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

Good morning, everybody. Welcome back. I am still Brad Zelnick, software analyst with Deutsche Bank. And for this session, we are really delighted to be joined by none other than the CFO of ZoomInfo, Mr. Cameron Hyzer, Cameron, thank you so much for joining us.

Yes. Thanks for having me Brad.

For certain. The format of this session will be a fireside chat. I've got a number of topics I'd like to speak to Cameron about, and we're going to learn through his insights, all the goodness and exciting things happening at ZoomInfo. In terms of interaction from the audience, I believe there is a feature in the web browser, a chat function. If you would like to ask a question, go ahead and if time permits, we'll try to weave it into conversation. But with that, maybe, Cameron, just open up, you come off of a great Q2, how much of your recent growth is coming from onetime events, perhaps influenced by COVID versus being driven by a more secular shift as companies work to digitize sales promotions like should investors be concerned that there's a tailwind that might abate at some point? And are you seeing incremental investment dollars going towards other catch-up areas that might have been deprioritized during the peak of pandemic.

Yes. So I think we see really almost all of our growth coming from the secular shift as more and more companies are looking to use data and high-quality insights to help drive their go-to-market motions. If you look back historically, we saw a -- we saw momentum around that prior to the pandemic, and we saw acceleration kind of going into to Q1 of 2020. And then the pandemic actually slowed that down. So it kind of step backwards a little. And then now that I think people are getting more comfortable with the macroeconomic environment that they're in, and particularly businesses that are selling to other businesses continue to see opportunities for growth. We see them continuing to invest in digitizing their go-to-market motions. And realistically, our view is you go to the dictionary or whatever, there's no word for undigitized People don't go backwards once they kind of develop a better and more efficient way to do things using data and insights. And so we view this as a real trend that we're going to continue to see for a long time and something that we're relatively underpenetrated against.

I like that that there is no word for undigitized. Maybe just related to what you said, Cameron, what trends can you extrapolate in terms of looking at the business by new logos versus seat or module growth for that matter?

Yes. So historically, all of our growth has been largely driven by either new logos coming on or expanding within those logos in terms of seats and the amount of data that we're helping our customers manage. And I think that -- for us, we look at the market within our platform, we've identified 700,000 businesses that sell to other businesses. And at this point, we have over 20,000, but there's still a long way to continue to add logos and to continue to bring people along that journey to help sophisticate and modernize their go-to-market motions. We also continue to have strong net retention that historically has been driven by adding seats and users as well as that data. But we are seeing -- and that's still the majority of our expansion within customers, but we are seeing more and more momentum around adding functionality. And whether that's moving people from our advanced version up to the elite version that includes Intent and workflows or its add-on capabilities like our engaged functionality that we rolled out last year or some of the new things like Chorus that we recently purchased. There's more and more momentum around that helping to supplement the growth that we have been driving through adding new customers and expanding within those customers.

Makes sense. And Cameron, if we look at -- if we think about those factors of growth and we think about seat growth, you're in an interesting position to take -- have a view on hiring trends for B2B sellers. I'd be curious if there's any observations that you can share with us as well as the appetite for your customers to take on new projects?

Yes. I mean -- yes, I'd say that more of our growth is about people that didn't know about the solution before and are now implementing it for existing sellers more so than driven by just how many new sellers or marketing people or people hiring. But I do see that within the B2B economy specifically, because that's where we operate, that people I think have gotten comfortable with the macroeconomic environment. They see real growth for their solutions. I do think there's a kind of larger trend for people looking for ways to do things more efficiently. And obviously, for a B2B seller, if you have solutions to help people whether it's on the technology side or services or whatever else, doing things more efficiently and leveraging their investments. I do think that that's a place where there is growth right now and will probably continue to be for place sometime.

Cool. Well, I'm not a B2B seller, but I can tell you even just as a research analyst, I have a ZoomInfo seat myself. Sometimes it's easier rather than digging for contact information for somebody to find that old business card or the e-mail that you had from 6 months ago. And I actually have my Chrome browser when I started up, I have a few pages. ZoomInfo is one of them that starts up for me. So I use the product all the time. But if we think about your primary audience, we think about B2B sellers and we think about sort of the hierarchy of their needs, where does ZoomInfo sit in the order of priorities for B2B sellers?

