ZoomInfo Technologies Inc. (GTM) Earnings Call Transcript & Summary

Hi, everyone. This is Jen Lowe from UBS' software team. Thanks for joining us today. I'm very pleased to have with me the team from ZoomInfo, Henry Schuck, who is the Founder and Chief Executive Officer; Cameron Hyzer, who's the CFO; and also Jerry Sisitsky, who runs the IR there. So very pleased to have them here.

Just to start, I know ZoomInfo, a lot of people have had an opportunity to learn about the story, but it is still pretty recently public company. So some others may be less familiar. So I thought maybe, Henry, if you could start it off. Could you just give us the quick elevator pitch on the business, what you do, and then we'll go from there?

Great. Yes, absolutely. Thanks, Jen. Thanks for having us. Thanks everybody who's on. Yes. So essentially, what ZoomInfo does is it helps B2B sellers and B2B marketers find their next best customer. And we do that by combining technology, data and insights on the professionals and companies across the globe. We deliver that through our platform that allows sellers and marketers to come in, identify the companies they're looking for, identify the professionals that those companies are looking for, look for signals and events that would drive a go-to-market motion, integrate that data and insights into their go-to-market systems and then automate workflow to engage with potential buyers at their ideal customers. We do that for over 17,000 customers worldwide. And then we do it in a way that allows them to take advantage of that data, take advantage of those insights and take advantage of that technology in the go-to-market system where they are familiar with executing across.

Great. And maybe just to follow that thought out, obviously, as we're all on the phone and on the webcast and not face-to-face, it's very apparent that the world is operating differently. Within your customer base, as they have to reinvent, in some cases, how they go to market, what does that mean for ZoomInfo's business? What are sort of the opportunities and the challenges that have cropped up in the current pandemic for you?

Yes, super interesting because as we were going into this year, I think one of the things that we've been seeing across the market is this strong secular tailwind of digital transformation across this sales department. And I think that what you -- what we've noticed is the sales department is kind of the last place within a company to truly digitally transform. So as companies sort of hit the pandemic, I think one of the things that they accelerated was digital transformation across their business, but especially in the sales org, where they couldn't afford to be inefficient in the way that they were historically. And I think that what you -- what we've seen in sales is that it's largely, especially in the enterprise, kind of relationship-driven, it's -- you go to market by flying across the country, meeting with your potential prospects in person, taking them out to dinner and golf outings and sporting events. And that was the way with which you identified new opportunities or gained insights into what was going on at the company and try to understand where your next best opportunity was within a company. And as the pandemic hit, companies started realizing, number one, that was an incredibly inefficient way to go-to-market pre-pandemic. But number two, a lot of those channels were just largely unavailable to them anymore. And so we've seen customers sort of pull their head up and say, look, we can go to market in a digital way. We can leverage insights and data and technology to arm our sellers in a more efficient way than we have historically. We should be leveraging data and insights and technology to optimize the way we go to market and how do we accomplish that. And one of the first things you see them doing when they do that is they go to their sales team and they say, "Okay, let's all really start using CRM now. We need all the sellers in CRM. We need you using CRM. This was our vessel to digital transformation. You guys need to start using it more." And I think what they found was the frontline seller looked at CRM as a task management tool for management. They view it as a place that they have to go, not a place that they want to go. And they don't particularly want to go, those frontline sellers, because CRM wasn't designed to provide them with the next best insight that they need on their potential customers and their potential prospects. And so what we're hearing from customers of all sizes, and especially in the enterprises, that they do want to be best-in-class with their use of CRM, but they need to transform it from a system of record to a system of insights. And the way you transform it from a system of record to a system of insight is you insert a foundational layer of data and insights at the core of CRM, so that every time a seller opens up the CRM platform, goes and looks up a customer, that they not only see the data that the company has about them, sort of what they ever had an opportunity, how much they're spending with the company, but they also see that universe of insights that are happening outside of the 4 corners of the website outside of the CRM. Is the company growing? Is it shrinking? Who are our ideal buying profiles of the company? How long have they been there? What does the organizational chart look like? Do they use a competitive technology? What sort of technologies are in their stack? How many locations do they have? Do they roll up to a parent? Are they a subsidiary? Do they do M&A? Is there a new CEO at the company? Have they launched new products in the last year? Are they growing? Are they shrinking? How much funding have they received? All of those key insights that a seller needs to be able to properly engage with their next customer buyer, we were able to embed inside of CRM to really make that transformation a reality.

