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

All right. Thanks for joining, everyone. I'm Parker Lane, software analyst here at Stifel. And with me today is Cameron Hyzer, our Chief Financial Officer, over at ZoomInfo. Thanks for joining us.

Yes. Thanks for having us.

Appreciate it. A lot of people know ZoomInfo now, but you went public a couple of years ago. Give us a lowdown on how this platform came together. There was 2 different businesses that people may or may not be familiar with. And what is the launch of a new platform and some of the deals you've made done to the way that you go to market and think about future development?

Yes. So step back a little for those of you who aren't super aware, we provide a platform for sales and marketing teams to effectively get high-quality data and insights as well as workflow tools to help them do a better job, sell more efficiently and more effectively. The sort of the genesis here that you're talking about is in 2019, we were actually named DiscoverOrg, and we acquired a company here in Boston called ZoomInfo. DiscoverOrg historically had really focused on, interestingly, org charts and contact information for different buyers of technology and marketing systems. And its heritage was all about quality, all about having the highest-quality information about the people that you're selling to. ZoomInfo was a company here in Boston with a big Israeli presence that was really focused on quantity and reach. So really covering the world of business professionals that would buy things. And the industrial logic was really to take all of the technology and algorithms that DiscoverOrg or had built around getting the quality of company information and combining that with the technology that ZoomInfo had built to really cover coverage across different buyers. And it actually worked out, I think, better than we were expecting. We built a whole new platform, leveraging the 2 different pieces of technology to really combine quality and coverage and roll out a new platform for sellers, ended up being super successful. I think one of the things that we're really excited about is it really expanded the TAM so that we were no longer selling to, predominantly, technology companies, that we're selling into the IT department, but could really sell to anyone, whether that's transportation logistics, financial services, insurance, pharmaceuticals, like you name it, those are our fastest-growing verticals. And since we rebuilt that platform and rolled it out at the end of 2019, that was still mostly focused on company data and contact data. We were able to develop additional functionality as well as make some strategic acquisitions to add other functionality onto the platform. And we think of that as we think of as advanced functionality, whether that's intent data, workflows, automation tools, conversation intelligence. We've rolled out a talent and acquisition platform, a marketing OS that's an ABM product, as well as data orchestration tools as part of our OperationsOS. And those additional tools effectively make the company and contact data that we're providing more actionable for our clients. It enables them to get faster time to value in terms of building that capability to be more effective at going to market. And at this point, over 75% of the revenue comes from customers that have -- that are leveraging some sort of advanced functionality. And our goal is to obviously increase the level of advanced functionality that they're using and continue to drive value for those customers.

Very helpful overview. Thinking about the data collection practices and privacy, that's something that's been talked about a lot recently, and you highlighted this at [ your ] Analyst Day recently. Maybe you can walk us through how that is done, first off. And then second, when you talk about these new verticals that you're entering or getting critical mass of customers in. Does that improve the data that's actually on the platform? Like, let's say you get a lot of manufacturing-type customers. Is that going to ultimately bolster the database you have for that end market?

Yes. So the data that we collect comes from a variety of sources. Probably the biggest sources are a couple contributory networks that we operate. So we offer a freemium-type product where people get limited use of the access in exchange for the contact information that comes out of their e-mail systems. And then we also have a customer contributory network where customers opt in to providing certain levels of information. A lot of it's what we think of as exhaust information from the motions that they're running. In addition to that, we collect information from the public Internet. We're kind of going through blogs and company pages. We have a variety of natural language processing algorithms that we've built that'll link that information back to companies. And then we purchase some publicly available information as well. All of those are running through our evidence-based algorithm, which is basically taking evidence points from different places to basically determine what's accurate, not accurate or fit for being published or should be unpublished. When we think about privacy, we're very privacy-focused. And realistically, we're collecting some data on individuals. It's really just the information that you'd find on your business card or e-mail signature, contact information that's being used for business purposes. I think when we think about privacy, it's really important to us to kind of be industry leaders from that perspective. So we've instituted a voluntary notice and choice program, not really required by most of the regulations that are out there. In fact, there's a new draft of a federal regulation that could go through this year that kind of entirely strips out business contact information being used for business purposes. But our view is that by being forward leaning with respect to privacy, it actually creates a real competitive advantage with respect to players that aren't at the same scale that we are. And particularly when you're dealing with customers like SAP or Google or Adobe, these -- Comcast, AT&T, these large customers that do have privacy teams and want to make sure that they're always on the right side of the line, that when they go through and diligence our privacy practices, it makes them really comfortable to lean in and really take the platform in a bigger way.

