ZoomInfo Technologies Inc.

Good day and thank you for standing by. Welcome to the Zoom Info second quarter 2024 financial results conference call. 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 1-1 on your telephone. You will then hear an automated message, advise your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jerry Sositsky, Investor Relations. Please go ahead.

Thanks, Amy. Welcome to Zoom Info's Financial Results Conference Call for the second quarter 2024. With me on the call today are Henry Shuck, founder and CEO of Zoom Info, Cameron Heiser, our CFO, and Graham O'Brien, who will become our interim CFO. After Henry and Cameron's 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 sections 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 forward-looking statements in the slides posted to our investor relations website at ir.gminfo.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. Let me start by discussing our financial results this quarter. In Q2, we saw a level of write-offs related to prior period sales that was higher than we had previously seen or had estimated for the quarter, particularly with SMBs. As a result, we conducted a comprehensive review culminating in a charge in Q2, and we accelerated operational changes around selling to small businesses, all of which we expect to reduce the volatility around future write-offs. We have revised our estimates for the collectability of a portion of previously recognized revenue, which has led us to take a $33 million charge in the quarter, and as a result, we are revising our four-year guidance. Excluding this charge, our results would have been more in line with our guidance for the second quarter. Inclusive of this charge, gap revenue for the second quarter was $292 million and adjusted operating income was $82 million, a margin of 28%. Our free cash flow was not impacted by this non-cash charge. The underlying driver for the high write-off rate is that in 2022 and 2023, we extended credit to a higher mix of SMB customers and the rate of non-payment by these customers increased throughout the past 24 months. Accordingly, we have made changes to the way we sell, renew, and service these clients. In April, we deployed a new business risk model to flag and require prepayment from prospects at the greatest risk of non-payment. This move mitigates the risk of future write-offs and represents an investment in the long-term health of our business, trading some new business ACV for higher quality bookings and focusing our efforts on customers more likely to pay, renew, and grow with us over time. We transacted $11 million of ACV in Q2 through upfront prepayments, and with our new model in place, we turned away a meaningful amount of new business from smaller, riskier organizations. I am disappointed that this charge has impacted our financial results. We believe this charge puts the long tail of these challenges behind us and lets us focus on the operational improvements we have been seeing in the business, which, as I will describe, has positioned the company for future success. There were a number of fundamental improvements we saw this quarter. As you know, our focus over the past year has been to move up market, stabilize and improve net revenue retention, and launch and monetize ZoomInfo Copilot. With our investment upmarket, Q2 was the best new business quarter in both the mid-market and enterprise ever. We meaningfully grew our $100,000 ACV customer cohort in both size and total ACV, the first time we've seen sequential growth in 100K customers since Q4 of 2022. This customer cohort now makes up 43% of our ACV. And we again grew our million dollar plus customer cohort on a sequential basis with the most new million dollar plus customers since Q4 of 2022. ACV growth from million dollar customers accelerated this quarter and is up 17% year over year. Reflecting these trends in aggregate, Enterprise ACV was up 9% year-over-year, and overall net new ARR was the best it has been in four quarters. This quarter was the first one since Q4 2021 where we saw net retention rates stabilize, which is an important milestone driven by stabilization of renewal rates and improvement on upsells. Over time, we expect to return to structurally higher levels of NRR through improving fundamentals and mix shifts as we grow our upmarket business. During the quarter, we closed transactions with leading organizations such as PwC, Deutsche Bank, Morningstar, and Manulife, and we also signed our largest ever new business transaction. This customer is one of the largest employers in the United States, and they saw our solution, rich in data, data compliance, and data integration capabilities, as mission critical to their B2B motion. With a solution that matched their exacting needs, we had what one of their employees described as the fastest moving contract in their history. This new business deal represents $1.4 million of ACV with a three-year commitment. Our operations and data as a service offerings, which are often used to help underpin a company's investment in AI, are also delivering results, up 23% year over year, and demonstrating strong 117% net retention rates, now representing 13% of our ACV. As companies look to invest in AI initiatives, they need a solid foundation of highly accurate data, and we are steadily becoming the source for that. Representative of that, we closed our first data as a service opportunity in EMEA to support a global network that allows financial institutions to send and receive secure messages and information about financial