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

Good afternoon, everybody. My name is Stan Zlotsky from the Morgan Stanley software research team. And we have the pleasure of hosting ZoomInfo, CEO, Henry Schuck with us this afternoon. Henry, how are you doing?

Good. How are you?

Not too bad.

Good to see you in person.

I know it's fantastic to see you.

Your hair is just as fantastic in person as...

Ah, stop it. You say that to all the guys. Well, thank you so much for joining us today. Maybe before we begin, very important disclosures. Please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

With that out of the way. Henry, you guys had a really terrific 2021. What are some of the highlights from the year and what's some of the momentum that you're looking to carry forward into 2022?

Yes. I think the big thing that jumps out at me in 2021 is we embarked on a number of new initiatives, new products, new growth areas, and we saw real momentum behind all of them. Our international business grew 91% year-over-year. Our emerging products, our RecruitingOS, our acquisition of Chorus, our acquisition of RingLead, they all accelerated, gave us more confidence in our M&A motion. We acquired our conversation intelligence platform Chorus in July of 2021. We -- it was growing 100% year-over-year. By the end of the year, it was growing 200% year-over-year. We doubled the number of logos in that acquisition. We made an acquisition of a company called RingLead which is a data orchestration system, integrated it into our platform. Between Q3 and Q4, we more than doubled the ACV that was coming out of that business. And so all of the initiatives that we focused on in 2021, all of the new products, all of the platform story all resonated with the market and all got terrific momentum in the year. And so 2022 is really about extending that momentum and really getting a number of those products to real scale.

Got it. The question that I get from investors quite often was, was there some kind of a pull-forward in 2021 due to COVID? Was there actual real pull-forward of demand? Or was it just more of a pull-forward of awareness?

Yes, it's an interesting question. We spent a bunch of time trying to figure this out internally and looking at internal numbers. And if you think about like how would a pull forward manifest in our numbers, there are kind of 2 really obvious ways. One, you'd have a whole bunch of new demand at the top of the funnel, that would be anomalous. And we didn't see that. And then the second way that you'd see it is you had a bunch of like increased conversion. So conversion rate would have popped at the bottom of the funnel. And we didn't see that either. And so really, what we saw was the continuation of the tailwinds we saw before the pandemic. The companies are rapidly digitizing the way that they go to market, rapidly digitizing their sales motions, their marketing motions. And there's no -- if you go into the dictionary, there's no definition for undigitization. Once you digitize, you keep digitizing and look for the next opportunity to digitize. And that's really what we're seeing. It's just a continuation of the tailwind we saw pre-pandemic.

Got it. So as far as like what is -- what do you think is one of the bigger throttles to your growth potential? Is it market awareness? Is it something that you need to do on the product? Is it simply some kind of constraints on the sales organization?

Yes, I think it's probably 2 things. One, it is market awareness for sure. There are a number of times where I talk to Chief Marketing Officers or Chief Revenue Officers who say, I have a general idea of what ZoomInfo is and what it does. But after the conversation, I didn't know it did all of these different things. And so it's certainly a market awareness piece. And when you get to the -- when we talk about the new revenue OS platform and the different pillars underneath that, that was designed to help us tell the story in a more clear way to our different personas. I think that's the big one in our businesses. We still are relatively new. We IPO-ed less than 2 years ago. We're a combination of 2 businesses that started off as company and contact data and then now have built a set of software applications on top of it. And so we're kind of new in a number of different spaces. And we're getting our story out there now.

Got it. Well, as much as you guys -- your current -- the incarnation of ZoomInfo is a combination of a number of businesses. I mean obviously, the ZoomInfo and DiscoverOrg combination is the biggest one. When you think about your path to $2 billion of revenue by 2025, is there anything meaningfully different that your business would need to look like? Or is it just a continuation of execution along what you have right now?

It really is a continuation of what we have today. And I think what ZoomInfo really is as an operating business is a business that instruments everything that it does. It has metrics on every part of the product, every part of the go-to-market motion, every part of the customer life cycle. And then every day, our team comes in and tries to turn the screw on every single one of those little metrics. And I think when you look forward, it is about just executing better, getting more market awareness across all of those different metrics. But I think from a product set, we have the product set to grow to $2 billion and well beyond $2 billion. And we see a huge opportunity in all of those different product pillars. We're just going to continue to tighten the screw across execution across all of those platforms.

