and I've got a quick follow up.
Speaker Change: Sure. Thanks for the question, Alex I think there's a couple of things one we've expanded the platform broadly to not only be Pla.
Speaker Change: Platform for prospecting sellers, but also for account executives account managers customer success managers, when we launched co pilot last year, we saw ourselves.
Speaker Change: Being pulled into a much broader set of conversations across go to market and the marketing into Rab ops and then we released today our go to market studio product, which really allows any revenue operator any revenue leader to bring their first and third party data together to leverage AI.
Speaker Change: Cross that data asset and then to orchestrate campaigns with sellers account managers str's and marketing teams.
Speaker Change: We're incredibly excited about the broad range of solutions that we're providing now beyond just sales and beyond just information, but throughout go to market and so it felt fitting that our ticker symbol change to encompass the solution that we're now offering.
Speaker Change: In the upmarket I think what we're hearing from our customers.
Speaker Change: It's two things one they are thirsty for data to leverage inside of their go to market organizations, particularly as they look to leverage AI to drive efficiency and effectiveness of their sales teams.
Speaker Change: And then when they see the power of that data they want to leverage a front line.
Speaker Change: Our front end application to help their frontline teams execute.
Speaker Change: And so when we're having conversations whether it be with stripe or intuit or <unk>.
Speaker Change: Sam Rush, when we're talking with them Theyre, telling US yes, we need this data because we know we can drive efficiency, we leverage this data with AI.
Speaker Change: But we also need the platform, where our frontline team can actually execute on the insights that are coming from that data and so that they're investing in our.
Speaker Change: Our data asset and then our co pilot platform to execute against that data Asa.
Alex Zukin: Makes total sense and then Graham maybe just one for you on <unk>.
Alex Zukin: Could you maybe just bifurcate that by what you are seeing both up market versus down market and then is there any sign of.
Alex Zukin: <unk> and IRR from here either.
Alex Zukin: And the guidance and kind of what you're thinking and seeing in the end.
Alex Zukin: The pipeline and renewal activity for the year.
Alex Zukin: Sure.
Alex Zukin: Retention upmarket continues to improve.
Alex Zukin: So we are really focused on in down market continues to be impaired, but not getting significantly worse. When we think about improvement going forward, we really think about it from a growth perspective up market versus down market. The last time, we talked about the upmarket business growing mid single digits in 2025, and the guidance I think we're definitely on that path.
Alex Zukin: And then down market, we were down 9%.
Alex Zukin: Last year were down 10% year over year in Q1, and we had an expectation that that would get worse in 2025, and we still feel really comfortable managing the down market business within those original parameters.
Speaker Change: Perfect. Thanks, guys.
Speaker Change: Thank you one moment for the next question.
Speaker Change: And the next question will be coming from the line of Mark Murphy of Jpmorgan. Your line is open.
Speaker Change: Yes. Thank you very much I'll add my congrats as well.
Speaker Change: I'm curious where the co pilot ECB Biter reached in Q1 was that something that you mentioned <unk> any thought on kind.
Speaker Change: Overall glide path of that ECB stream for this year.
Speaker Change: I can take that one.
Speaker Change: Co pilot continued to grow.
Speaker Change: Kind of a rate that we expect that they were going to disclose milestones as we can.
Speaker Change: Get to those milestones in the future, but we are really happy with not only the.
Speaker Change: The migration pattern, but also just the upsell opportunity that we continue to see you there in Q1.
Speaker Change: Okay.
Speaker Change: And how do you feel about this.
Speaker Change: Earlier stage co pilot.
Speaker Change: Rollouts, because I think commonly we've seen with other co.
Speaker Change: Co pilots and agents out there that companies will run into some hurdles.
Speaker Change: Trying to understand the security policies.
Speaker Change: At the governance and the data retention.
Speaker Change: Yes, sometimes they're encountering some.
Speaker Change: Some bug munis are you seeing any of this typical.
Speaker Change: Speed bumps or does it feel like it's full steam ahead.
Well, we feel really good about the trajectory of copilot, particularly in the up market. This was Q1 was a quarter, where we saw the most upmarket deals for co pilot that we've seen and so we're getting much better at the motion of navigating data privacy data security and AI governed.