I think if you ask -- if you ask Gartner or someone else, they'll say that in the modern B2B stack after people implement a CRM system, the first thing that they need is high-quality data and insights to help them: a, reduce that research time that they need to operate with. If you're reaching out to a prospect or trying to close a deal, you need to know all sorts of things. Who's the buying committee in a particular prospect? Is it a high priority prospect? What sort of signals indicate that it's good or bad, even basic things like is this in my territory. So that sort of information takes B2B sellers a long time. And historically, they spent more than half of their time, just curating that information and trying to kind of get to the point where they can reach out to the right person with the right message at the right time. We significantly accelerate that. And I think as you noticed, even in your personal use, there's a lot of value to that data. The value proposition is very obvious, and it's custom built much more for sellers to be able to find all that information and what they need to do. And then, on top of that, we're wrapping applications and workflows so that not only can you find information easily and it be accurate and high quality, but then you can automate your motions around that. You can use signals to automatically kick off e-mail campaigns or ad campaigns or an SCR campaign and then move within those. So that you have really the best campaign that you can standardize across the company. You can tweak based on different roles that you're reaching out to or whatever else that makes it really powerful for our customers.

So Cameron, if we think about all that you do to make the salesperson successful or to your -- I think your tag line is still hit your number. If I reflect back on CRM tools of the past, they've historically really catered to sales management and tracking activity and being able to forecast the business and manage a pipeline versus truly helping the sales reps sell. And we've heard from any sales pros that ZoomInfo clearly addresses the latter. I remember in one call in particular, with a sales manager, an old school guy said, "Hey, I always tell my teams, there's no shortcuts in selling. You got to make all the dials, you got to send all the e-mails. " And he said, "You know, when I found ZoomInfo, I finally -- I found that shortcut. " So along those lines, what's your vision for what the salesperson ultimately needs? And what ZoomInfo might provide in the future? And I guess maybe you're not going to give us a 10-year road map of product and M&A that you might do. But maybe as importantly, what are the boundaries of functionality where that might be off limits for you?

Sure. So I think you hit it spot on that there's been this void in other sales technologies over time, that really haven't focused on making that individual salesperson more effective and more efficient. And that's really where we see an opportunity for us to continue to add capabilities where you as a salesperson can come in and really be the best salesperson that you can be. I think we're focused on making that person successful and helping them hit their number. And that starts with high-quality data and insights, but then the automation and workflows around that are super helpful. If we're taking triggers that -- historically, you may have been running a motion around a new VP of some area, whether it's facilities or transportation and logistics coming in, that may trigger a workflow for you to reach out to that person and do whatever. Or if it's -- you're a security software company, a new director of security coming in and you want to filter that down to companies that have received funding within the last 12 months or in a particular area. We're able to not only give you that signal but then also kick off those workflows. And that's where having the Engage product is super helpful and integrate in other information that you have. So if you're using our Chorus product, you can see other phone calls or meetings or e-mails that you've sent out to those people in the past or to that company in the past. And I think that really, from our perspective, there is no boundary in terms of helping that salesperson become more efficient, and there's going to be more and more application functionality that we're able to wrap around the platform that we have today and really make all of these sets of functionality better with high-quality data. Because, at the end of the day, it's all about knowing who you're reaching out to, knowing the specifics about that company and being able to use triggers to figure out when is the right time to do that.

That makes sense. And as part of your strategy, you've made a number of high-quality acquisitions along the way. Just yesterday, you guys announced RingLead. So I've got a few M&A-related questions. First, maybe starting with RingLead, can you update us just why it's so exciting and what we should expect. If I'm not mistaken, I think they had something like at least if I looked at like LinkedIn or so, around 100 employees or a little less. Like any sense of the scale that would be helpful as well.

Yes. So we are really excited about RingLead. Largely because it helps us to help our customers manage the real volumes of data that they may be using. And particularly if you're a midsized or a larger company, you're probably not just taking ZoomInfo data in order to run your go-to-market motions. But you probably have a plethora of first-party information, whether that's coming from your website or information that your salespeople have entered in. And we help from the -- RingLead helps from the most basic things like de-duplication. So if you have a salesperson that comes in and enters Oracle Inc. into your CRM system, you want to know if that's the same Oracle that you're getting from other places, the same Oracle that you have already in there. So automating all of those processes of deduplicating data all the way up to how you route data? How are you kind of bringing in leads? Where is that going to making sure that it's all kind of high quality when it's coming from other sources is of real importance to folks in order to take the friction out of those go-to-market motions. So you're not having to run manual processes in the background to figure out that something is going off the rails. So I think that historically, it has been a smaller business, fewer than 100 employees, but growing very nicely. And I think a great addition. We've been partnering with RingLead for some time now. And we've seen a real uptick in our ability when we work together to help drive more growth, which also creates more excitement about the acquisition.