Got it. And maybe just staying with this theme of current products that future product set. How are you thinking about making some of these acquisitions right on Chorus.ai, obviously, very interesting. New functionality that you added that really took you into an adjacent area that where you weren't before. RingLead was a little bit more closer to the core of what you do. But how do you think about these kind of tuck-in acquisitions versus really going down and building this yourself?

Yes. So I'll give the -- let me use Chorus as an example. We could go out and build conversation intelligence. Like we could build the software that listens to a call and transcribes the call and then makes that transcript available. In order for conversation intelligence to be really good, it needs thousands -- tens of thousands of hours of calls to listen to and transcribe and to build a model around. And so even if we came out and built our own conversation intelligence product, it would be years before the transcription would be good enough for commercial use. And so instead of building something that was less than ideal for our customers, we were able to make an acquisition, get years of that sort of the call volume data and transcription data, 14 patents on transcription and AI insights against business-to-business calls, and then go to market immediately. There are often places where you can just build software and you don't need a library of data to actually have the software function well. Where those opportunities exist, we're going to build our own software. But where those opportunities don't exist unless you have volumes and volumes of data that make the product actually work and good enough for commercial use, that's where you'll see us be active from an M&A perspective. And then a number of other things have to line up too. Our M&A philosophy requires that those acquisitions are accretive in the short term. We look at how many of our customers could buy those products, Chorus is a great example because it could sell to the largest of enterprises and the smallest of SMBs. We look at how hard it is to enable our sales team to sell those products, because Chorus is a pretty easy one, but RingLead is much more technical. And so we're thinking about how do we enable our sales team. And then I think maybe the biggest one is how does our data plug into that asset? Because we really believe that once the data is embedded and integrated it creates a meaningful competitive differentiation that it's really hard to catch up to if you don't have the data asset underneath it.

So maybe just sticking with the data asset idea, right? You recently introduced this concept of RevOS, right. Not just a concept, but the actual product, RevOS. Just maybe give us a little overview. What is RevOS? How does it leverage the -- what's truly new in RevOS versus what's being leveraged from the core underlying ZoomInfo platform?

Yes. So RevOS itself is a new way to talk about all of the platforms and functionality that ZoomInfo has. There are 4 platforms that sit under RevOS, our SalesOS platform, is our core sales-driven platform, our MarketingOS platform, which is designed for marketers, our RecruitingOS platform for recruiters and then OperationsOS for operations professionals. Across those platforms, horizontally is the data asset. None of those platforms operate without the data asset, the 150 million business professionals and the 100 million businesses that we publish and continuously cleanse information on. And so that data asset sits at the foundation of all of those, and then they talk to one another. So for example, what's new, MarketingOS is a platform that we launched that's designed specifically for marketers. We launched it in the middle of February. And one of the reasons why we launched it. Well, one of the things is if you followed ZoomInfo for the last 5 years, you're an investor in ZoomInfo, one of the things you would have asked me consistently is when are you going to get more of the marketers share of wallet. When are you going to get more of the marketer share of wallet? The reality of the situation is we actually built a bunch of products for sellers that were historically bought by marketers. Intent data, those were -- that was only bought by marketers. We built it for salespeople. Website visitor identification, that was always a marketing purchased item. We built it for salespeople. Even the core audience building of ZoomInfo, the ability to say, Hey, I want to look at every health care company with over 100 employees in 7 locations that uses Salesforce. That audience identification or total addressable market creation, that was always bought by marketers. We just made it easy to use for salespeople. And so we were able to take all of these assets and then move them over into a platform that was built specifically for marketers, built a UI and UX for marketers and then connected all of those different capabilities to a number of different channels that marketers could execute their campaigns against. The key one being the display ad networks. We made an acquisition of a company called Clickagy, in late 2020 that gave us access to a B2B DSP, which essentially is the ability to put ads out to the display ad network. So today, inside of ZoomInfo and the MarketingOS platform, marketers can come in and designate a specific B2B audience. They can say, "I want to target VPs and directors of IT at health care companies in California, Washington, Nevada. And then I want to go start doing display ads against that unique group of B2B professionals." And it just doesn't exist any other place in the B2B ecosystem outside of LinkedIn where you can build a targeted B2B ad segment. So you can do that now inside of ZoomInfo and start targeting those audiences all across the display ad network.

