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spk10: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Zoom Info second quarter year 2022 financial results conference call. At this time, all participants are on 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 need to press star 1 1 on your telephone keypad. At this time, I would like to turn the conference over to Mr. Jerry Sisitsky. Sir, please begin.
spk02: Thank you, Howard. Welcome to ZoomInfo's financial results conference call, highlighting our results for the second quarter of 2022. With me on the call today are Henry Schuch, founder and CEO of ZoomInfo, and Cameron Heiser, our chief financial officer. After their remarks, we will 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 filings with the SEC. 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 included in the slides that we have posted to our investor relations website at ir.zoominfo.com. All metrics discussed on this call are non-GAAP unless otherwise noted. A reconciliation can be found in the financial results press release or in the slides that we have posted to our investor relations website. With that, I'll turn the call over to our CEO, Henry Shuck.
spk01: Thank you, Jerry, and hello, everyone. We appreciate you joining us for today's call. Zoom Info's Q2 results once again beat expectations on the top line and the bottom line. As we continue to execute against our unified all-in-one platform strategy, and set ourselves up to, again, raise our full-year financial outlook. In the second quarter, we delivered gap revenue of $267 million, year-over-year growth of 54%, and sequential quarterly growth of 9% when adjusted for the number of days in the quarter. And we did that efficiently and profitably with an adjusted operating income margin of 40% ahead of expectations and our highest levels of margin performance since Q2 of last year. Together, delivering a rule of 94 quarter. We quickly integrated acquisitions, drove them to profitability ahead of plan, and continued to invest in the business. We generated $108 million in unlevered free cash flow in the quarter, proving that even in an evolving macro environment, we can deliver a leading combination of growth, profitability, and free cash flow generation at scale. While we just crossed the $1 billion revenue run rate threshold, we are closing in on our next milestone of $2 billion. On our way there, we are committed to delivering best in class levels of both growth and profitability. We are convinced that the front office of the future is integrated, data and insight driven, and leverages software to drive efficiency. Zoom Info's RevOS is the only platform that can holistically inform and automate the go-to-market motions of companies of all sizes. This integrated experience is what customers want and what all businesses will need to succeed going forward. The integrated platform drives efficiency for our customers, helping them to do more with the sales teams they have, and helping our users succeed and drive more growth for their companies. We're delivering more functionality to the RevOS platform deepening the integration points and integrated experience, and making it easier to activate insights from our best-in-class data. We achieved a number of meaningful milestones in Q2. Advanced functionality now represents 29% of ACV, and ACV from advanced functionality more than doubled over the past 12 months, an acceleration of growth compared to the end of last year. Customers with advanced functionality now represent over 75% of our revenue, and are leveraging more and more of our platform, including intent, workflows, engage, chorus, data as a service, and more. We closed the quarter with 1,763 customers with greater than $100,000 in ACV, while the average revenue across these customers continues to grow. And we now have more than 30,000 total customers and are driving record levels of ACV per customer. Our new products and platforms are also gaining meaningful momentum across the board, creating a foundation for long-term durable growth across new markets. MarketingOS and TalentOS both added the most ACV ever in a single quarter, while nearly 50% of TalentOS customers are new to ZoomInfo. Chorus recorded the most new business sold in a single quarter, and we have nearly tripled the Chorus business since we acquired it a year ago. Engage had a record quarter. with the largest amount of ACV added ever as we increasingly landed engaged upmarket with 3x the number of deals with mid-market and enterprise accounts than in Q2 2021. And we have more than doubled ring lead revenue in the nine months since acquisition. In short, we are executing well and demand remains strong. We also continue to monitor the economic environment and look for signs of impact on our business. We listen to chorus calls, we speak with our sales reps, and we hear directly from our customers. We have seen sales cycles that are somewhat extended relative to sales cycles in Q1, driven by incremental