Speaker Change: In sports within our clients.
Speaker Change: And that's not creating.
Speaker Change: Real speed bump for us today.
Speaker Change: Thank you very much.
Speaker Change: Thank you one moment for the next question.
Speaker Change: The next question will be coming from the line of Elizabeth quarter of Morgan Stanley. Your line is open great. Thanks. So much for the question I first want to just ask a little bit on the expense side, just given the better top line, but operating income and free cash flow guidance looked like it was pretty unchanged for the year. So just given the continued shift up market with better profitability and better.
Speaker Change: Top line and our full year target is there anything to consider as it relates to investment priorities that maybe limiting some of the flow through and then as a follow up just as you leverage your own tools could you speak to the internal efficiencies that youre seeing and how that may be reinvested or pass through overtime.
Speaker Change: Yeah, I can cover the guidance upfront so.
Speaker Change: I want to reiterate that we saw no impact to the overall business in Q1 from the economic environment.
Speaker Change: In a more normal economic environment, we probably would've felt comfortable flowing through more of the beats into the full year guide.
Speaker Change: So for the avoidance of doubt, we're not seeing anything material in how our customers behave. This approach the guidance is 100% driven by caution as it relates to the uncertain environment as it did when we think about revenue versus adjusted operating income versus cash flow, we looked at revenue and the low end of the range was de risked by the <unk>.
Speaker Change: <unk> of the beat in Q1, we're still expecting to deliver it to deliver 36% margins in 2025, and then on margins specifically the seasonality of our business has evolved I think we've talked about this some over the past few quarters, we expected margins to be several points lower.
Speaker Change: <unk> full year margins in Q1, and several points above the full year margin in the back half of the year. So in line with our expectations.
Speaker Change: We've deployed copilot across all of our go to market teams I think what that's really allowed us to do is take the efficiencies gained by that deployment in their use of the platform and allowed us to invest more in our upmarket growth.
Speaker Change: Market sales resource allocation and so we feel really good about our continued.
Speaker Change: <unk> opportunity to shift more and more resources up market as we get efficiencies across our sales team.
Speaker Change: Great. Thank you.
Speaker Change: Thank you one moment for the next question.
Speaker Change: The next question will be coming from the line of Raimo <unk> of Barclays. Your line is open.
Speaker Change: Perfect. Thank you kristie on that topic. Please.
Speaker Change: You talked about the extra buffer.
Speaker Change: Where are you kind of put it in.
Speaker Change: If you think about.
Speaker Change: A downturn.
Speaker Change: Kind of tougher times in selling where did you think the issue is going to be more on down market, but there you had already like quite a few years. So I'm. Just curious are all in the morning market and how do you price for that.
Speaker Change: Yes, I think the.
Speaker Change: Down market will be more reactive to.
Speaker Change: A macro slowdown than than our upmarket business I think we're we feel like we're in the best shape, we've really ever been in from an upmarket downmarket mixed perspective to weather something.
Speaker Change: It's worth reminding our initial guidance provided an opportunity for down market to decline.
Speaker Change: Managed down.
Speaker Change: <unk>, an acceleration relative to where we were in 2024 and our guidance today continues to allow for that so we continue to feel comfortable managing the downmarket business.
Speaker Change: To a place where it's a smaller and healthier version of itself.
Speaker Change: And then one follow up for Henry.
Speaker Change: Are we seeing that in the front office space. There is a lot of talk on Adrian pilots et cetera.
Speaker Change: What do you see in terms of customer understanding or we're at a different vendors with different offerings fit in and what can you do to kind of improve your ascending Jim. Thank you.
Speaker Change: I think look I think can go I think of all the departments in corporate America go to market is the has been the slowest to leverage AI and agents.
Speaker Change: And their motion and I think the big reason for that is.
Speaker Change: Is that.
Speaker Change: You need it is necessary for you to leverage third party data and third party insights in order for you to build an AI agent that's relevant to go to market professional you can't just rely on your first party data. The same way that you can rely on first party data to build a support ticket agent.
Speaker Change: And Sarah customer service agent.
Speaker Change: The data that go to market professionals need need exists outside of their first party data now that first party data is incredibly important and it needs to be married to third party data to actually execute.