That's great. And maybe following up on that because I think that's one of the questions I get the most often from investors is trying to understand this vast amount of data that ZoomInfo has collected, and why can't someone else go and do the same thing. Can you just spend a little time talking about the competitive moats there? And what you've done that would be difficult for someone else to replicate?

Sure. A couple of different things. I think the first one is we've built, at the center of all of the data that we collect, is this algorithm that's collecting data from millions of different sources and then making decisions in real time on what to publish or not publish based on all of those different sources; the accuracy of those sources; the recency of the information; the relative weight of a different source; for example, if we see something in an SEC report today, that's a really valuable source with a really high weight of accuracy. If we see something from a blog post today, that's a less valuable source with a less relative weight of accuracy. So we're bringing all of these key data points into this evidence-based machine learning algorithm to make decisions on what to publish or not publish across our platform. And 2 of the key inputs into that algorithm is data that we receive through our contributory network. And we have 2 key contributory network. One is our premium user base who get limited free access to ZoomInfo in exchange for the contact in their e-mail system. And so that's 200,000-plus users strong who are providing that insight for that limited free access. And on the other side, we have a customer contributory network where customers who integrate with our CRM or marketing automation solution have the option to share data from those systems with us that we collect and make sense of and validate for them and then feed signals into the machine learning engine. Across those 2 contributory network, we're seeing close to 50 million contact events every day that's driving the 95% accuracy that we guarantee in our contract and also the breadth of coverage that we're able to deliver. So today, we cover 15 million companies, 130-plus million business professionals across the globe that essentially is every knowledge worker in the United States, and a large portion of them abroad. And then that data asset is kept up to date and accurate because we're gathering so many signals across all of those different unique sources and the contributory network that drives incredibly high accuracy. Now building a -- you need a contributory network to keep that much data in -- that much data accurate at scale. The contributory network is a must. And then the evidence-based machine learning engine is making sense of all of those different signals, but it's kind of a chicken-or-egg problem. In order for a customer to agree to integrate their systems with you, share that information so that you can validate and cleanse it and send it back to them, you have to want to have an incredibly robust data set. And two, that data set has to be incredibly accurate so that they trust the validation that you're doing across those data points. Because if I decide I'm going to integrate with ZoomInfo, and I'm going to make sure that ZoomInfo owns the executive title, the phone number, the e-mail address, the revenue number, the employee number, the location of the company, I can't have 3 other vendors also owning those fields. It's a zero-sum game in that way. And also, I need a vendor who can manage those data points across the broad spectrum of data that I have in my CRM or marketing automation or sales automation tools, and I need them to be able to do it at incredibly high accuracy. And so you already have to have the data set. You have to have the high accuracy of that data set and the trust that you build up over time in order to build that 1 contributory network. And then on the other side, the freemium contributory network. One of the things that we're able to do is use the data that we've collected to build up millions of professional profile pages and company pagers across the web. ZoomInfo -- those ZoomInfo pages are some of the most visited pages in the world across the web. And those drive convergence into data contributors. Well, you can't really build those pages unless you have a robust and accurate and very large data asset, coupled with expertise in SEO that drives the traffic to those pages. And so you need a really great data asset to build a contributory network, and you need a contributory network to build a really robust data asset, and we think that builds a great moat around our business.

Great. And going on the customer contributory network, another question I frequently get usually right after that one, the first one is what's the incentive of your customers to contribute back to the ZoomInfo community? And are there limits on the types of data they're willing to contribute back? I mean, on one hand, it seems like there's value to them to have a more robust network, but there might be certain information that they prefer to keep proprietary. How do you sort of negotiate that conversation?