finance and procurement review, but deals are still closing. While a more uncertain macroeconomic environment may create some elongating near-term sales cycles, our very efficient go-to-market motion and proven quick time to value for our customers will help insulate us. The market opportunity is huge, and we are executing against it. We are in the earliest days of what we believe is a generational transformation of how businesses go to market with data, insights, and a purpose-built software platform, a transformation that we are uniquely positioned to lead. We have the right platform, the integrated data and insights that power that platform, and we're delivering success to our customers as they look for efficiencies, and look to consolidate with fewer and fewer strategic vendors. We continue to deliver success to customers of all sizes across all industries, with customers increasingly choosing Zoom Info as a pillar of their go-to-market tech stack. As companies focus on efficiency, profitability, and unit economics, the most obvious path is to get more out of your existing sales and marketing resources. For two decades, we have been the trusted partner to deliver just that. I wanted to highlight a few of our Fortune 1000 wins in the quarter, each of which went through meaningful user, security, and privacy reviews before either expanding or becoming customers. These are customers at varying stages of sales and marketing maturity who are each using the ZoomInfo platform in ways that suit their current needs while providing them the flexibility to grow with us as they sophisticate their sales and marketing efforts over time. Caesars Entertainment, the largest casino entertainment company in the U.S., chose ZoomInfo to help drive more events at their properties around the world and to drive a more efficient and scalable way to go to market. Historically, their sales stack was primarily Salesforce and LinkedIn, but they needed to transform their CRM from a system of record to a system of insight. First, by making sure the data in Salesforce was up-to-date and accurate, and next to push insights directly inside of CRM. They did a short trial of Zoom Info, immediately saw positive results, and their sales team was ready and excited to rely on Zoom Info going forward. In addition to SalesOS and CRM enrichment, Caesars is also implementing Zoom Info chat functionality, which allows their events teams to respond and engage with prospects in real time, converting more of them to customers. A multinational financial services company that is a global pioneer and leader in payment processing and technology started with a mix of sales OS user seats and data as a service across six subsidiaries. In the last year, we consolidated those agreements into a single MSA, added additional sales OS user seats, additional DAS enrichment, as well as intent data, form complete, website visitor identification, and ring lead within operations OS. We are now deduping, normalizing, and enriching all accounts and contacts across their core Salesforce instances, allowing them to build custom modeling and driving a much more efficient M&A integration and combined go-to-market motion. At Stripe, what initially started as a deployment across a small team of business development professionals has grown to a relationship that spans hundreds of sales professionals on SalesOS, as well as a new footprint across their data science and engineering teams, to provide our best-in-class data and insights, including technographics, advanced attributes, and intent. Stripe is an incredibly data-driven organization and is now driving a more centralized and holistic approach to data, integration, and prioritization for their go-to-market efforts, ensuring that every client interaction is timely and insightful. One of the largest communication companies in the world is using SalesOS across more than 1,000 sales reps and multiple channels of their business, including inside sales, wirelined, and wireless, with a large percentage of users in their global enterprise sales team. As part of the deal, we will integrate directly into their instance of Salesforce, and we are also supporting their data and analytics teams with regular delivery of our scoops data. In the quarter, we also added PNC Bank, one of the top 10 banks in the United States, as a customer of SalesOS. First, I think seeing a top 10 bank in the US become a new customer this quarter highlights just how much truly white space opportunity there is for us. PNC is deploying Zoom info across their commercial account teams to capitalize on growth opportunities and to ensure that when they are engaging with clients and prospects, that they're having high quality interactions backed by data and intelligence. In Q2, we introduced meaningful new integrated experiences across RevOS. Most notably, we integrated the most powerful sales automation capabilities of Engage with our best-in-class data targeting and workflow capabilities in SalesOS. Through this