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

All right, everyone we're going to get started. My name is Brian Peterson. I'm one of the application software analyst here at Raymond James. Very happy to have ZoomInfo back with us this year. Graham O'Brien, Jerry Sisitsky. We're going to make this interactive. So if you guys raise your hands, if you have any questions, feel free to fire away. So Graham, maybe to get started, just a high-level overview on ZoomInfo, what you guys have been up to on the product side over the last few years.

Yes, it's great to be back, Brian. Thanks for having us. In the last few years, ZoomInfo, the focus has been shifting the business upmarket. We've been really successful in doing so over the last 8 or so quarters. Our upmarket business is growing 6% year-over-year in Q4. It's now 74% mix of the total business. That's up 4 points in 2025 alone and almost 10 points over the last 2 years, our upmarket business is significantly more profitable than our downmarket business, and we continue to see improving retention opportunity upmarket as we roll out new AI-powered products for go-to market.

And maybe just talking about like operations, OS or some of the new products that you've launched. What are you seeing in terms of adoption there? And what kind of value are you providing for customers?

Yes. The operations story is really positive. So that is our data access, DaaS product. That product is growing solidly in the 20s year-over-year. It's over $200 million of ARR at this point. And it's not a seat-based model. This is essentially selling access to our proprietary data asset largely to upmarket and enterprise customers for things like territory planning, as a basis for intelligent campaign design, we could talk about Go-To-Market studio in a second on that front. And again, that business is a 9-figure revenue business that is growing strong. And it also adds profitability that is in line with, if not better, than the profitability of our upmarket business and aggregate.

And how has that trajectory been versus your expectations? And has there been any challenges in terms of kind of seat-based versus non-seat? I know that's a big debate in software. So curious how that's going.

It's going great relative to our expectation. And again, operations is not seat-based. We do have seat-based products that are also growing well, but the opportunity with operations and some of our other products that will live either in the operations suite or adjacent to it, I mentioned Go-To-Market studio. We have some really promising levers to continue to accelerate that business and make progress blending the pricing model of the business.

And what about the adoption on Studio and CoPilot, I know that's come up a lot over the last few quarters. Maybe give us an update there.

Yes. It was a great year for ZoomInfo CoPilot. We more than doubled the ACV on CoPilot in 2025. It's now more than 20% of our total ACV. This is kind of the progression from what was our legacy Sales OS product targeted for end user direct seller use cases. So think account executives, account managers, SDR, CSM, sales leadership. So we are really excited to see the progress there with CoPilot. On Go-To-Market studio. We announced Go-To-Market Studio in the middle of 2025. Q3 was largely a story of building it with a select group of early access customers. Q4, we started rolling out some paid POCs with those customers. And Q1 is really where we're starting to broadly bring it to market.

And maybe just think about how ZoomInfo looks in kind of an AI world, I think it's a key debate in terms of like there's opportunities, but there's all risks. Like how could you frame that for us?

Yes, I see a lot of opportunity. It depends what your view is of kind of applications and seats in the future. But I think across almost all scenarios, we have a really great opportunity. And I think about this as a spectrum of how ZoomInfo helps customers go-to-market in an AI world. You start with the data foundation and we kind of touched on that with the operations business. Then you've got the orchestration layer with Go-To-Market Studio. You can think of that as like a control tower that sits on top of ZoomInfo data that brings in your first-party data from CRM, from Snowflake, from other data silos, marries all that first and third-party data together and then helps you design intelligent campaign, design helps you enrich data at scale and then effectively push that out. None of that from a subsea orchestration backwards is seat-based. We pushed that out to a CoPilot or a go-to-market workspace, and we can offer the full go-to-market spectrum or we can essentially show up as the back-end contact server for customers in Go-To-Market.

Have you seen any changes in seats as you think about some of your customers? Like -- and how are you thinking about like seat dynamics with some customers over the long term, understanding that you're selling both at this point?