Totally. I think what -- first, all of the data that our customers contribute has to be multisource. And so we don't ever just take like some special gem you have inside of your CRM system and publish it inside of ZoomInfo. We have to see that signal, that data point, that contact record from multiple different sources before it gets published. And so I think the first thing is customers get comfortable with the fact that there's nothing really unique or special that's going to get shared in that way. And then the other key thing is these are contact records and accounts from a graphic data point, size of company or revenue and then largely the information that can be found on somebody's business cards. So their name, title, e-mail and phone number are the key data points that we're capturing from the customer contributory network. So we don't look at opportunity record. We don't look at interaction records or activity. It's just those key data points and they have to be multisource. And then I think what we hear most often from our clients is, look, we know that 30% to 50% of the data inside of our CRM or marketing automation systems is inaccurate. And then the other 70% to 50% of the data is accurate. We just don't know which is which. There's no signal in our CRM that says, "Hey, this is one of your bad record, and this is one of your good record." And so our ability to come in, integrate, validate those data points not only tell you which data is bad, but also give you confidence about which data is good and can be actioned against is a big factor in their willingness to participate.

And so you sort of outlined, you've got the freemium customer base, the customer contributory network, but there's a lot of other data that lives within ZoomInfo that is maybe independent of what you're collecting from those sources. Can you talk a bit about some of the other data sources you have and how that makes a richer set of insights for your customers?

Yes, definitely. I think that one of the things that we've realized is that customers want to go to market in an event- and insights-driven way. And historically, how you've seen them do that is they do it out of marketing automation, and they do it based on what people that they know who have visited their websites have done. And so you could segment people who filled out a form on your website, who also visited a price me page, or you could segment people who clicked on a link in your e-mail and then visited the About Us page or a specific solutions page. But all of that has to be -- you're the first-party source of that data, and you only get it on people who've actually like filled out a form or clicked the link so you could identify them as who they are. And they've got audiences around them, and they build marketing campaigns and sales events around sort of that data that they've collected on specific customers or prospects. Now what they've also realized and what we've realized is really the world of insights outside of the 4 corners of your website or e-mail that you spend is that, right? No company looks the same on December 31 as it did on January 1. Companies are growing. They're shrinking. They're adding new technologies. They're removing technologies. They're getting funding. They're doing M&A. They're buying companies or getting acquired by other companies. They're bringing in new executives. They're growing. They're shrinking. They're launching new products. Opening new locations. Every single one of these events can drive a go-to-market motion for a company. And so what we've done is collected a long tail of these different events and attributes, everything from who their benefit broker is to whether they do 401(k) matching or have unlimited PTO, to what technologies exist on their website or what technologies they use for a variety of different use cases, to funding alerts and growth rates. And so what our customers want to be able to do is leverage those key data points to run a go-to-market motion. Hey, a company adds a technology that's a partner or remove the technology that's a competitor, we want to run a go-to-market motion around that. Hey, somebody who's in our key target account list for this year just hired a new Chief Information Officer, we want to run a motion around that. And you just don't have that visibility inside of your first-party system. And so we're able to give you that visibility into the broader world so that you can start executing campaigns against all of those key events and insights. And so if you focus on -- if we think about techno graphic as one of -- which is technology information about what a company uses from a technology perspective, how do we gather that information? Well, we've built a large catalog of unique code snippets or cookie that render on a company's website. We've mapped those back to the technologies and the vendors who make those technologies and the versions of those technologies and then we've built an indexing engine that goes out to millions of websites every night and then look for those technologies on those websites. And it makes -- it takes an image of the technologies that exist on those websites today, then it goes back tomorrow to see if those technologies still exist there or if there are new technologies that we didn't see before that have been added there. And then we deliver those insights into our platform. So you can imagine, if I'm a marketing automation vendor, every time a new -- every time a company uses a marketing automation vendor, they have to insert special marketing automation code on their website. We can see that, and then competitors can see when those technologies are being added to a website. Or I'm an account manager and I work for a marketing automation company A, and all of the sudden, marketing -- and a customer of mine adds marketing automation system B's code snippets to a website, that's a key triggering event for me to reach out to try to understand why and what the use case is there. Or they add a partner technology to their technology stack, I want to be in there talking about how we integrate with that partner, how they can take advantage of our technology with that partner. And so that's one way. We gather benefits information from a special government form that companies have to publish. And so some of this is publicly available where we're gathering it, synthesizing it, normalizing it and matching it back to the proper entities. We run literally millions of surveys every year to individual companies, and then we ask them about projects and initiatives that are upcoming. And then we publish those in our platform. And so there are a variety of sort of unique key company attributes and data points that we're gathering and publishing in the platform, and they come from a variety of different places.