Speaker Change: AI driven motion, which is why we built <unk> studio is to allow our customers to bring what was historically very siloed go to market data together with third party data and then build those AI emotion and AI agents offer perfected enriched and broad and a broad data asset that includes <unk>.
Speaker Change: First and third party data. We think this is the unlock for go to market team to actually go to market with AI.
Speaker Change: Makes total sense. Thank you.
Speaker Change: Thank you.
Speaker Change: And our next question will be coming from the line of Kash Rangan of Goldman Sachs. Your line is open.
Speaker Change: Hi, Thank you very much.
Speaker Change: My question would be.
Speaker Change: With respect to the new emphasis of the company go to market, Henry which I can certainly appreciate what the new budgets can you go after with this new positioning and.
Speaker Change: What are the new Tam. So you can go after as a result of that and also moving upmarket is laudable.
Speaker Change: But it's also higher cost of acquiring business.
Speaker Change: As you move upmarket what is the trade off with respect to profitability that you might be making investing in new markets, New enterprise customers, new distribution can be a broker tradeoff in the near term how do you weigh the near term versus the longer term payoff.
Speaker Change: So much.
Speaker Change: Yes, a lot in there I think the first thing is in a down market, we have been moving more and more of our business to digital self service and so in the micro SMB today, we are pushing micro SMB to digital self service, where they're transacting without the aid or help a seller and that's new in our go to market motion.
Speaker Change: Feel good about the trajectory thats happening there that has already allowed us to move and reallocate resources from the down market and move those resources upmarket.
Speaker Change: I should remind everybody that our upmarket business is meaningfully more profitable than our down market business and so as we move more and more of the business upmarket, we have the opportunity to increase margins at that business is far more profitable than our down market business and then on the question of <unk>.
Speaker Change: Expanding within the enterprise and other budgets that we would unlock.
Speaker Change: I think our big opportunity that we have a number of opportunities there first with our go to market studio product that we launched this week, we have the opportunity to bring Rev. Ops professionals sales ops professionals and sales leadership.
Speaker Change: Into the <unk> platform to help them build the to build the go to market motion that go to market campaigns that they've always had trapped in their heads, but would have to sit in a long queue with IP and data science to actually bring to life and so we're really excited about bringing a much broader spectrum of <unk>.
Speaker Change: Market leadership into the into the <unk> platform and then also I had mentioned this I mentioned this but usage of our platform by account executives and account managers, who are on co pilot now matches the utilization of our platform by our heaviest STR.
Speaker Change: Prospecting use case, and so that gives us real expansion to bring in a much broader spectrum of the go to market teams and zoom menthol and to get more than just top of the funnel prospecting use cases, and broaden that the account executive and account manager in CSM use cases.
Speaker Change: Super all the best for the journey Henry Thank you so much. Thank you.
Speaker Change: Cash.
Speaker Change: Thank you and our next question will be coming from the line of Brad Zelnick of Deutsche Bank. Your line is open great.
Brad Zelnick: Great. Thanks, so much for taking the question and it's so great that you guys are right here in New York.
Brad Zelnick: Nice to see the upmarket momentum here in Q1 I've got two questions. Maybe first for Henry I was really intrigued by the Intuit relationship that you talked about I wanted to understand is that specific to Intuit enterprise suite zero up market product and can you maybe talk more about the economic relationship.
Brad Zelnick: What this can develop into and how many more such relationships are out there that you can go after.
Henry Schuck: Thanks, Brad we are really excited about our partnership with Intuit. It's a partnership that has grown up with merit over time, and we continue to find new and broadening use cases, new use cases, there. It's not just limited to the enterprise suite at Intuit, it's much broader than that.
Henry Schuck: Particularly we've been helping them with their mid mid market focused business and our outbound outreach and think that we can expand much further to more data management data cleanliness opportunities within the company look I think the Intuit is a good example of what we see across all of our enterprise.
Henry Schuck: Customers, we are lightly penetrated into our enterprise customers are upmarket customers and we see no demand ceiling today and our ability to continue to grow within the enterprise and so our job now is to execute on that opportunity to learn from the way that were deploying.
Henry Schuck: <unk> and enabling our enterprise customers and then bring that across the enterprise base, but we don't see any.
