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

Sure. So look, I think we focus on providing a really actionable and accurate data set to our customers. I think when we talk to our customers about that, we see that there's real value that they're getting. And I think that we like to make sure that there's a real ROI there but align the pricing with our -- with the value that we're providing. I think historically and going forward, we're going to focus on really only pushing price when we're delivering significantly more value to the customer. So we're entering a phase where we believe that we are going to be delivering that value and that we'll be able to increase prices as a result of that. But that has been our philosophy and probably where we'll continue to focus going forward. It's more aligning value with price more than just pushing price.

Got it. And then I tend to get a lot of questions around the product road map and kind of the competitive positioning, so maybe switching to that. Can you actually discuss your new AI Copilot product? Obviously, there seems to be a lot of excitement, and you guys think it's one of your most important releases in a long time.

Yes. So Copilot is definitely exciting. If you think about all the information that we have within the ZoomInfo platform, there's a lot of it. It can be -- I think we have over 50,000 attributes for particular companies. We have hundreds of millions of people that work within those companies and what their roles are, what their contact information is, and then multitudes of signals about what those companies are doing. And you can think of signals as something like if you're selling -- if you're a health insurance brokerage firm and you're selling your services, you probably really want to know when there's a new director of HR, when there's a new benefits person or even when a new CFO comes along. Maybe you want to know when that company gets an investment from a private equity firm or they're doing research on HSAs. All of those things are signals that we provide to our customers. And based on those, that's a great time to reach out, and we're going to provide context about that. So just based on our third-party information, if you log into Copilot to start out, you're going to get a recommended list of the AI basically connecting all of the dots within all the information that we have to say, look, this company, maybe you focus on companies that are 100 to 1,000 employees in the whatever, Newport Beach area. So you're going to get a list of, okay, this company just hired a new head of benefits. They're 500 people. They're in Newport Beach, right within your sweet spot. You should reach out to them. And not only should you reach out to them, but it's going to give you the context and help write an e-mail to say, you should reach out to them and say, that particular person who was just hired, congratulations on your new job at XYZ company. We provide benefits to companies just like yours, and here are all the value proposition points that you'd want to make. I would love to talk to you about your initiatives now that you started at the company. Then it will look around at the rest of the buying committee and say, I see that you just hired Joe to run benefits for your company. He's really great coming from ABC company. Here are all the things that we're able to do for you in that role. And so from a prospecting use case, that's really interesting that you're basically cutting out a lot of that research that you'd have to do to come up with what's the context around reaching out to someone, who are going to be the best companies, et cetera, et cetera. And then from an account perspective, once you sell that company, you're probably going to hand it off to someone else. Or maybe, you're going to have your CEO come in and meet with executives from that company at some point. The AI will basically connect all of the things that we know as well as bring in CRM data. It will bring in your Chorus data if you have -- if you're recording calls for them or connect with your e-mail system, so that you can have a real-time up-to-date account plan or information about that account. If I'm going to go meet with an executive, I can just log in and say, okay, I'm going to meet with XYZ person at this company at Jefferies, like what do I need to know. It will tell me, here's the conversations that we've had to date. Here's what Jefferies' pain points are. Here's how big of a company they are. Here's what they do. All of these things right at your fingertips that you can hand off between people. You can create account plans. You can give people more context into what they're doing. So providing that intelligence to sales people throughout the cycle, whether it's prospecting new, whether it's closing a deal, whether it's servicing a customer, we feel is something that really isn't available out there. And we're going to continue to lean in and make it better over time as we're bringing in more signals, as we're bringing in more integrations, and as we're really driving the product into the future.

And with the products having recently gone GA, how do we think about the implementation or the adoption curve or the time line for that product?

Yes. So we've run a few platform migration plays in the past. So when we acquired ZoomInfo, it was DiscoverOrg. And when we acquired RainKing, it's DiscoverOrg. We would take -- ZoomInfo is a good example, where DiscoverOrg was really focused on high-quality data but on a limited data set. ZoomInfo is focused on finding as much information as possible out there, but didn't have the same level of quality. So when we merged the technology that we've built to really drive quality with the technology that ZoomInfo had built to really drive quantity, when we married quality and quantity together, we were able to deliver a lot more value to our customers. So we went out to our customers and we said, okay, this is a much better product. We have all these other things in here. You have a much broader array of data that's higher quality perhaps than you had in the past. We worked with our customers to drive additional revenue from that value. And over the 2 or 3 years following that acquisition, we were able to migrate all of our customers from the legacy DiscoverOrg or the legacy ZoomInfo platforms to the next best -- the new and better platform. We're going to do that same thing here. So we'll start with customers that have the highest propensity to really drive value from the platform. Part of that's going to be based on those customers that already have CRM integrations as an example or maybe are already using Chorus or other things that will drive even more signals than just the base level of data. And then work through the customer base over time to continue to bring more and more customers over to the new platform and off of the legacy platform. And over 2 to 4 years, we expect to ultimately get our entire customer base over.