And maybe just touching on that and going back sort of the history of the company a little bit. There are certain vertical markets where maybe you have a bit more penetration, things like technology. First, can you just touch on sort of what the base looks like currently from an industry concentration perspective? And then secondly, as you work to get more traction in some newer verticals, is there data that you need to add in to effectively add value to those verticals that might look a little different? Or I'm just curious how you -- like the example of the technology information would seem highly relevant to the technology sector, but maybe less so to others. So is that sort of an ongoing process? And is that key to your vertical market diversification?

Yes. So let me have Cameron take the current makeup of the customer base and the industry focus, and then I'll take the sort of what other data you need to go into a vertical market. One thing I do want to touch on is it's easy to look at techno graphic information and go, "Oh, the techno graphic information is really important to technology companies." So I think one of the things that we've realized is the technology information is actually a really great proxy for a number of different things that any industry can use. So for example, we have private equity and VC companies who use our platform. They want to know when companies migrate from QuickBooks to NetSuite. Because that motion, they're not a technology company, but that motion indicates sophistication of a financial process. And that means the company is growing and it's investing in its financial infrastructure, and it's a really key proxy for growth and sophistication. And adding the other sort of one of the other key things that they look at is the addition of customer success technology. If a company adds a game site like tool, it means that they're focused on retention, those tend to be the companies that are going to grow the fastest and they're making the right investments. And so a lot of these technologies, when you start thinking out of the box, they become really great proxies for other sort of key information that you're trying to get -- you're trying to trigger off of.

Sure. And so if you look historically at our customer base and where DiscoverOrg and ZoomInfo had focus, the early adopters of digitizing the sales motions were software companies. DiscoverOrg had originally started focusing on companies that we're selling into, the technology organization or marketing organizations. So a little bit less than 70% of our total revenue today comes from technology and specifically software vendors and business services vendors. But as we look at the new customers that are coming on right now, we actually see that over 40% of the new customers coming on are from industries outside of software and business services. And those include transportation and logistics, manufacturing, financial services, even education institutions. So that growth continues. We do still continue to see good solid growth from the kind of core historical industries like software and business services growing in the kind of mid-30s overall. But where we have lower penetration in those other industries is where we're actually seeing elevated growth, sometimes 50%, 60%, 70% year-over-year.

Okay. Great. And then...

And I think, Jen, to your question around data to add in, we're -- an interesting example here would be we're launching a recruiting platform at the end of this month. And we have a couple dozen beta customers who are lined up to take advantage of that platform. One of the things that we realized is we have a great data asset that sales and marketers leverage, but that data asset is equally applicable to recruiters. Now recruiters have unique use cases. They have a unique way they want to use the data. They have unique data points that they'd want to see added to that platform, unique things that they want to search against. And so as we went to -- as we thought through going after that market, one of the things we realized was like, look, number one, you want a reskinned, re-architected platform that's purpose-built for recruiters. And then there are also unique data points that you want to add in to companies and professionals that recruiters can leverage along the way. And so recruiters, for example, we've done an interesting use case where recruiters want to understand benefit packages better than its kind of most sales and marketers, specifically because if they're a company that they're recruiting for offered unlimited PTO or want to pay match really great medical vision and dental, they want to screen companies that have worse benefit packages than they do and target candidates at those companies differently than they'd target candidates at the companies that have equally compelling benefit packages. And so we're going to go out and we're going to sort of surround the core horizontal data asset with some vertical-specific data points that are more use case built. So you could kind of think of that as when we think about a new vertical to go into or a new niche, we're kind of 80% there because of the horizontal nature of the data asset today. And all of the technology that we've built around leveraging that data asset gets to deleverage in any new use case. But we're doing kind of 20% additional work to kind of round out the data asset in a specific vertical and then go to market with that.