Question here.

Speaking about, what about European, EU standards?

Yes. So with respect to GDPR, there are exemptions in place, particularly for direct marketing pieces. So we work with our European customers. Some people -- one of the great things about having a privacy kind of lean to us is that we have a variety of different capabilities that you can use. So some companies lean on the more conservative side with respect to European data. SAP is a great example of that. In certain countries, they only want to take information that's publicly available. So we actually have flags and links in the system that we'll only expose to their sellers publicly available information with the source that you can find that against. Other customers don't have -- are not quite as conservative in terms of their interpretation of GDPR, and they're willing to take additional information. The notice and choice program is something that's fully GDPR-compliant. So we're out telling individuals what information we have. We give them the opportunity to correct or amend that as well as remove themselves from the system altogether. The interesting thing with European customers that they don't always focus on is GDPR not only requires you to kind of take care with your information, but it also requires customers to keep their information up to date about people that they have in their CRM or whatever else. So that's certainly something that we're selling to folks that our enrichment products will actually enable them to meet the GDPR requirements in those cases.

Another question.

If you go back, corporate made a comment about vertical markets. I'm just curious, how much of that is by design versus incidental to you just gaining critical mass in the vertical and how does vertical offerings differ? Like, how do you do? Do you, like, go in areas where you have some really...

Yes. So our offering is really a horizontal offering. It's giving a salesperson or a marketing person or recruiter access to information about all the companies that are in their particular universe, information like revenue, technologies that they use, what offices they have, how many people in those offices, all those things as well as the people that work at those companies, the org charts and whatever else. We don't necessarily have, like, specific things that are focused on just financial services or just insurance as an example. There may be some ancillary data points that are much more applicable to those areas. But in reality, the kind of focus is on the horizontal platform and continuing to build value essentially for all of our customers. I think where we've historically been really strong was in the software vertical, which part of that was they're just early adopters of digitization, particularly in the sales and marketing world. And part of it was the DiscoverOrg work heritage was more focused on mapping out IT departments and the high-quality data there. I also think that along those lines of the early adopters, there's also a generational aspect where software sales leaders tend to be a little younger, a little more focused on data and improving things and doing things differently. But what we see today is that sales leaders from any industry, whether it's transportation logistics or manufacturing, retail, financial services, they're starting to come more around to using high-quality data and insights to help their team do a better job. And certainly, as younger people move into those areas of leadership that are more used to having technology to help drive motions, that's an opportunity for us to introduce them to these capabilities.

If you ever think -- if I think back a few years ago, and the value prop was largely with data, and thinking about where you are now, I guess I always sort of made the analogy in my own mind that it was the gas that made the cargo, but the car itself is maybe a Salesforce.com engine or something else that was ingesting that, right, or another marketing platform. Now you're building all of these intelligent applications around it, it seems like you're gaining pretty broad adoption. And I think you're coming in this term, the operating system of sales. So I'd love to hear how do you think that changes the competitive dynamic going forward? Should a HubSpot or a Salesforce be thinking more about the competition angle with the ZoomInfo? Or are you planning to go side by side those other leaders in the SaaS space?