Well, congrats. It sounds like an exciting opportunity for customers and obviously for RingLead and you guys combined now together. But if we think about that in context of, of Chorus, Incent, Clickagy, how should we just more generally think about your appetite for M&A in terms of rate and pace as well as deal size?

Yes. So I think that we've done acquisitions in a bunch of different kind of ways. We've acquired companies that are similar to us, we've acquired companies that are really just tuck-ins and additional. I think that one of the unique things about ZoomInfo that is exciting is that we have a real muscle memory around doing M&A and doing it well, really driving new capabilities and functionality, integrating things quickly. So that they're part of the platform and not just hanging off the edges and really driving value out of those. I think particularly compared to most growth software companies kind of in our -- of our size. And we've been able to do that while still driving 50% plus organic growth, which -- yes. I think that, that's an important factor that by leveraging M&A as a supplemental area where we can continue to drive value for our customer and continue to grow, but still get that organic growth out of the system and take advantage of the huge opportunity in front of us, makes it really exciting. So I think we'll continue to do M&A. I think we're -- we continue to be excited about some of the things that are out there. And I'd say that the pace that we've done, probably 2 or 3 a year over the last few years is a good pace. We could stretch a little above that. But -- it's not like we're going to go out and acquire 20 companies anytime soon.

That makes sense. And I totally appreciate that with M&A. It's not as if you can completely dictate the exact timing of when something is available in actionable and all makes sense to me. But very much appreciate a lot of these capabilities that you've brought on board, which maybe takes me to the next question. Now you've got things like text parsing chatbots with Incent, purchase intent data with Clickagy, do you still sell them as stand-alone products? And how do you merge their go-to-market with core ZoomInfo, which is pretty unique. And does that then change the different possible customer journeys in terms of what you might land with and how you then expand from there? I'm sorry, I'm going to ask you like this 90-part question, that's not my intent. But I think you see where I'm going with this, like does your own sales motion adapt with so much more to sell? And are your reps incentivized and even enabled and understand how to land quickly versus maybe taking more time to sell the mega deal? Like how does your go-to-market evolve with all these acquisitions?

Yes. That's a great question. We've always been super focused on ensuring that our go-to-market motion is effective and very efficient. And I think you see that in the metrics and the profitability that we're able to kind of put up even at high growth. And that is very true with new products that we develop as much as it is for M&A. So it's certainly a filter that we use that when we think about M&A, we want to make sure that it's being sold to a similar buyer that it's something that the value proposition resonates very quickly. And that's part of the secret of our intelligence layers that the value proposition is obvious. I think as you mentioned before, you started using it, and it's just easy to see how that helps you be better as a salesperson, how it's going to help you be more successful. And I think with many of the other acquisitions that we've made, whether it's Chorus or Incent or Intent, those are all very obvious value propositions for folks. With Chorus, in particular, it's sold to the same buyer, and all of our salespeople use it today. So it's easy for them to articulate that value. It's -- when you see the demo we've already integrated Chorus in with the ZoomInfo platform for parts of it, and it's very easy to see why that's going to help our customers be more effective and efficient. So -- but it largely depends on the product itself. So for Chorus, it's something that we do plan to enable our entire our entire go-to-market engine to be able to sell. All of our sellers will be out there. They can talk about it, they can land with it. They can add it on to the customers who already have the intelligence layer. For other things, it may be a different motion, and we're constantly looking at what are the right things. So if you think about you think about recruiter, not an acquired product, but a new product that we've rolled out, that was something that was organically a pull from the market or HR teams that their sales teams were using ZoomInfo, and they said, this is a great thing. We'd like to use this too. We kind of reskinned the platform and gave them some different bits of functionality that were helpful. that's a place where we'll employ an overlay team. So our account managers can introduce recruiter specialists into the HR organization and they can take it from there. Because again, we're focused on making sure that our sellers know exactly where they're going and how they're doing it. And on the HR side, it's a little bit of a different value proposition and a different demo that they're going to use. So it does kind of depend on which thing we're talking about is how the go-to-market motion evolves. But the good thing is that is the -- that is one area where we are absolute experts and probably the most efficient go-to-market motion you're going to find. And we work with our customers throughout all sorts of different target areas, so we're able to adapt and really take advantage of the product itself and how that should be driven into the market.