So maybe sticking with the MarketingOS, right? Obviously, marketing has as an industry, and there's a lot of technology that sits around. I'm sure you've seen those...

Ecosystem charts.

Yes, the ecosystem charts with like 5,000 logos on them -- how deep do you want to go into this marketing piece? Because obviously, you have the B2B DSP with Clickagy, but there's also campaigns. You can do a lot more on the marketing side. And obviously, all of it would be underpinned on the data platform that you have.

Yes. So I think what we want to do is give marketers the ability to leverage our data and then go out to whatever channels they want to run their marketing campaigns on. And so today, we connect to the B2B DSP. We connect to social media networks. We connect to your marketing automation systems, your CRM system. You have the ability to give your sales reps notification when certain things happen that you're marketing against. And I think that's what we want to be focused on. Give you the data asset to build an audience, a workflow engine to automate the creation and execution of that audience against the number of different channels you're already using.

Got it. And just as far as the core ZoomInfo platform, right, obviously, the core platform has a ton of data, and it's really differentiated data. And now you're building out a lot of software that sits on top of that data. How are you thinking about kind of balancing between really continuing to drive the growth of the underlying data platform versus continuing to build out more software that sits on top of that data?

Yes. They're -- we realize that the software asset becomes increasingly valuable, the better the data asset is. And so if the data asset atrophies or doesn't keep up with the quality or doesn't keep up with the quantity, the software assets become less and less valuable. And so we're investing equally behind the data asset and continuing to maintain its quality and continuing to build up the 2 big networks that we have that feed us the data. And then we're building the application set on top of it. It is many of these applications, they're just not functional without our data. Our sales automation functionality, which lets you line up e-mails and do SMS texts and make phone calls. You can't really do any of that without data plugging into those systems, and you're certainly not going to get great insights from that system if you don't have a data back end for it. And so investing and engage without investing in the data asset doesn't make any sense. And so we're equally investing behind both sides of those.

In the world of data, the way you guys look at it, is there a certain concept of like almost diminishing returns where you have -- there's only so much information that you can have on Stan Zlotsky as a business professional, right, outside of my personal information. What -- do you ever think about that kind of concept?

Yes. So I'll just -- yes, the way we think about it is like if we're going to go run a motion to increase data quality or bring in a new data vendor or add some significant data, some data somewhere, we think about how many of the 100 million business professional -- 100 million businesses or 150 million business professionals are we going to touch or affect with that data. For example, a bunch of people when they leave their jobs or start new jobs, they post on Twitter about it. They have got a new job. And so we thought about, hey, why don't we go build some mechanism to capture all of those, link them back to their profiles and then update their data inside of the ZoomInfo platform. We ran a POC. It's like 200 people a week doing something like this, it just doesn't make sense. And so that's like we do think about the impact that a new data asset would have across the universe of a 150 million business professional, and then we make decisions about how we invest behind new data assets that way.

Got it. So one of the questions that I get from investors who are maybe a little newer to the ZoomInfo story is. But isn't ZoomInfo just kind of glorified LinkedIn? So what are the key differentiators between ZoomInfo and LinkedIn? And maybe just a derivative question, what happens if one day Microsoft decides to say, "Hey, we're going to just open up LinkedIn and let you plug in your Marketo and Eloqua directly in?