Yes. So I do think, historically, and it's still the case today that it still very much is a side-by-side discussion. If you think about Salesforce, it's, like, the biggest example. They've really left a void of tools that are really focused on helping the salesperson do a better job. They have a great system that helps sales leaders get visibility into their pipeline and have a kind of central hub to keep information about customers. But if you talk to almost any salesperson, I highly doubt that they're going to tell you, yes, I love Salesforce. It helps me find my next customer. It helps me deliver a message better. In reality, most of them view it as a task that they have to put information in that's going to help the company, but not them. So where we've been able to really excel in our entire value proposition, it's helping that individual salesperson or a marketing person or recruiter hit their number, really do a better job in what they're doing. And I think that if you look at, like, where Salesforce is going, they're becoming much more of an enterprise application where they're looking to do reporting or integration between companies where they have communication systems underneath. Like, all of those things are moving further and further away from what we really do. I think ultimately, if they said, "Yes, we really want to develop something new and different that's going to help the salesperson sell better," sure, but that's not the direction that they've really gone in over the past 5 or 10 years.

Cameron, going back to the evolution of the platform. Earlier this year, you did announce RevOS, 4 key pillars there. Maybe you could walk us through those 4 key pillars, who the buyer persona is there and how that's going to impact deal sizes going forward?

Yes. Totally. So the SalesOS is really our flagship platform, what we've had for forever essentially. And really, the buyer there is a sales leader, sometimes operations-type person that's developing tools -- that are developing processes and tools to help their sales guys do better. The great thing about the SalesOS is that we've gone from really providing company and contact information to developing workflow tools and automation capabilities that ultimately can be spread across a wider part of the team. One of the great things about Engage and Chorus, which is our conversational intelligence, is it actually helps to standardize your motions across the team. And that standardization allows you to run analytics and A/B test different things, really start to tune how you're selling and where you can sell best. So that capability set really begins to increase the ASP across customers. And in some cases, if you're taking the kind of full suite of SalesOS, you're going to have a ticket size that's 2x or maybe even larger than just taking the basic set. The MarketingOS is really an ABM platform that's focused on demand generation and the marketing buyer. In many cases, they were involved or in some cases, have bought aspects of the SalesOS as well, but it's really helping to orchestrate your marketing campaigns across different channels. One of those channels might be an SDR, might be advertising, might be social. Whatever it is, organizing those campaigns and prioritizing who you're focusing on and who the buyers are. That ABM platform, there's -- it's either high 5-digit deals or 6-digit deals, which is obviously bigger than our average customer. So it tends to be a solid upsell and a place where we're seeing a lot of traction. The OperationsOS is really being sold to an operations team. It's kind of the IT wing of sales, if you want to think about that, data scientists, people who are doing more sophisticated things. One of the obvious examples is, if you're developing a new territory plan, you're going to take your entire addressable market, you're going to slice it and dice it based on different variables, size of company, industry, geography, whatever. We can give you capabilities to do that in a more precise way and ultimately drive a better outcome. So those data scientists are going to ingest data, they're going to cleanse data, they're going to route data between different places, and that's what this OperationsOS does. And then the TalentOS is really focused on talent acquisition or recruiting folks. Kind of got into that business because a lot of recruiting folks were using our system, the kind of typical SalesOS to go out and find candidates. And really, what they're doing is supplementing a workflow that they've gotten used to now and using LinkedIn to find passive candidates. The issue that they have with LinkedIn is, a, response rates aren't that great, so we can significantly improve the response rates by helping them to reach out by e-mails or phone numbers to folks, and then also giving them automation tools on top of that to run a motion in a better way. Our SVP of Sales came -- went to Henry, one day and said, "I just met the best recruiter." And it was from Travis Kalanick's new company, CloudKitchen or whatever it was. He said, she's great. On day 1, she reached out to me in the LinkedIn in-mail. And then 2 days later, she followed up with an e-mail and the following week, she followed up with a text. Henry's like, "Really? That's the best recruiter you've ever met?" And he's like, "Yes." No one ever, like, actually, like, has a real motion to go through these things and that's exactly what the TalentOS does. It gives you that opportunity to automate those motions and reach out to different people through different channels to ultimately convert that into an interview or whatever. So given the fact that there are a lot of recruiters using this, we basically reskinned the platform and put all the capabilities that we had into a recruiting motion, which when you think about it, recruiters are less digitized than most of the rest of the organization, but they should be running something exactly like a sales motion. They should be building a pipeline, putting people through plays and cultivating that pipeline through to an interview and an offer.