experience, SalesOS and Engage customers will be able to click to dial, click to email, and add professionals to multi-touch, multi-channel prospecting campaigns without leaving SalesOS. And teams can now view first-party activity data from Chorus and Engage alongside Zoom Info data in Sales OS. Calls, emails, and online meetings populate an activity feed in Sales OS, and that activity data can be used as filter criteria to create dynamic audiences for targeted prospecting and account expansion motions. This enhanced functionality is similar to our bi-directional sync with Salesforce, HubSpot, and Marketo. where we enable customers to merge their first-party CRM and marketing automation data with Zoom Info Sales OS, Marketing OS, and Operations OS platforms. Through Q2, customers have synced over 2 billion records from these systems, four times the number of records synced through Q2 2021, highlighting the value our customers are seeing by bringing their first-party data into Zoom Info to create targeted audiences in the system they use to go to market. In Q1, we launched Marketing OS for account-based marketing, giving marketers the ability to build targeted audiences with Zoom Info's best-in-class intelligence and to deploy ads across social media and display networks using our DSP. The average account is now building a dozen audiences and running multiple campaigns. As we did with Sales OS, We continue to look for opportunities to integrate and unify experiences within our platform. Within Marketing OS this quarter, we introduced AirCover, enabling sales reps to identify key accounts in Sales OS and share them directly with their marketing team to instantly create and activate targeted social media and display advertising campaigns. This cross-functional motion sets up a sales rep for success and enables a truly aligned account-based marketing approach. and we continue to invest in developing new technology, finding new valuable data sources, and streamlining processes to advance coverage and accuracy in our data cloud. In Q2, our contact database surpassed 220 million records, and our SalesOS customers will see a 4x increase in SMB coverage and a 2x increase in company locations with a 10 percentage point improvement in match rates. Incorporating multiple machine learning models enabled us to improve our company database with 100% fill rates on core firmographic attributes. We released multiple artificial intelligence models, enabling us to increase the accuracy of our data, including machine and deep learning models that have grown our technology data coverage by more than 30% year over year, and that detect employment changes for contacts in our database faster and with higher accuracy, which is a result of us improving our detection of companies and titles and raw data produced by our technology that actively monitors for these types of changes. From a privacy standpoint, in Q2, we achieved ISO 27701 certification. This is a global standard for organizations looking to put in place a system to support compliance with the EU's GDPR, California's CCPA, and other data privacy requirements. Meeting the rigorous qualifications of ISO 27701 further strengthens our commitment to data security and privacy. We have also rebuilt our privacy center to make it as easy as possible for professionals to access, review, update, or remove their profiles. Our center also explains what ZoomInfo does to be a privacy-first company, and helps our customers with their privacy compliance as well. And we're yet again going beyond our regulatory obligations by re-notifying millions of long-standing individuals in our database, ensuring they remain aware that they are in our platform, that they can claim their profile, or opt out if they wish. Before I wrap up, I wanted to welcome Allison Gleason to our board. Allison was previously the SVP of Americas at Cisco, responsible for more than $25 billion in annual sales. She's a true sales professional, having been in multiple sales leadership roles since her earliest days of holding an individual quota. We are incredibly excited to welcome her to our board and look forward to the many ways in which she will contribute to our continued growth and success. In summary, we are the runaway market leader with our product platform and sales leadership. We have the industry's best integrations and a marquee list of growing customers, along with proven leverage in our model, given our powerful unit economics. We are building a generational company, and even with some uncertainty created by the current economic environment, we are investing in the platform, investing in the team, and we continue to grow profitably. Sales and marketing teams are being pushed to do more with less, and the only way to actually achieve that goal is to get more out of every marketing dollar, and sales resources. Our mission since inception has been to help companies big and small do just that. With that, I'll hand it over to our Chief Financial Officer, Cameron Heiser.