Henry Schuck: Demand.
Henry Schuck: Demand difficulties in continuing to grow that upmarket business, because we're still lightly penetrated across the enterprise huge opportunity if I can follow up for you Graham.
Henry Schuck: As we think about your comments in the forecast that you put together and the conservatism embedded caution given the backdrop I just want to be clear that in terms of close rates pipeline build or anything to average discount trends is there anything in the last six weeks here into Q2 that you saw.
Henry Schuck: Seeing that is informing the way that you think about the forecast and if we think up market versus down market is there one versus the other that you are perhaps more concerned about.
Henry Schuck: Yes.
Henry Schuck: I don't think we haven't seen anything in the past six weeks with our customers, but it's different I think that our caution is informed by the broader uncertainty and.
Henry Schuck: I think that that's really what's informing that.
Henry Schuck: Reiteration and slight raise on on revenue.
Henry Schuck: So what was the last time the question Brad.
Speaker Change: Just thinking up market versus down market. If there is one or the other you are more concerned about.
Henry Schuck: As you look to the remainder of the year.
Henry Schuck: Yes, we feel we continue to feel really bullish around the upmarket opportunity, we got to 3% growth in Q1, and we're really excited about the path. We're on to mid single digits in 2025 down market would probably be earlier to react to.
Henry Schuck: Some macro worsening so I think that we are we recognize that our initial guidance accounted or gave us a lot of room to manage that that part of the business and we're just not going to really rely on downmarket to contribute to our revenue guidance in any significant way.
Henry Schuck: It makes perfect sense. Thanks, so much guys.
Speaker Change: Thank you and our next question will be coming from the line of Jackson Avalere.
Speaker Change: Of Keybanc capital markets. Your line is open.
Alright, thanks for taking my questions guys.
Speaker Change: Henry on the upmarket growth how much of that growth is coming from.
Speaker Change: Some of those customers that are actually.
Speaker Change: Hiring sales reps like adding new seats to the platform.
Speaker Change: Yes, I can take that it's a mix. So we have some of our customers are hiring sales reps.
Speaker Change: A lot of our up market growth comes from our operations product, which is up double digits year over year, that's not really a seat based model that's usually a.
Speaker Change: Data delivery model on a subscription basis. So we definitely have a mix of.
Speaker Change: Customers and prospects that are growing seats, we have a mix of customers that are <unk>.
Speaker Change: Signing up for our operations business.
Speaker Change: And then also I mentioned this we are expanding our use cases across account executive account manager in CSM seats, as well, where historically, we may have been limited just to the top of the funnel STR use case today with copilot, we're able to expand beyond just that top of the funnel use cases so.
Speaker Change: Those seats existed within our customer base, they don't need to be hired for us to sell into but now we have product that delivers a use case.
Speaker Change: And value proposition for them and then the product itself is bringing them in and having them engage with the product at levels that are the same as our STR prospecting use case.
Speaker Change: Okay. So I mean.
Speaker Change: Would it be fair to characterize it is like.
Speaker Change: Sales hiring is not yet.
Speaker Change: Wins for you guys at the moment.
Speaker Change: Could be kind of upside as if things improve through the year.
Speaker Change: Yes definitely.
Speaker Change: Okay, Okay Cool and then my follow up.
Speaker Change: Our remaining performance obligation when should we expect the growth in does whether it's total or current when should we expect those to kind of more reflect what youre seeing.
Speaker Change: In the upmarket motion. Thank you.
Speaker Change: Yes.
Speaker Change: Yes, I think when I look at the current bookings growth we've been negative and then I think we are at zero percent in Q1.
Speaker Change: Trajectory there is improving.
Speaker Change: I would expect.
Speaker Change: To get back to positive there, it's mostly a matter of time Q1 was the last quarter, where we were lapping.
Speaker Change: Compare last year, where we had a high volume of down market new business transactions that didn't go through our more rigorous qualification process. So we didnt really fill the bucket up again with the same or similar transactions in Q1 once we get into Q2 of this year, where we start lapping the introduction of the new business risk model last year.
Speaker Change: We start to get into heavier upmarket.
Speaker Change: Our market quarters, we should have an opportunity to start to get back to positive current bookings growth.
Speaker Change: Got it alright, thank you very much.