Yes. I haven't seen a significant change in the last few quarters. I think that some customers are reducing seats in aggregate. Some customers are pockets where they're hiring or adding the seats. We continue to have a lot of seat opportunity in our existing customer base that we haven't actually sold into yet. But with our -- the success of our operations business, the rollout of go-to-market studio, if you think about the seat contribution to our revenue base, it peaked in 2022. And it's gone down significantly over the last few years with our fastest-growing business being not seat-based. So I continue to see this progression towards a blended consumption model that sets us up well in across a lot of scenarios.

And maybe just looking at AI from a budget perspective, are you finding that for some of your AI-enabled products that that's coming from an existing budget? Is that net new? Just curious how those conversations are going with customers.

It's a combination, but I would say that AI-specific budget is certainly kind of prioritized and is kind of better budget to go after. Historically, we're usually coming from a CRO budget where sales are off-budget occasionally, it's a CIO or a data budget. But we've had success kind of going and actually combining budget at some of our customers and sometimes under kind of an ELA motion where we get stakeholders and leaders across different parts of the business to come together and align on the long-term investment with ZoomInfo.

You hit on this earlier, but maybe just could you opine a little bit on some of the data advantages and the process that you have with the data and the sources and how you can use that to provide value for customers?

Yes. It really does come back down to the kind of the moat around our proprietary data asset. So we have a lot of that data we were able to acquire through our contributory data networks. And what that can look like is a nonpaying user comes in and gives us access to their business data and return for some limited access to ZoomInfo. We also have customers that opt in to contribute there business data into our data asset, that scale of that asset is an advantage. We're able to then complement that with licensing agreements, often exclusive licensing agreements with bespoke data providers, marry that all together and then there's kind of data science and the background that goes into cleansing, ranking, enriching that data to create that unique third-party assets.

And how hard would it be if -- I think -- a lot. So how hard would it be for customers to implement that themselves? They would have to be recreate the data sources do all what you do. You don't really see that as a risk?

No, that's not really like a viable risk that we see like most of this is not publicly available. So I think it creates even more value and even more opportunity as customers seek to do go-to-market work, whether with employees or with agents, the accuracy and the actionability of that context layer becomes even more important.

And maybe talk about some of your upmarket success. What have you seen there in terms of how you're going to market for those customers? Any changes that you've implemented over the last year or two?

I think a couple of years ago, we went and segmented our new business account executives so that they -- we had a dedicated enterprise account executive team. That meant that we were okay with longer sales cycles because we were going to land at a higher price point. We were kind of rolling out more relationship-based selling than transactional selling. And I think we're basically through that process now. We've effectively reoriented our sales and marketing structures over the past 3 or 4 years to become focused on the upmarket and then downmarket, it's really an efficiency play for us. We want those logos. We want them to contribute data into our asset. But generally, downmarket customers are a little bit more sensitive to near-term trends, and we're able to go and acquire those customers with a greater rate of efficiency.

And what have you seen competitively? Has anything changed? And maybe you can unpack that, like what does it look like upmarket versus downmarket?

Yes. I think downmarket, especially kind of the lower end of downmarket, if you think about customers or prospects that have fewer than 25 employees. There's been a history of half a dozen or so players down there that are lower cost and lower quality. I think that's still true. As customers grow and they start to value the quality of the data, they start to really start to value the kind of our privacy position and kind of being leaders when it comes to security and compliance. That's where we kind of see the limits of a lot of those down market providers as we get into the mid-market and above. And then upmarket, we don't see -- a lot of our sales cycles don't have competitors. You could think about like a Dun & Bradstreet with a legacy company data installation. And then more holistically, we're moving more and more into a world where we can sell you the full spectrum from data to execution and application or show up and essentially do parts of that in the Go-To-Market world.

And maybe just talk about the value of the platform, like anything you can share on like the ROI or some of your larger customers? Like what have they shown in terms of implementing the platform and the value that they ultimately get?

Yes. The value in several points of data accuracy is actually immense depending on the scale and the reliance you have on doing your go-to-market on top of that data layer. You could think about like directionally our saved for account executives or account managers who don't need to contact switch out of 12 or 20 different kind of reference point and they can do all of that in one spot. And then you could think about like unlocked look-alike pipeline, where if you don't have ZoomInfo and you're able to identify pipeline with them and so you can identify $90 of that plus another $90 of a similar pipeline.