And then what would be the moat around a product like this? Is it the underlying data at this point? Or is there a speed to market component? How should we think about that?

We really believe that the quality of the data that we're able to provide is going to drive much more value for customers. And I think for 15 years, we've always had the highest-quality data that's out there. We've always focused on continuing to drive more and more data. More and more data at really high-quality levels to drive better outcomes for our customers. Over the past few years, we've really focused on where can we continue to add signals around that data. So I think the amount and kind of efficacy of the signals that we're providing are going to continue to create a bigger and bigger moat. And we've started to create a platform where we can bring in signals from other providers as well. So G2 is being integrated into the system as an example, where signals from G2 can help drive a motion. We normalize that within our entire platform of who the buying committee is and who the companies are. So I think that we're really leaning into our strength in terms of high-quality data in terms of that moat. And then certainly, we're continuing to train our models and to drive value for that. So I think there is some level of -- we are the first company out here who's going to be able to really drive significant value through an AI-based platform like our Copilot, and we're going to continue to make that better and better over time. But I think the real key to driving that value is high-quality data, almost more than anything else. And really, there's been no one out there that's been able to create the kind of data and maintain it and continue to drive more and more signals like we have.

So is that the key between winning a customer and perhaps not being able to keep one? How should we think about it? It comes down to the data? Because there's been some defections. But then, you've also had boomerang customers. Can you talk about that dynamic?

Yes. I mean, certainly, at the low end of the market, we do see some customers, particularly when they're under economic stress or duress, that they go out and look for a lower-priced solution. I think they get promised that the data's good enough or almost as good. I think once they start using it, they realize that it's really not. And in many cases, we'll see those customers come back to us, basically with the story that like our salespeople erupted or they started not doing as well. Because even if it's just contact data and you're reaching out to folks, if 20% of the contacts aren't good, you're wasting a lot of time reaching out to those folks. You're really frustrating your sales team in a way that they were used to having 95-plus percent accuracy, and now they don't get that. So I think frustration levels, lower productivity from those teams certainly manifest themselves in those discussions. And certainly, when we start looking at Copilot as an example, the users who are using Copilot are generating twice as many opportunities as the kind of control group users in the same company that aren't using Copilot. Realistically, we charge relatively little in that context that if I can make your salespeople twice as effective or help them generate twice as much pipeline that then they can go out and close, for a sales person that you're paying $200,000 or $300,000 to, an extra $1,000 or $2,000 is definitely worth it from that perspective. So I think it's the quality of the data that drives real outcomes, so the actionability and outcome-driven nature of the data that really kind of creates that opportunity for us. And those are things that we continue to push on. If you look upmarket, so on the enterprise as an example, we see very little competition. And part of that is they really care about quality, and they actually test the data oftentimes before they buy it. Anytime we're in a trial where people are really testing the data and testing the actionability of the data, that's like a guaranteed win for us at the end of the day because that is, again, playing to our strong suit in terms of quality and frankly also the privacy that we're able to deliver. Basically, ensuring that companies are using ethically sourced data, that it's integrated in well with everything they do and high quality is why the enterprise has been such a fertile ground for us.

Got it. With maybe a couple of minutes left here, maybe coming full circle, so what does ZoomInfo maybe look like 3 to 5 years from now? Is it going to be much more enterprise heavy? How should we think about that?

Yes. So we're certainly focused on continuing to shift the mix towards enterprise. So yes, we're not going to give up on our small business customers. I think that we're still providing value there. But where we're deploying incremental effort or discretionary effort is going to be much more focused on those larger customers. They tend to be more stable. They tend to be more sophisticated and therefore can derive more value out of what we're providing. And so that will be our focus. I think that hopefully, we're working through and can turn the corner on the mid-market set of customers. And I think improving the net retention for mid-market customers will also help. So seeing a business that's much more weighted towards enterprise and mid-market that still has small business customers, but it's a much smaller portion of the overall base, is certainly our goal.

Got it. We're down to about a minute. So I'm just going to ask about really quickly on margins here. You guys have really strong margins. There's been a little bit of near-term pressure. Just any color there of where we are in that part of the cycle.

Sure. So we believe the hallmark of a good business is to generate strong margins and cash flow, and so we'll continue to do that. Certainly, we are focused on driving sustainable growth into the future. And so we've been investing heavily into Copilot and really driving value for our customers there. Copilot's probably a few hundred basis points of margin pressure, but we think very worth it in terms of what we've been able to create in terms of a product and our vision of where that's going to continue to deliver value for our customers. So I think as we are able to return to growth, we should be able to harvest some of the natural operating leverage that we have in the business. And as we do that, I'm sure we'll reinvest some of that back into continuing to drive growth, but we'll probably deliver some of that back to additional profit as well.

Excellent. It says we got 3 seconds left. So thank you for your time, Cameron.

Awesome. Thank you very much.