Speaker Change: Thank you and our next question will be coming from the line of Brent bracelet.
Speaker Change: Piper Sandler your line is open.
Speaker Change: Thank you good afternoon, Graham wanted to double click into the down market business I get.
Speaker Change: That you are seeing a good healthy acceleration up market, but the downmarket business still looks like it's up $350 million of our business.
Speaker Change: How much do you think that business could contract you hear that contracting for next year for the next couple of years I think it makes sense to focus up market, but any color on that.
Speaker Change: The duration of that business and how it contracts over time and one quick follow up for Henry Thanks.
Speaker Change: Sure Yes.
Speaker Change: It's a contract in 2025 and contracted faster pace and at year end 2024, and 2034, it was down 9% our guidance in 2025 implied that it would be down.
Speaker Change: Hi negative teams.
Speaker Change: I think the way we would think about this as getting to an optical optimal optimal mix up market versus down market out of the business. We're at 71%, 29% right now that first milestone is let's get the 75% and I think once we get to 80% that would be my my assumption around where downmarket would probably stay.
Speaker Change: The lives as the healthier and smaller version that we have been talking about.
Henry Schuck: Totally make sense kind of more of an 80 20 model and then Henry for you.
Speaker Change: Companies generating over 100 million a quarter.
Quarter and cash on average here you've done a dozen acquisitions over the last 10 years.
Speaker Change: Really helping kind of repositioning the company, what's your appetite to do both buyback and tech tuck in M&A, but love to get your thoughts there. Thanks.
Speaker Change: Look I think that we're going to be opportunistic with M&A, particularly tuck in M&A, but look right now we're going to continue to aggressively reduce the share count.
Speaker Change: At these levels given how much greater our intrinsic value is then than the market value today, we have great confidence I have tremendous confidence in the future of zoom info.
Speaker Change: And I really believe that the best company to do M&A against today is zoom info and we're going to use our cash to buy back shares of what we believe is the law.
Speaker Change: Lowest priced most opportunistic company to buy shares okay.
Speaker Change: Makes sense. Thank you.
Speaker Change: Thank you and our next question will be coming from the line of Taylor Mcginnis.
Speaker Change: UBS Your line is open.
Taylor McGinnis: Yes, hi, thanks, so much for taking my question Graham.
Speaker Change: So when we think about the evolution of IRR. This year, how much of it is an improvement that youre seeing in the different customer segments, starting to emerge. So those specific <unk> versus mix. So maybe you could talk a little bit about that and part of the reason I ask is as you start to lap the SMB go to market changes that you made.
Speaker Change: I guess, how much of a tailwind could that be to SMB NRI and therefore, the total tail and then to the extent you can you can share what <unk> is being baked into the guide I think that would be helpful as well.
Speaker Change: Yeah, when I think about the.
Speaker Change: The proportion of just better upmarket mix versus improvements within those segments.
Speaker Change: Right now, it's really being driven by better upmarket retention, if you look back.
Speaker Change: So when we were at 85% for several quarters there the sequential uptick is coming from better retention upmarket, we're not getting a large tailwind yet from the better mix I think over time as we continue to improve upmarket retention as we take the upmarket mix from the low 70% of the mid Seventy's that it starts to become more fit.
Speaker Change: <unk>, but right now the biggest driver of our retention improvement is upmarket retention improvement and then I don't know.
Speaker Change: We're going to talk or disclose explicitly the retention in the guide.
I think if you just think about it as mid single digit up market growth that is being driven.
Speaker Change: Driven by improving retention and up markets and then down market.
Speaker Change: Eight to nine points degradation in year over year growth, where we see lower retention and the potential for.
Speaker Change: That's remained lower than it's been.
Speaker Change: Great. Thank you so much.
Speaker Change: Thank you and the next question will be coming from the line of Michael <unk> of Wells Fargo Securities. Your line is open.
Michael: Okay great.
Very much appreciate you taking the question.
Michael: The second straight quarter, we've seen a pretty good consistent top line upside.
Michael: I wanted to spend some time just on the commentary you're making around incremental conservativism in the rest of your forecast is there any.
Michael: Any more color you can add on.