Yes. That's great. And it almost got ahead of me on my next question, but maybe just to look at that. So you've got sort of the strong brand and presence within the sales and marketing organization. It will be exciting to see the recruiting products are more formally launched in next month, I think you said. But I'm curious about the go-to-market investment around recruiting. Is it largely going to be kind of an upsell scenario to existing customers or going to be sort of its own thing operating in a separate way and a separate go-to-market? Just how are you thinking about layering recruiting into what's already a very highly efficient sales machine?

Yes. I mean a little bit of both. Number one, I think we have an opportunity with our -- within our enterprise accounts. And last quarter, we announced we now have over 720 companies spending over $100,000 a year with us. That's growing 60% year-over-year. We feel really good about our land-and-expand motion there. But we think we can leverage our relationship within those enterprises to go into the talent acquisition and recruiting departments of those companies, essentially give our sellers another arrow in their quiver to you. Now -- and that's part of it. And we think we have -- we'll get a nice head start because we can leverage those relationships. But also today, 9 out of the 10 largest staffing firms in the United States are ZoomInfo customers. Now there's ZoomInfo customers on their sales and business development side of the house, and so they're using our platform to identify hiring managers and new people to get contracts with that they can recruit for. But on the recruiting side, we're much, much less penetrated across the staffing and recruiting firm, but it's such a natural motion to go to those firms and say, "Look, you trusted us on the sales and business development side, that's going really well for you. Let's have a conversation about getting these licenses, getting licenses to your recruiting team because we've rebuilt this platform specifically for recruiters." And so we think those 2 things give us a head start in the market, but ultimately, we'll have a specific go-to-market design for targeting talent acquisition and recruiting department.

And just looking at sort of going back to some of the earlier discussion around the existing CRM solutions in the sales and marketing organization. I know in some cases, you're working with an existing sales force automation or marketing solution. In other cases, you're engaging a bit more directly with the customer. But maybe to start, I mean, how important is it having relationships or how important are some of the leading CRM players to your go-to-market strategy? Is it if they're there, you make it easy? Or are they actually advocating for you? How do those relationships play into your strategy?

Yes. Look, we've been partnered with just about all of the CRM and marketing automation players in the ecosystem, largely because we believe that our platform brings those platforms to life that they make the investment that you're making in CRM and marketing automation and sales automation more tangible because of the data and the insights that we're able to provide into those platforms. And so I think we appreciate all of the relationships that we have there. We do think they really are true partnerships in the term -- in the way that they're symbiotic in the relationship. And so they're important relationships because our customers all go to market through CRM and marketing automation and sales automation platform. And so our ability to integrate and partner around those solutions is important. Now today, our go-to-market motion is fundamentally direct. We have a direct sales team and we're going to market directly through that sales team. We've built an incredibly efficient go-to-market motion that delivers a 10x LTV-to-CAC, a sub 30-day sales cycle, because the value proposition that we're providing is still obvious and it's quick time to value. And I think one of the things that we've seen in the midst of the pandemic is that leaders want solutions that they can see implemented in a matter of weeks, not a matter of months or years. And so they want to be able to put something in the hands of their sellers and their marketers that gets incredibly fast with time to value. And ZoomInfo on the spectrum of sort of heavy implementation to Microsoft Office is much closer to the Microsoft Office side of the world than it is to sort of a heavy implementation ERP systems.

Maybe just staying on that point you made around the 10x LTV-to-CAC. I think the combination of growth and profitability at ZoomInfo is pretty unique within the broader software coverage universe. And I'm sure you get the question all the time, but when you see a 10x LTV-to-CAC ratio, is that a signal you should be putting a bit more gas into the engine and pushing ahead a bit more on the sales side? Or how do you think about getting that balance right between growth and profitability?