So let me take the second part of that question first. That will never happen. The whole idea behind LinkedIn is that it's a social -- a professional social network. It's built on trust. It's their core value. The idea that Microsoft would now take all of the data that you put into your LinkedIn profile and then open it up to everybody's marketing automation system, let them suck that data in and start marketing to everybody who put their data inside of LinkedIn. It would cripple the network. By the way, not a single social network has ever done that. Not a single professional social network or a personal social network has made that data accessible. In fact, when you actually see the opposite they're taking APIs away. They're making it more of a walled garden. It would be antithetical to who LinkedIn is to do that. On the second piece, LinkedIn does something similar, but it's not a direct competitor. We're almost never in a situation where somebody says, hey, I'm going to buy ZoomInfo or I'm going to buy LinkedIn. LinkedIn is a great channel. It's an important channel, getting in front of your buyers through advertising on LinkedIn or through InMails on LinkedIn. That's an important channel to touch your potential prospects or customers. But that's just 1 channel. There's a whole world of other channels that sales reps and marketing professionals are using to engage with their prospects. They're doing it on chat. They're doing it on e-mail. They're doing it on calls. They're doing it through display ad. They're doing it with social networking ads. They're doing it through marketing automation. And so the universe outside of LinkedIn as a channel is a much bigger universe and that's where we're focused.

Right. And the LinkedIn Sales Navigator is something that I think a lot of sales professionals have used. And I think when they -- at least from our conversations, right, when they look at it and then compare it versus the kind of data they can get through ZoomInfo and with the kind of capabilities that ZoomInfo brings, that's really where it starts to stand out. But just the concept of sales enablement and technology and software, really driving sales enablement and better sales productivity, it's something that's really been emerging over the last 4, 5 years. And there are certainly a lot of companies who are playing in that space, right? There are a number of privates. When you think about that landscape, do you see it becoming almost like a winner take most where ZoomInfo is positioned across both software as well as the data assets? Or is there a potential where you can have such a large market there could be a lot of really successful companies as we look out 3 to 5 years?

Yes. So I think that the ability to -- there are a number of activities that sales and marketing professionals do every day around sales enablement. And what we want to be able to do is own that universe of activities that exist sort of outside of the CRM. That includes chat, it includes sales automation, it includes list in audience building. It includes display ads. And I think that the company that pulls all that together and have the data foundation that supports all of those is going to win. And I think that is our strategy is to take those assets, embed our data foundation across all of them. And then we're out in market telling this platform story. It is resonating with our customers in a really meaningful way. And so we think that is the strategy to win.

And as far as just your -- obviously, you have very deep data assets. How are you thinking about partnering with some of these other kind of sales enablement platforms that are out there as far as they provide the software, but you guys would plug in to power them from a data standpoint. How are you thinking about those kind of partnerships?

Look, I think we're fairly agnostic against the other platforms. Our customers come to ZoomInfo with a variety of different needs and a variety of different platforms that they use to go to market, and we're happy to be a conduit to plug into those. Ultimately, what we believe is that when you're using an integrated platform, you can get so much more out of that, but it is incumbent on us to show the customer that. In the meantime, they're welcome to bring the system that they use currently, and we plug into all of them.

Got it. So maybe just sticking with the partnership angle. On the go-to-market side, right, how do you view go-to-market partnerships? And maybe whether it's in the U.S. or maybe you really -- your driver of growth internationally, where do you see partnerships fitting in?

Yes. So first, we've spent a lot of time developing our technology partnerships. And so we have a strong partnership with Snowflake, where the ZoomInfo data asset lives inside of Snowflake, inside of the Snowflake app marketplace. It allows Snowflake users to marry any of the analysis or work that they're doing inside of Snowflake with ZoomInfo data, do that in real time, do that without having to go out, pull data in, move data out. We have a similar partnership with Google on the big query stack and analytics stack. We have a growing partnership with AWS as a technology partner. And we're going to market in a number of those different partnerships together and selling customers together. We think that's a continued area of strategic opportunity for us. And then we think as we grow out this year, this platform story has evolved, we think there's a real opportunity for SIs to build an SI partnership channel for us as well as we're going in and rearchitecting the way companies are going to market with all of our solutions, we think SIs can be strong partners for us there, too.

Got it. Let me throw out one question, and then we'll open up the floor to questions. You recently announced availability of your product through the GSA schedule to be bought by government agencies. What prompted you to make that decision to go after this specific vertical. What's the opportunity? Why did you decide of all the different verticals that are out there to really focus on this one?