Michael: Inputs are changing relative to what you were assuming at the start of the year and maybe any added commentary you have just around the visibility into rest of your targets at least on the upmarket side. It's just helpful context, as we roll it altogether. Thank you.
Michael: Yes.
Michael: I think that the methodology, how we develop the guidance hasn't really changed we basically went through the same process for revenue profitability cash flow adjusted earnings per share.
Michael: And then considering kind of a unique environment that we're in right now we just essentially the last that was layer on and incremental.
Michael: Amount of caution around the guidance so.
Michael: I don't I don't think there is one or two things I would point to I think you should still expect in the guide mid single digit.
Michael: Up market growth.
Michael: A decline in the down market growth trajectory.
Michael: And consistent margins.
Michael: Thank you.
Speaker Change: Thank you. Our next question will be coming from the line of Brian Peterson of Raymond James Your line is open.
Speaker Change: Thanks, gentlemen, and congrats on the quarter Henry you've mentioned a few times that you're expanding the roles that youre addressing I'm curious if there is one hole in particular, where you're most excited about in terms of incremental adoption in 2025, and maybe just remind us any sense of what your seat penetration is with your enterprise customers. Thanks, guys.
Speaker Change: Sure she penetration in enterprise customers is very low I would tell you like maybe high single digits low double digits.
Speaker Change: And then on roles that we're most excited about I think I don't think Theres. One let me give you a couple I think first.
Speaker Change: Expanding into the account executive and account manager workforce. We think is a huge opportunity. It represents three times the seat opportunity ads SDR and top of the funnel sellers represent and we have a great solution for them that they are leveraging and using.
Speaker Change: With co pilots. So we're excited about continuing our journey to expand into that area that I would tell you.
Speaker Change: That Rev Ops sales ops, and then by extension sales leadership with GTS studio will be a target audience of ours. These are people in the company you have the most creative ideas about how to go to market, but they get stuck in a long line with IP and data science and engineering.
Speaker Change: Just to see those ideas come to life and that's a pretty painful experience that we've been really focused on.
Speaker Change: Building around and giving them a solution to <unk>.
Speaker Change: To be able to get those creative ideas in the market and executed on.
Speaker Change: As fast as possible and when were showing GTS studio to those leaders. They are incredibly excited about getting their hands on the on the platform and we think we're going to continue to have moments, where we get to delight our customers like that.
Speaker Change: And are excited to be a non op to have that opportunity.
Carter: Thanks Carter.
Speaker Change: Thank you and the next question will be coming from the line of Patrick Walraven of citizens. Your line is open.
Great. This is Austin coal on for Pat Walraven Henry.
Speaker Change: Henry I'm wondering about the Genesis for this new chapter of the Zoom Info story. If you will when did you start coming up with this larger go to market vision. It seems in some sense like a kind of natural evolution of the platform, but wondering if there were some maybe potential buyers out there that we're in.
Speaker Change: Acquiring about these kind of capabilities that go to market studio cannot provide.
Speaker Change: I think probably the big thing that we realized was.
Speaker Change: No matter, how great of an E mail you put together no matter how personalized it is no matter if it brings in insights from the most <unk>.
Speaker Change: Rare bespoke sources and is perfectly crafted that unless a frontline seller or a marketer takes action against that perfect audience no revenue is generated.
Speaker Change: And so we were hearing from our customers, Hey, I'm pulling an intent and website visitors and all the different unique data points, but.
Speaker Change: But I'm not seeing it turn into revenue the way that I anticipated. It would yes. It performs better than our last campaigns that were less personalized, but we want to see this move.
Speaker Change: Move exponentially.
Speaker Change: And so when we were able to bring go to market studio together and marry that to co pilot in a way that Gibbs co pilot the ability.
Speaker Change: To be in front of our frontline sellers connected to their slack connected to their teams connected to their email connected to their text messages.
Speaker Change: Design, so that they can take action quickly with those audiences that their sales leaders and their Rev. Ops and sales ops professionals are putting together for them. We recognize that once that you. Once you marry frontline execution, what that perfect personalized insight created.
Speaker Change: E Mail.
Speaker Change: And inside created talk track, that's where you can really move the needle and go to market and so that was sort of the learning that we had.
Speaker Change: That drove us down this road to put those together.