Cameron, when we look at the core -- I guess, not core, but the largest parts of the business, Sales (sic) [ SalesOS ] and MarketingOS today, when a customer or a prospect signs up for a free trial or when they pick up the phone and talk to your sales team, is that because they've recently made an investment or a change in their own technology stack? Or is there some other sort of pain point that they've identified that gets them to be receptive to the message you're selling?

Yes. Typically, it isn't because they've already invested in something. There are probably a couple of trigger points that tend to happen. One and probably more often than a lot of others is, they either used to work at a different company that use ZoomInfo or they hired someone that use ZoomInfo or they heard about it through some competitive angle. It's actually a great conversation that we had on a Chorus call where a guy called up and he said, "So a year ago, I fired a guy because he wasn't very good. And he went to a competitor and he ended up and I, like, met him at a bar for drinks and he was like one of their best performers now." And I asked him, like, "What's the difference? Like, how did you become good when you weren't good with us?" The guy said, "Well, they have ZoomInfo, so I don't have to, like, do all this like grunt work. I can just go out and call people and run through motions." And so, like, literally on the Chorus call that we were recording, like, sent around, and it's like, "So I need to buy ZoomInfo." It's those sorts of interactions that kind of drive it. And I think salespeople aren't always thinking about like what technology are they using and how are they going to strategically change how they sell. More often than not, they're thinking about, how do I close the next deal. How do I close this deal? How do I close that deal? So our real focus is getting in front of folks and kind of showing them, look, using high-quality data and insights and workflow tools and automation can help you find your next deal, can help you be more efficient and effective. And so when we're able to get in front of someone, when they have time to think about it, it's not a super hard sale. The value proposition is super obvious to them. It's just getting in front of these people that day to day, they're worried about calling the next person, getting that next sale and kind of closing deals.

You touched on Chorus multiple times, so I want to dig in on that business. For those less familiar, what exactly is conversation intelligence? Why is it a perfect fit with your core data asset? And then what are some of the initial wins you'd point to since that business has come into ZoomInfo's platform?

Yes. So conversation intelligence, what we do is we record and transcribe calls and then generate analytics around those, really identifying the key moments in a sales call that you can then run motions off of or improve. So you think about how that comes to fruition. One of the use cases for Chorus is to help salespeople ramp faster and become better. So you think about in the old days, if you had a sales person, you'd kind of start by giving them some training and then you have them ride along on some number of calls and hope that those calls kind of cover the waterfront of, like, the things you want to tell them, and then you'd send them out and a sales manager would go with them. And then finally, you'd let them kind of out of the nest on their own. In Chorus, you're kind of taking all these calls, and you can create playlists of here are the best moments where someone's responded to an objection around pricing, around a particular competitor, around different product functionality. Here are the best moments where someone was asking for a deal was, whatever. You get all of these different places, you create these great playlists. Then you can also start to run different analytics around it. So at one of our customers' Zoom video, they would -- at one point, they were using conversation intelligence to determine that salespeople that told the founder story were 30% more likely to close a deal. So they went out to everyone and they said, "Okay, we analyze all this data, you should tell the founder story." We actually have done that internally, and we found that salespeople right now that tell the platform story, that are getting into all the different bits of functionality, perform 3x better than folks that don't. So part of our enablement right now is really giving people the tools and capabilities to walk through the platform and all the different functionality that people can use, so that they're planning those seeds and ultimately can upsell folks into additional functionality over time. Those analytics are super powerful in terms of being able to drive performance. And then also part of what we're doing is using those moments and calls to start to drive motions. So -- and that's the core part of what ZoomInfo does. So if you think about if you're on a call and someone is like, "Oh, well, I got to go talk to my CFO about this." That's a perfect time to automatically kick off a motion where you're sending the CFO an ROI white paper about your platform or starting to serve ads to them or whatever else. Not only do we know exactly who that is, but we can automate that within the system to kick off a workflow or a sequence to be able to do those things. All of those things coming together is part of what will ultimately drive conversation intelligence to be a core part of what every sales team should be using to drive better performance.