The government vertical really mimics our enterprise vertical in a lot of different ways, primarily around enterprise, enrichment and API access, cleaning data internally of our customer systems. And so the enterprise motion that we built after we acquired EverString integrated all of that data, continued to build up the data asset ourselves, we have this incredibly robust data asset that was selling into the enterprise, unseating legacy vendors. And then the federal government it's over the next 4 years, has $350 million of contracts coming up that exist today on legacy platforms that our product, our service could serve in a much, much better way. And so we saw the opportunity there. There's clear dollars that we can go after. It mimics a motion that already exists inside of our company, and it leverages the data asset that we've already built. So we think like opportunistically, that's a good area for us to spend energy on. And the GSA schedule allows us to contract faster because the terms of the agreements are already preset. And so the actual contracting part of the sales process happens faster inside of the government. The sales process is a bit longer than our traditional transactional motion. But the actual contracting is faster with the federal government than it is with our enterprise plan.

Are you guys going to have to pursue like a full Fed ramp certification?

We're not pursuing that today, and we feel pretty good about the GSA schedule that we're on and think there's a lot of opportunity to unlock just with that.

Got it. All right. Well, let's see if there are any questions in the audience.

Thanks, guys. Appreciate the conversation. Just to connect on branding our products under RevOPS. I know we've seen maybe not necessarily in our space, but in adjacent spaces when they kind of do some collective [ lending ], can help either with the sales motion or sales times that can help with sometimes land sizes or even close rates. I know it's still early days there, but how would you characterize the benefit maybe we're seeing from [indiscernible]?

Yes. We are very protective of our sales motion. We think we have one of the most -- I think we do have one of the most efficient sales motions ever built inside of software. And so we're very careful about disrupting that. We tested this out in January and February, the new models and some new pricing and packaging that come across with it. And what we saw on the new business side where we tested it was an increase in ASP and an increase in conversion rate on the opportunities that we were selling under the new RevOS structure and the new pricing and packaging that came along with it. And so we feel really good about introducing that without disrupting the motion that we have.

A quick question really on enterprise go-to-market motion. As you've been selling more and more to the enterprise, how has that changed your historical kind of more call center-driven account executive go-to-market? And how is that evolving?

Yes. So going to market in the enterprise is unique. Landing in an enterprise is not. And so our motion is very much a land-and-expand motion. We may land an enterprise customer at a $50,000 ASP, and it's in 1 small division of the company. And then over time, we're selling to all of the other divisions of the company and growing that to $1 million or a multimillion-dollar contract. In order to do that, it requires a talent that knows how to coordinate across multiple divisions and bring a number of stakeholders together to make a multimillion-dollar purchase. That's talent that we've been out in the market for the last 2 years, bringing into ZoomInfo, but then surrounding it with our core sort of call center motion. And so if you're an enterprise account manager at ZoomInfo, you're also teamed with the CSM and someone that we call a CDR, a customer development rep who essentially acts as your sales development person within the account. They're calling around the accounts, setting appointments for you in different operating divisions, creating opportunity for you to come in and sell more ZoomInfo product. And so essentially, we're bringing the best of both worlds together in that model.

Any other questions? All right. Let me just close up the session with one more question. On international, right, it's been a big highlight of your 2021. What are you looking to accomplish on the international side in 2022? And what kind of investments are you making behind that coming into the year?

Look, I think we started 2021 almost testing out the enterprise motion and seeing what we could accomplish there. It turned out we grew that business 90% in 2021. We see a huge opportunity. It's all white space. We recently hired Simon McDougall as our Chief Compliance Officer, he's based in London. Who's helping us go to market there and have more privacy-first conversations with our clients. We see a huge opportunity internationally. We're focused on English-speaking Europe to start and Australia and New Zealand. The business continues to grow. The top of the funnel is really strong, and we've opened an office in London to bring people in and have an actual presence there. And so we think that the combination of those efforts will continue that momentum that we're seeing internationally.

Okay. Awesome. Well, Henry, this brings us to the end of our conversation this afternoon. Thank you so much for your time.

Yes. Thank you so much. Thank you. Thanks a lot.

Have a great [ day ].