Speaker Change: Super interesting. Thank you.
Speaker Change: Thank you and our next question will come from the line of surrender thin of Jefferies. Your line is open.
Speaker Change: Thank you.
Speaker Change: When you guys are thinking about kind of the pipeline and the idea of it.
Speaker Change: Youre excited about where you see the up market can you maybe talk about the mix itself copilot adoption early on was primarily newer customers, but it sounds like the increase in <unk>.
Speaker Change: <unk> existing clients has been a more recent driver just how are you thinking about the different.
Speaker Change: Those two cohorts and kind of what's ahead.
Speaker Change: Yes, I think we view the <unk>.
Speaker Change: Net net net revenue retention is the primary driver of.
Stabilization and a return to reacceleration of revenue.
Speaker Change: Our new business pipeline is more segmented than it's ever been we introduced in 2024, but for the Downmarket customers, we're able to score them qualify them figure out whether it should we go into a <unk> digital motion or if it's more of the higher end of down market, whether we <unk>.
Speaker Change: Keep a sales rep in that sales cycle, and then up market we've really.
Specialized and segmented our account executive base, so that we are.
Speaker Change: Investing behind some of these longer sales cycles for these larger customers. So we're much more prescriptive and scientists scientific with our customer acquisition engine and that will eventually that's starting to show up and improving retention outcomes, but improvement in retention is the key driver in <unk>.
Speaker Change: Getting back to our growth goals.
Speaker Change: Thank you.
Speaker Change: Thank you and our next question will come from the line of.
Speaker Change: Rishi.
Speaker Change: <unk> of RBC Your line is open.
Wonderful Hey, Andrew Graham. Thanks, So much for taking my question just one from me I wanted to go back to the Q2 revenue guidance and maybe under unpack some of the set of assumptions behind it you saw in this quarter above 1% days adjusted sequential growth Youre guide calls for negative 4% data suggest that sequential growth.
Speaker Change: My math.
Speaker Change: At the same time, you are seeing improving momentum upmarket your comps don't get arent Super difficult and you are seeing success with co pilot.
Speaker Change: Well, maybe just walk us through kind of a set of assumptions you have behind it how much of it is conservatism.
Speaker Change: The guidance philosophy is pretty similar as before thank you so much.
Speaker Change: Sure.
Speaker Change: The incremental caution I've talked about was baked into both the full year and quarterly guidance and of course, the magnitude is bigger by nature with the full year in the quarter.
Speaker Change: But yes Q1 was another great revenue quarter that was driven by great Q4 sales performance and continuing better cash collection and write off outcomes. So there is a little bit of seasonality in there relative to our up market opportunity.
Speaker Change: Starting to see more and more of the end of Q2 and Q4, but you could think about this incremental caution that we've layered in as applicable to the full year as well as the Q2.
Got it thank you.
Speaker Change: Thank you and our next question will be coming from the line of Alan versus Husky.
Speaker Change: Of Scotiabank your line is open.
Speaker Change: Hey, guys. Thanks for taking my question, great to hear retention and the software vertical improved sequentially for the fourth quarter in a row can you just go a layer deeper on what trends you saw in this segment. The past few months and can you update us on how this vertical.
Speaker Change: Impacting zoom into those total revenue growth. Thanks.
Speaker Change: Yes, so we saw retention in the software vertical improve sequentially for the fourth quarter in a row software vertical was one of the largest contributors to the deceleration in decline in growth that we saw starting in 2022, we experienced a lot of downside pressure there. So in general we were able to.
Speaker Change: Keep most of those logos, but at lower annual spend as we got into the middle of 2024 and more so now we're not we don't have that level of downhole pressure and in fact, we're starting to get more of an upsell.
Speaker Change: <unk> place again with.
Speaker Change: With the software vertical so.
Speaker Change: A.
Speaker Change: The retention improvement is really positive for four quarters in a row.
Speaker Change: We think we're almost at that place now where software is actually contributing back our back contributing to our aggregate growth.
Speaker Change: As opposed to.
Speaker Change: Yes.
Speaker Change: Impairing it.
Speaker Change: Great. Thank you everybody for joining us Tonight, we appreciate it.
Speaker Change: Thank you for participating in today's conference call you May all now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].