Not only efficient, but I mean, from time of IPO, I remember learning about your process in terms of just optimized and the use of data, unlike anything else, at that point, they've ever seen. And a great job. I want to ask about some of the deals and capabilities, in particular, Cameron. But before I do, maybe if I can just touch on just the different industries. Like I think historically, over half the business was coming from the software industry and business services verticals, what other verticals are most promising or have the most traction? And how does your product or go-to-market itself have to evolve to access additional verticals?

Yes. So I think the verticals are a good way to think about it, but I actually think about it slightly differently. In that -- our oldest customers were really early adopters of digitizing their go-to-market motion and using high-quality data and insights in order to drive their motions. And there's just a strong correlation between companies that originally started with, how do I get new data, I want to try new things. I want to become more efficient with the software industry. That's just kind of how it works. So really, we started with early adopters that was very focused on the software industry. And then business services was a quick follow on after that. But today, we actually still see strong growth in those particular verticals, but we actually see stronger growth in pretty much every other vertical that's selling to other businesses, whether that's financial services and insurance or health care or retail or manufacturers or transportation and logistics. Like if you're selling to another business, the value proposition of the ZoomInfo platform is very obvious. Most of these people, they kind of show up and they say, "I didn't even realize that this existed this is great, let's get it moving within our team. " And I think that, that's just the message that we need to continue to get out to folks. And particularly, as we see a bit of a generational turnover in sales leaders. So Henry always says that most of the sales leaders that we see today are somewhere between his age and my age. And I was -- I kind of came into the workforce in the mid-90s. It was like one of the first kind of cohorts of people that had e-mail from the very beginning at work or in college. So I think it's that generation of folks who are now coming in and saying, look, I've had all these other digital tools and the rest of my life? Why don't I have this for all of my sellers. And that's the secular shift that we continue to see. And honestly, that generational shift probably happened a little earlier in software than it did in -- for manufacturing selling, but we're starting to see more and more of that in -- across all verticals.

That makes sense. And I'm about the same vintage as you are. So I can remember having e-mail in college and -- yes, good times. Maybe just as we think about your go-to-market, I think about vertical industries and we just think about the business scaling to well over $1 billion in revenue and exciting things for years ahead. How should we think about your go-to-market scaling along with that as you've got customers for which you're a larger and larger line item. Perhaps need more handholding or as we've seen other companies where they go to more verticalized sales motions and sales organizations, do you think that you can scale it as it is today?

Yes. I think that that's something that we are very focused on and have been successful with to date. One of the key initiatives that's been helping to drive the acceleration of growth has been our enterprise motion. And we think very crisply about not everything is the same even within our kind of historical go-to-market motion, things change. The classic example is, last March, the entire world went into lockdown, everyone had macroeconomic concerns about what were going on. We're able to watch the data that's kind of coming through our system. We're very much on top of that. and we react quickly in order to adjust our motions and make sure that we're kind of focused on the right things and getting the right messages out to folks. And that's equally true for the enterprise motion where we're constantly bringing in new people, thinking about different ways to attack those larger opportunities and move those through. And I think we've been really successful in adjusting how we deal with the largest customers, those that are multi 6-figure deals or even 7-figure deals and continue to drive growth in those. If you look at one of the things that we focus on a lot is our customers that generate more than $100,000 in revenue per year, and we've seen that continue to accelerate. And at this point, over 1,100 customers generate that level, and that's up significantly from where we were just a year ago when we went public and even before that.

Totally makes sense. With respect of time, I want to stay focused on important and exciting topics. Maybe on partnerships. I mean, you mentioned earlier RingLead was originally a partner. So I guess part -- partnerships can be a feeder for M&A even at some point, they can create off-balance sheet leverage for the overall business product complementarity. There's a lot that you can get out of partnerships. I'd love to hear, in the general, your view on the types of partners that make the most sense and where you're investing? And then maybe in specific, we'd love to hear a little bit about the Snowflake partnership that you have and how that's been received so far and any changes in customer behavior when consuming through Snowflake, et cetera?

