ZoomInfo Technologies Inc.

Good day, and thank you for standing by. Welcome to the Zoom Info fourth quarter and full year 2022 financial results. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your speaker for today, Jerry Zuzinski. Please go ahead.

Thanks, Lisa. Welcome to ZoomInfo's financial results conference call for the fourth quarter and full year 22. With me on the call today are Henry Schoch, founder and CEO of ZoomInfo, and Cameron Heiser, our CFO. After their remarks, we'll open the call to Q&A. During this call, any forward-looking statements are made pursuant to the safe harbor provisions of U.S. securities laws. Expressions of future goals, including business outlook, expectations for future financial performance, and similar items, including without limitation, expressions using the terminology may, will, expect, anticipate, and believe, and expressions which reflect something other than historical facts are intended to identify forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the risk factor section of our SEC filings. Actual results may differ materially from any forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the cautionary statement in the slides posted to our investor relations website at ir.zoominfo.com. All metrics on this call are non-GAAP unless otherwise noted. A reconciliation can be found in the financial results press release or in the slides posted to our IR website. With that, I'll turn the call over to Henry.

Thank you, Jerry, and welcome, everyone. A year ago, you joined me on our earnings call as we talked about our expectations for 36% revenue growth for 2022. A lot has happened between that initial guidance and now, and even in the face of a more challenging economic environment, we continuously raised our guidance as we moved through the year and delivered 47% revenue growth in 2022. We delivered that growth efficiently with an adjusted operating income margin of 41% for the year and more than $450 million in unlevered free cash flow. In the fourth quarter, we delivered over $300 million in revenue with a 42% adjusted operating income margin, which was up 100 basis points sequentially and up more than 350 basis points from Q4 last year. Structurally, we are a profitable company, and we remain committed to driving top line growth while expanding profitability and efficiently growing free cash flow. This combination of growth and profitability differentiates us from many other growth-oriented software companies that have struggled with a clear path to profitability. We have always operated with discipline, efficiency, and a focus that allowed us to generate profitable growth, and we will continue to do so. While these are good results, we can be doing better. Our customers are challenged by the current state of the economy. Within our largest vertical software, companies are laying off employees and cutting back spending. Many companies, regardless of size or vertical, have materially lower growth prospects than they did a year ago. All companies are looking to do more with less. We remain early in the digital transformation of B2B sales, and while our platform drives meaningful efficiencies for companies in all industries, as our customers reduce their sales budgets and headcount, they take a harder look at all their spending. As we had indicated earlier in the year, the more challenging economic environment has impacted our upsell and cross-sell motions, with increased customer scrutiny causing an elongation of sales cycles. The economy has had a direct impact on our business to be sure, but to continue to grow and scale through this time, we will be intensely focused on four priorities. Surrounding ourselves with the right people, investing in enterprise solutions, delivering delightful product experiences, and executing with excellence and efficiency. I continue to dedicate my energy to those priorities every day. And as I have communicated to everyone in the company, If it is not driving us forward across these four initiatives, it is not a priority. With regard to the first priority, I have made significant changes to the leadership team over the last few months. We announced last week that our CTO Nir Karan is leaving ZoomInfo. Nir joined ZoomInfo in its startup phase and has helped us grow the engineering team from its very earliest days. I want to thank him for being a strong leader and a great partner. The new executives we have hired bring strong, relevant experience leading great teams, driving customer success, and building highly scalable world-class products. These leaders and others across the organization will help create the foundation we need to scale for the next phase of growth. First, Ali Daddan joins us as our new Chief Technology Officer from Atlassian, where he was Head of Engineering for Work Management, Confluence, Trello, Jira, and Atlas. He's coming from an organization that is universally recognized as having the best product-led growth motion, supported by a remarkably well-integrated underlying platform, and he brings more than two decades of experience scaling global technology companies. We're excited to have him join the company and lead our innovation and development efforts. Also, Dave Justice is joining Zoom Info as our Chief Revenue Officer. Dave has more than two decades of experience leading global sales in the software space. serving as Chief Revenue Officer of PagerDuty for the past three years. Between PagerDuty, Salesforce, and Cisco, he has held sales positions at all levels of the organization with a particular focus on enterprise sales. We need the right people in the right roles focused on the things that matter most, and I believe we have that now. With regard to the second corporate priority, investing in our enterprise business, we recently surveyed thousands of ZoomInfo users to understand the impact our tools and data have on their day-to-day productivity and the value that they derive from the platform. Their responses underscored just how essential we are at a time when companies are trying to hit their targets with fewer resources. 67% of sales leaders reported immediate top-line revenue gains after implementing ZoomInfo. Sales development representatives cut their time researching prospects in half. Account executives reduced deal cycles by nearly 40% and increased win rates by more than 45%. SDRs, AEs, and account managers increased quota attainment by more than 50%, and the average quota attainment with Zoom Info was more than 90%. 