transactions. Leveraging ZoomInfo's data, the organization's operational and engineering teams are building an internal AI solution to identify fraudulent transactions. This is just one of the many ways that customers are able to use our data to continue to innovate their world-class business solution. In June, Google announced ZoomInfo as a key partner in its strategy to make generative AI more reliable and accurate for enterprise use. Google selected us because of our specific, trusted, and authoritative data sets. The end goal is to help enterprises integrate more accurate data into their AI models and give users more relevant responses and better experiences. The past 12 months have marked one of the most innovative periods in our company's history. As we successfully launched Zoom Info Copilot, our AI-powered offering that combines our best-in-class proprietary data set with first-party data from our customers' sales and marketing systems and digital buying signals to offer sales teams the best insight about their buyers. June was our first full month selling Copilot, and it performed solidly above our expectations. We now have more than $18 million of Copilot ACV across more than 1,000 logos, up from nothing just a few months ago. And we already see material improvements in engagement and utilization rates across Copilot users. Improvements in these rates have historically been closely correlated to renewal and retention rates. Early signs show that Copilot is expanding our value beyond top of funnel to support go-to-market teams along the entirety of the funnel. And by doing so, it expands our value proposition from sales development to account executives, account managers, customer success managers, and revenue leadership. Our commitment to unmatched proprietary third-party data and signals, a growing ecosystem, and continuous investments in AI continues to feed an aggressive copilot roadmap. That roadmap is driving excitement across our customer base and in new customer conversations. Over 75% of our copilot upsells were with mid-market or enterprise accounts. With the traction we're seeing on Copilot and our operations and data as a service products, we believe we'll be able to continue to win new customers and increase upsells to our existing base, a key driver of net retention. Today, we also announced several changes at the board level. We thank Todd Crockett for his many years of service representing TA associates on our board of directors, and we appreciate the positive impact he has had on the trajectory of the company. We welcome our newest board members, who we believe will be immediately additive in helping us execute our growth strategy. Dominic Mehta is a seasoned operating executive with experience leading scaled businesses and a very strong background in data and platforms. Dom spent 25 plus years at Bloomberg, where at different times he ran the terminal business, all of engineering, and was chief data officer. And we also welcome Owen Wertzbacher, the Chief Investment Officer of High Stage Ventures, who brings a strong public equity investor perspective and capital markets background to our board. Over the last several years, we have rebuilt our executive team, expanded our bench, built great products, leaned into AI, and diversified the leadership skills underpinning our board. We have focused on bringing in healthier new business relationships and doubled down on our enterprise relationships, where we know we have upside opportunities in the future. And over the past four quarters, we have retired more than 39 million shares of ZoomInfo, approximately 10% of total shares outstanding. We will continue to run this business efficiently while repurchasing shares. We have $400 million in an existing share repurchase authorization remaining as of June 30th, and we anticipate aggressively deploying that. When you combine our strong, our continued strong cash generation with ongoing share count reductions, we believe the company will do at least $1 of levered free cash flow per share this year and that we will grow that number meaningfully in 2025. I recognize that our positive operating momentum is overshadowed by the change in estimates we announced today and the increased conservatism around our guidance. Our intention is to fully put these challenges behind us and share the details that you need to understand our financial profile while also highlighting our commitment to growing free cash flow per share. To that end, I intend to be a meaningful personal buyer of ZoomInfo stock as well. Before I hand it over to Cameron to discuss the results in greater detail, I want to touch on the leadership news we announced this afternoon. As you saw from our announcement, Cameron will be transitioning from his role as Chief Financial Officer. He will stay with us over the next few months to help ensure a smooth transition. Cameron, you've been a great partner to me personally and the business over the last nearly six years. And on behalf of myself and the entire company, I want to thank you for your many contributions and to wish you all the best. We've initiated a search for a permanent successor and are fortunate to have a deep bench of talent throughout our finance organization during this transition period. Graham O'Brien, our VP of FP&A, will take on the interim CFO role. Graham is intimately familiar with our strategic and financial growth plans, and we are confident this will be a seamless handoff. With the charge booked, we now start with a clean slate. With that, I'll turn the call over to Cameron.