Sure. And I guess just as a public service announcement, I'm not sure that the Snowflake partnership is really a pipeline for acquisition just yet. We're going to have to grow a little bit more to make that possible. But I think partnerships historically have not necessarily been our strong point. We've always been a very kind of focused direct sales company, and part of that has been just been so efficient. But we haven't wanted to focus on other things. But I think we have realized that there is real leverage that we can get from partnerships and the Snowflake example is a great one. They've been a customer of ours for a long time. They're very focused on also running an efficient go-to-market motion. And I think that we both realized that with the high-quality data and data that people couldn't get elsewhere. Having that be part of the Snowflake data marketplace is of real value to them and real value to us. In a place where we've seen a number of customers really lean into using that data to help drive effectively alternative use cases versus just the standard salesperson trying to do their job better. But things like an FP&A team that's looking to do territory planning. They're bringing in a lot of data from other places and having that high-quality kind of full view of your TAM, within Snowflake in order to run that data science in order to figure out really who should be where and what's the best kind of allocation of resources, is places where it's still early, but we've seen a lot of really strong interest in that. Other places where we're still working on cultivating partnerships are around SIs as an example, places where we can really help a project get off the ground if you're implementing or upgrading a CRM system. One of the big problems that people have with their old CRM systems is the data was out of date or not terribly accurate. So no one wants to put in a new system that just inherits bad data from before. That's a place where we can help enrich and cleanse a lot of that data. So not only do you get better functionality coming out where you also have better underlying data when you implement a new system. And so those are also conversations where we're continuing to get more traction as we talk to folks.

Got you. Again, with respect to time, I think we've got 5 minutes or so. I want to make sure I hit some important topics. International growth, just as we talk about partnerships that makes me think, in some cases, it might not be for additional salespeople out there driving demand in a region you're already, where you already have a presence and you're established, but there might be areas around the globe for which it helps to have a local partner. So I guess maybe from both a product perspective, data perspective and then from a distribution perspective, to what extent do partners help you to better penetrate internationally? And also, can you maybe talk about the data layer, how extensible is it into new geographies? How hard is it to get a critical mass or base level of data to be relevant in a given region?

Yes. So I think that -- I'll start with the data. The data is actually really good internationally. We've spent a lot of time over the past 18 to 24 months, really focusing on bringing the international quality of data up to the standards that we have in the U.S. I think there's still some work to be done in terms of coverage. So it's kind of getting down to the smaller and smaller companies within particular areas. And I think that we're -- we've added 60% more kind of records, whether that's companies or people at those companies are whatever else in the past year. So I think we continue to see that grow significantly. And even before that, it was still the best source of data internationally. So yes, I think we want to get to a very high standard. But from what else you can find out there perspective, there really was nothing else historically, and now we're just putting more and more distance between what you could otherwise find with respect to international folks. I'd say that one of the other things that we've really focused on and something that's helping us is that we actually have a lot of the information. It comes into our AI engine, but we hadn't always translated it as well from different languages. So if you think about the Director of IT title in France or Germany, it didn't translate immediately for a lot of folks without kind of a lexicon that we've built. So we've built out that Lexicon and that's helped us to significantly improve the normalization of data across different companies in different regions. So I think that -- all of that is what's really helping to drive the 75% growth that we're seeing internationally. It's now over 11% of our revenue overall. And that's a place where -- we're also focusing our M&A motion now on international opportunities, and that's so that we'll be able to continue to drive more and more growth and bring that revenue contribution up to what you might see from other more mature software companies that focus on sales teams and marketing teams.

Cool. I think I've got time for one more. And I'll ask you one that I know you get asked, maybe I'll ask you a little bit differently. As you continue to expand the product offering, there seems to be increasing overlap with what core CRM offerings, Salesforce and other CRM solutions do. And I mean, you're moving from data to being much more in the process, if you will. Do you foresee this being a coopetition dynamic into the future? And at what point might it become more competitive?

I think our view is that CRM has and continues to focus on the higher level folks within an organization. And I think you see that through their acquisitions you see that through just the functionality that they really focus on. So yes, I don't know that we see it as being terribly competitive, and we don't see that our focus on the salesperson themselves and helping them hit their number is something that we're planning to displace like Salesforce or Microsoft dynamics. I think that we'll see those work together. And honestly, our historical view, and I think this holds is that we really do make all of those systems better. We help them stay, we put information and we help cleanse that. We help enrich that. And now we're helping with more and more application functionality. We're hoping to automate and put information into CRM. So for instance, with our Chorus product, it's fully integrated into CRM and it allows you to really have the voice of the customer in your CRM system as opposed to just type written notes that your salespeople might or might not have put into the system and it might be fully accurate or complete or whatever. Now we can put the entire customer conversation in there. It's fully searchable based on key topics, whether that's pricing or your customers, your founding story or certain objections that you might hear, who are the competitors. All of that information is fully in the CRM now, and it makes it just much more useful. So I think at the end of the day, we're really enhancing the value proposition of those systems. And yes, I do think that we'll continue to coexist and ideally create more value for our customers over time.

Makes sense. With that, Cameron, as always, thank you so much. Great to see you. and thanks for participating at this year's conference.

Absolutely. Thanks for having us.