Right. And I know you guys had a lot of success with the software vertical when you guys went public. I know you've diversified away from that. Curious where do you stand in terms of kind of an end market exposure? And are there any new end markets that are really ramping up in '25 and into '26?

Yes. So software was almost 40% of our total ACV at peak a few years ago. We went through -- turned out a downsell pressure with that kind of end market over the last few years. Most of that was rightsized their spend and keep the logo, invest behind business relationship. It's still around 31% or 32% of mix. So it is still our largest end market. And generally, what we see there is that the customers are looking for, whether it's the application side or the data side, they generally have a better sophistication when it comes to go-to-market AI use cases or continue to be hopeful about the prospects there. And then outside of software, things like finance and insurance, real estate, transportation, some of the more legacy verticals, we've had success growing those as kind of software rightsized.

What has been the impediment to adoption in some of those other end markets? So they just kind of late to the stage sort of technology and AI? And what are you doing to kind of educate those end markets about the value you provide?

Yes, I think that's exactly it. If I think about where we kind of fit in to companies that are doing it Go-To-Market. My belief is we fit in somewhere with every one of the surface area of ZoomInfo's go-to-market application is expanding. And if I have a large conglomerate that's in a more kind of legacy vertical, they might not be sophisticated when it comes to AI use cases. So usually, we show up in that situation and we are the data foundation with operations. We are kind of the first time they've seen go-to-market orchestration with go-to-market studio, and we are their seat provider for a CoPilot or workspace. On the flip side, if you've got a smaller company that's an AI start-up that has well funded and high sophistication around these essentially, applications. We might just be a context layer where we plug as an MCP into Claude, and they're doing a lot of the Go-To-Market work in Claude, but we are still their trusted context layer in that scenario.

What is their data strategy? If you're familiar -- like in insurance care or some of these guys that are maybe legacy to this situation, like what are you typically replacing? Or is that viewed as mostly greenfield?

It's mostly greenfield. Usually in those scenarios, the data strategy is being developed when we show up.

Okay. So how do you think about that net new logo opportunity because like there would seem be a lot that you can lean into. So what are we thinking about net logos as part of the growth algo?

A Finite set of -- especially the higher end -- the higher we go in the enterprise, or just a finite set of companies out there. So there are still logo opportunities but the real growth opportunity comes from expanding with them. I point to our 100,000 logos where we're almost back to record highs there. We continue to grow that logo population. We have 1,921 customers that spend $100,000 or more with us annually. But the next kind of the future of growth there is going to be coming from someone that spends $200,000 that jumps to $1 million or from $1 million to $5 million.

So what's the right way to think about the NRR expansion then? And I know that maybe it looks a little bit different kind of upmarket versus down market, but how should we think about that over the long term?

Yes. NRR is 90% right now. That's up from 85% and 86% a year or so ago. So we've been able to improve that as we shifted the business upmarket. Upmarket NRR is about 100% in period the last few quarters. I think the next goal there would be to get back closer to 105%. And I think that's going to come from a couple of things. One would be effectively improving gross retention with stickier products with kind of improving customer relationships. I don't think a lot of that is already in process. And the second part of that is expanding product footprint with those customers. So that is a Go-To-Market studio. That's a workspace, that's an operations thing.

And I guess, maybe down market, how are you thinking about the NRR there? And I guess, blended that should probably improve, right, as the mix continues to evolve more [indiscernible].

Yes. So the blended to 90%, I think just improving that will come -- would come from improving that market. Downmarket, the goal has been to make that a smaller and healthier part of our business. We still value the downmarket business. We still value those customers, and a lot of them are important contributors to our contributory data network. But -- and it is smaller, it is 26% mix now. It is healthier. We were seeing better retention outcomes from downmarket customers in the back half of last year relative to the first half. And part of that is we're qualifying the business we put in there at a much more rigorous levels. So we're selling less new business down there deliberately, but we're also going through some SEO headwinds with our new business down market. And as we navigate those, I think we have an opportunity to start to get some of that back as we get into the back half of this year and start to get the downmarket business going from negative 10 now approaching a better number over the next year or 2. The goal of getting the mix upmarket, downmarket to 80-20. I think a year ago, I would have said that's going to take 5 years. We're already at 74-26. I think I feel like we're going to be a year or two ahead of schedule, and we can get to 80-20, potentially by the end of next year.