70% of marketers reduced spend due to more accurate targeting and the average recruiter using ZoomInfo reduced the time to hire by 20%. These results tell us that the ZoomInfo platform is mission critical for our customers and delivers tremendous ROI. With our platform, marketers are able to reduce spend and target leads more accurately. Sales teams spend less time researching and more time selling, and with more accurate data, more than double the response rate. Recruiters find better candidates and get them in the door faster. When our customers win, we win, and we will continue to ensure their success as we cement ZoomInfo as the essential revenue operating system for efficient businesses. Our net retention rate, which was 104%, was a disappointment this year, and in large part reflected the more difficult operating environment. The biggest driver in terms of lower net retention in 2022 was a lower level of upselling, as the continued elongation of sales cycles impacted our reps' ability to sell more seats and more data into our install base. Customers continued to renew as our gross retention rate remained in the 90s, but upsell opportunities were diminished as customers looked to cut costs, particularly in the second half. We ended the year with 1,926 customers who spend more than $100,000 annually with us. up approximately 30% year over year, and advanced functionality now represents 31% of ACV. There's a tremendous opportunity with enterprise customers, and we're making it even more of a priority to unlock that opportunity. During the quarter, we closed transactions with leading organizations like Amazon Web Services, Bank of the West, Barclays, Cigna, Edward Jones, Goodwin Proctor, FedEx, Panasonic, ServiceNow, Sodexo, and Waste Management. Companies are increasingly looking to work with fewer vendors and consolidate their tech stacks. They choose ZoomInfo because our integrated platform aligns sales and marketing teams to optimize conversion, and it can expand with them as they grow and develop a more sophisticated go-to-market strategy. As examples, a leading provider of human capital management solutions traditionally only leveraged company data from ZoomInfo to drive their territory planning activities. After a SalesOS pilot that delivered significant ROI in a short amount of time, they rolled out SalesOS to thousands of their account executives, expanding their use of the platform. One of the largest financial institutions in the world doubled its investment in ZoomInfo, adding more SalesOS seats, and is now integrating our data into Salesforce for their commercial banking unit, while leveraging intent data to improve their targeting efforts. We are focusing our 2023 development efforts on extending our lead in data excellence, delivering a scalable enterprise experience, developing and training customers on high-impact plays that drive go-to-market efficiencies directly from the ZoomInfo platform, and investing behind more product-led growth opportunities. We will continue to invest in accuracy and coverage to further extend our data leadership and optimize our search experience. We will also invest in more robust bidirectional syncs with CRMs and APIs to meet the needs of our enterprise customers and in holistic signals and unified scoring mechanisms to meet the needs of sales and marketing teams that use Zoom Info as their shared source of data truth. When I think about building a world-class enterprise experience, it comes down to the scalability and simplicity of our product to create a delightful experience for users. As we move up market to serve larger global enterprises and deliver predictable and efficient performance for our customers, our product focus is shifting to driving scalability, automating workflows, and simplifying everyday tasks for our users and their admins. We will invest more in enterprise-grade settings and permissions for admins simplified account setups and integration, in-product analytics and performance dashboards for leadership, and a better self-guided product onboarding experience to help unlock value along the user journey. In the recent G2 Winter 2023 grid reports, ZoomInfo ranked in first place across 29 grids and was listed as the number one enterprise solution in eight different sections. For the eighth straight quarter, we led all four of the sales intelligence, marketing account intelligence, account data management, and lead intelligence enterprise grids. We're also doubling down on our investments in marketing OS. We will continue to build out our advertising capabilities related to our proprietary B2B demand side platform, build deeper account-based marketing functionality, expand reporting capabilities, and invest more in unified scoring mechanisms. Marketing OS is a common upsell pathway after customers have successfully implemented Sales OS, and we are seeing more traction with sales and marketing teams who want to share the same foundational data, tools, and processes. We will also invest heavily in supporting our customers to execute high-impact go-to-market plays. Customers are looking to do more with less, whether that means with smaller teams or fewer advertising dollars. Being able to take timely action on signals is key to successful and sustainable go-to-market motion. We will continue to invest in both user-level workflows enabled through Sales OS and Marketing OS and organization-wide workflows and workflow management through Operations OS. Scalable workflows supported by our ring lead and DAS offering have been integral for companies looking to become more efficient and automate time-consuming motion. In closing, I'm confident that we have the team, the platform, and the strategy to win this market. A huge opportunity remains ahead of us, and we are well positioned to capitalize on it as more and more sales teams use data and insights to find, acquire, and grow customers. Our customers are generating significant ROI, and our users are reporting phenomenal results as they leverage the ZoomInfo platform. We've added a number of leaders who will continue to help us grow and scale, and who bring a wealth of enterprise experience and a customer-first mentality to the organization. As I mentioned last quarter, while we can't control the macro, we can't control how we manage the business. I am all in, the team is all in, and we're ensuring that we're consistently delivering the results that you have come to expect from us. While Cameron will be sharing our specific guidance for next year, I will share with you the framework we use in developing our guidance. We have assumed that the economic environment does not get better. And at the low end of the guidance, we have assumed that things get progressively worse. We understand that while our new leadership is great for the long term, we may see some disruption while the team gets up to speed. We remain steadfast in our belief that we will continue to expand profitability and we'll continue to lead with efficiency, focusing on compounding free cash flow growth over the long term. With that, I'll hand it over to Cameron.