So when we think about growth and profitability, I think the real gem of this business is the fact that we can grow. We've grown recently in the 40-plus percent range and still generate 40-plus percent margins. So our plan and goal is to continue to grow the sales and marketing capacity that we have. I think in our minds, we'll continue to grow it at 30% to 40% a year, obviously, pushing to continue to grow sales as much as we can. I think, realistically, doubling the sales team or more than doubling the sales team would probably lead to inefficiencies, but we don't really want to push. So we think that the current level of continuing to invest in line or slightly faster than revenue growth is the right way to continue to grow the business and continue to really grow for the long term.

Okay. And then maybe just sort of rounding that out and going back to the earlier discussion, too. There's a few different growth initiatives that have come up. You mentioned recruiting as one. I don't think we touched too much on international, but that's another enterprise. Pushing market has been a focus as well. How do you think about the allocation of resources and the timing of resources behind all those things, which seem like they could be pretty exciting expansionary opportunities for you to...

So -- go ahead.

Look, I think -- when we think about the priorities in front of us and the resource, I think Cameron can talk a little bit to the resource allocation. But as we think about the priorities in front of us, number 1, we think there's a huge opportunity in the enterprise that you mentioned. One of the things that we found is just within our existing enterprise client base, we see $1 billion opportunity in just expansion of seats across our current enterprise customers. And so we spent a lot of time in 2020 ensuring that we put the organization in place to help us continue to expand upmarket, continue to sophisticate the land-and-expand motion. And so we've invested resources both from a sales, talent and leadership perspective across that segment, but also from a product and go-to-market perspective across that segment, building things like auto trial provisioning, so that any user at an existing enterprise customer who comes to ZoomInfo can 1 click auto provision into a 60-day trial of ZoomInfo. We collect feedback from those users along the way, and then we're able to take a group of those users and those seats and go up to a Senior VP of Sales or Chief Revenue Officer and say, "Hey, look, we have 100 people on a trial, that here's the feedback that they've seen. Let's talk about a seat expansion contract." And so we've invested in the people side. We've invested in the technology and products in the resources side to make sure that we can go after that market in an effective and an efficient way. I think recruiting is a real one, especially as companies come out of the pandemic next year, and they -- and I think still a lot of them will find themselves behind from a hiring perspective that the world returns to normal. And so having our solution in market and enterprise-ready when that happens, I think we'll see great results there. International has also been a real focus of ours. And last quarter, just by sort of realigning some go-to-market resources and doing some additional data work on our international data set, we saw a 60% year-over-year increase in the international cohort. We think there continues to be a large opportunity there, and we're going to focus on English-speaking Europe and English-speaking rest of the world to start and then expand from there, but I've already seen really positive results through go-to-market focus there. I think those 3 sort of come to mind as really sort of big, obvious priorities for us. And then we'll resource allocating across those 3 functions in a meaningful way.

Yes. And when we think about that resource allocation, it really is continuing to grow in a couple of different functional areas. One is continuing to grow the sales and marketing capacity that we have, whether that's in the current channels continuing to grow our enterprise motion or continuing to grow the international focus. We also think about it in terms of adding to the innovation that we currently generate, and that happens both within our R&D organization as well as in continue to add quality and coverage on the data side that lands within our cost of service world and then continuing to grow our capacity to really delight our customers by adding additional customer support resources as well. And I think across all of those levels, we have the opportunity to grow that capacity and the engine for growth in line if not faster than revenue based on many of the natural operating leverages that we get throughout the company.

Great. Well, I think we're at time. So I enjoyed the conversation. I'm sure everyone else did, too. This was fantastic. It's been exciting to see your first, I guess, 6 months as a public company. And looking forward to see what's next. So thank you, guys, and have a great rest of your day.

Great. Thank you, Jen.

Thanks a lot, Jen. Thank you.

Okay. Bye, everyone.