And I guess maybe a higher-level question, the margins are very, very high. But how do you think about the balance of kind of investing in growth or maybe driving more operating leverage?

Yes. I think we can -- I think we have almost all the investments we need for growth already in the run rate. And we've been able to shift some of that -- it's really been largely a story of shifting resources into upmarket prioritizing the product builds that we want to go and get out there and then rightsizing some of the down market resources for a business that we are not as focused on for revenue generation. So I don't think there's like a net incremental need to go spend to accelerate growth further. And I do think we have opportunity to continue to be more efficient in sales and marketing, in G&A I think R&D, like we are already a smaller, more productive team. And then in cost of service, as we shift some more of our revenue base into potentially a consumption model, we might see some gross margin pressure.

I mean, how would we be thinking about kind of the incremental contribution margins then? Or anything that you would call out as you guys look to grow going forward?

Yes. I think the guidance that we rolled out a month ago was almost a point of margin improvement in 2026 relative to 2025. Some of that is just entering with a more profitable run rate this year. But I think you could look at a scenario whether it's this year or a future year where it's 1 or 2 points lower gross margins and then a point plus better from both G&A and sales and marketing.

Maybe opportunities to leverage AI. I know you're doing some of that today. But where do you think you could maybe expand that to drive further margin expansion going forward?

Yes. I mean, first and foremost, we're customer zero for our sales and marketing, AI products, right? So CoPilot and workspace, Go-To-Market studio. We want to be best-in-class and to be the blueprint for our customers to show them how to leverage our own product set. And then outside of that, I think we've -- we're probably a little bit ahead of the curve in R&D when it comes to software development and productivity around that coding. And then G&A, I think there's like some legal finance HR use cases, where we've been able to automate and eliminate manual work and do it in a way that actually reduces risk.

You guys have a very large buyback outstanding. I know M&A has been part of the capital allocation plan historically. Where do you guys sit today in terms of like how you're thinking about deploying the cash?

Yes. I think the story the last few years has been allocating the majority of our free cash flow to buy back stock. I think we still view the market price of the shares and info as pretty disconnected from the intrinsic value of the share of ZoomInfo, but we're also going to be -- take a risk adjusted due to this, and we're going to balance buybacks against M&A, against debt. When it comes to M&A, I think that we've been -- I know we've been quite successful doing [ AQUA hires ] over the last few years. So in a scenario like that, we can go and find an AI native start-up that has built something that's on our road map that we can accelerate 6 months or 12 months, there's very little capital and maybe no capital outlay and we're just bringing them on as employees. So we'll continue to monitor the landscape there and balance the capital allocation decisions.

Anything from the audience?

So you mentioned you don't really see customers today deploying AI internally to build their own solutions. I'm curious. What do you see from AI-native start-up vendors? How do you think they compare to what you offer when you see them over ZoomInfo [indiscernible].

Yes. I think the AI development tools that are out there, stuff that we're using for our own developers like make application building easier. So I think if you are a -- or I guess, scenarios where AI native companies, like they might be building some of their own internal applications, whether that's for go-to-market use cases or not. There's always going to be some barrier about whether that makes sense for them to do it or just to go buy it from a trusted vendor. But I do think it further enhances and highlights how valuable the context layer is because if you don't have the data and you don't have the context layer, whatever you're building on top of is not going to work.

Maybe just one for me just on the timing of the buyback. I know that's a question I get a lot from investors. How do you think about any rough parameters around -- on the timing of where you'd be deploying that?

Yes. It's -- I think you said -- we got $1.2 billion available with the $1 billion on top of the $200 million of remaining. We generate about $400 million of cash flow every year. We carry $10 million to $200 million of cash at the end of any quarter end. So it gives us options if we wanted to get more aggressive to deploy.

Got it. All right. We'll stop it there. Everyone, thanks for listening in.

Thank you.