And when you assess this opportunity out there, it's probably applicable to any salesperson, right?

Yes.

Big or small organization. There's a few private companies in the space, but you've put together Chorus' leading asset with your data asset. How much white space is there inside of sales teams from what you've seen out there? And how does that translate into growth for that particular part of the business over the next few years?

For just Chorus?

Just the conversation intelligence.

Just the conversation intelligence, and there's a ton of white space. When you look at all of the vendors of conversational intelligence, it's probably, I don't know, 6,000, 7,000 kind of total companies. We have well over 25,000 customers. So when we look at Chorus, we were really focused on, okay, there's a lot of overlap between some of our older customers, the people who started leaning into digitizing their sales force and people who are now buying conversation intelligence. So we got a lot of confidence that of the next 10,000 customers that are going to buy conversation intelligence, probably 8,000 of those are already ZoomInfo customers. So there's a great opportunity to kind of continue to follow a journey where people start with data to -- high-quality data to start digitizing their go-to-market motions and then are adding on additional functionality like conversational intelligence and other things. And then when you think about the overall universe of companies that are selling to other companies, there's over 700,000 companies out there that are selling to other companies and could do a better job by using conversation intelligence as well as any other part of our platform. So that's an important view where there's just a ton of white space. It's definitely lightly penetrated all the way around, and there's a ton of value for these companies over time to do more with less and become more effective with their motions.

Perfect. I want to pause and see if there's any more questions from the audience here. Perfect. You've been very successful in the U.S. market. RevOS is now out there. When you think about replicating that success in international markets, we touched on it a little bit earlier, but what are some of the stats on just the scale of the data asset? How much of that's grown so far over the last year or so? It seems like it's ticked up pretty substantially.

Yes.

And then the investments you've made in the London office, both from a personnel standpoint and just again back to the data, which is so critical here, how big does the share of international become for you over time? And where is that key focus over the next 12 to 18 months?

Yes. So we started really focusing on international quality a couple of years ago. In the last year, I think we improved our coverage by over 130%. And if you -- kind of the way that we collect data, we actually collect data from everywhere. So we've always had a fairly big pipeline of international data, but all of our algorithms have been really tuned and focused on kind of taking U.S. data and getting the highest quality data out of that. So what we did over the past year or 2 has really started to tune our algorithms, add more translation capabilities. Some of it's actually just cultural translation. So a director in Italy has, like, a different meaning than a director in Germany than a director in the U.S. So working on all those algorithms to really improve the international coverage and capabilities was a big part of what we did. And then partially because of the pandemic and partially because we wanted to just test it out, we started selling into Europe through our Boston office. So we've got a team of folks who basically got up at 3 a.m. to align with European hours to sell. They were super successful. We were able to really continue to drive growth in the international business, but that's not super scalable. There's only so many people in Boston that want to wake up at 3 a.m. to sell into Europe. So we opened up a European office in London at the beginning of this year. I think we're over, I don't know, 30 or 40 people at this point in London. And we'll continue to lean into that to continue to drive growth in Europe. At this point, the overall international revenue stream is over $100 million. I think in the last quarter, it grew over 80% or 70%, so continues to be a great greenfield area. When I think about the international opportunity, there's no reason, if you look at larger companies like Salesforce or Adobe, you see international revenue being 30%, 30-plus percent of overall revenue. There's no reason that we shouldn't see that same level of mix over time. I think the issue in terms of seeing that mix shift is that there's still so much opportunity in the U.S. that we continue to grow really quickly in the U.S. So I don't think that mix shift is going to happen immediately. But over time, we do expect that, that'll be a real big opportunity for us.

Yes, makes total sense. Well, we're about out of time. So I think we'll cut it off there. Please join me in thanking Cameron from ZoomInfo.

Thanks a lot.