spk17: Thanks, Henry. Q2 was another great quarter in terms of execution and growth, and our outlook for the business remains strong, which is leading to another increase to our top and bottom line guidance. Companies of all sizes and industries continue to look for efficient ways to improve their go-to-market performance. And there is a generational shift in sales leadership who are looking for high quality data and insights to drive more efficient and automated go-to-market motions. As a result, while we are seeing some evidence of elongated sales cycles driven by the evolving macro environment, we continue to see strong demand for digital transformation. We are confident that given the tremendous value we provide to customers and our current narrow level of market penetration, will continue to drive durable growth. Therefore, we are raising our full year guidance for revenue to $1.08 to $1.09 billion and adjusted operating income to $433 to $437 million. At the midpoint, this represents revenue growth of 45% relative to 2021 and an adjusted operating income margin of 40%. We continue to expect to deliver more than a dollar per share and unlevered free cash flow in 2022. In Q2, we delivered gap revenue of $267 million, up 54% year-over-year, which implies 9% sequential growth compared to Q1 2022, as adjusted for days in the quarter. Excluding the impact of products acquired within the last 12 months, our organic revenue growth for the quarter was 42%. Adjusted operating income in Q2 was $107 million, a margin of 40%, the highest level of margin performance in the last 12 months. As we have discussed in the past, we expect to increase adjusted operating margins over time. Turning to the balance sheet and cash flow, we ended the second quarter with $371 million in cash, cash equivalents, and short-term investments. Operating cash flow in Q2 was $106 million, which included approximately $6 million of interest payments. Unlevered free cash flow was $108 million for the quarter, or 101% of adjusted operating income. We continue to expect that on an annual basis, unlevered free cash flow conversion will be in the range of 100% to 110% as a percentage of adjusted operating income, with unlevered free cash flow conversion trending down in this back half of the year consistent with seasonal patterns. With respect to liabilities and future performance obligations, unearned revenue at the end of the quarter was $412 million and remaining performance obligations, or RPO, were $985 million, of which $764 million are expected to be delivered in the next 12 months. We believe that calculated billings and RPO are imprecise metrics to assess in-period activity and forward momentum. As a result, we focused on days-adjusted sequential revenue growth. and we delivered 9% days adjusted sequential revenue growth in the second quarter. With respect to debt, at the end of Q2, we carried $1.25 billion in gross debt. With continued growth and profitability, we again drove an improvement in our leverage ratios with a net leverage ratio of 2.3 times trailing 12 months adjusted EBITDA and 1.8 times trailing 12 months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements. This represents approximately a full-turn improvement in leverage since Q3 2021. Lastly, we are very pleased to be one of the first 500 companies in the United States to have signed the UN Global Compact, the world's largest corporate sustainability initiative. Through this declaration, we further commit to focus on ethical corporate governance, environmental stewardship, and best-in-class diversity and inclusion. With that, I will provide our outlook for the third quarter and our increased outlook for the full year 2020. Before I do, I would note that we are cognizant of the current macroeconomic environment and we are confident in our ability to meet or exceed our updated guidance for Q3 and the remainder of the year. For Q3, we expect GAAP revenue in the range of $277 to $279 million and adjusted operating income in the range of $111 to $113 million. Non-GAAP net income is expected to be in the range of $0.19 to $0.20 per share. Our Q3 guidance implies year-over-year GAAP revenue growth of 41% at the midpoint and an adjusted operating income margin of 40%. We are providing updated full year 2022 guidance as follows. We expect GAAP revenue in the range of $1.08 to $1.09 billion, up $20 million from our prior guidance. And adjusted operating income in the range of $433 to $437 million, up from $421 million at the midpoint of our prior guidance. We expect non-GAAP net income in the range of 78 to 80 cents per share based on 411 million diluted weighted average shares outstanding, up from 76 cents at the midpoint previously. For unlevered free cash flow, we expect to generate between 438 and $446 million, up from $440 million at the midpoint of our prior guidance. Our full year guidance implies 45% gap revenue growth at the midpoint, an adjusted operating income margin of 40%, and an unlevered free cash flow margin of 41%. With that, let me turn it over to the operator to open the call for questions.
spk10: Ladies and gentlemen, if you have a question or comment at this time, please press star one one on your telephone keypad. Again, to ask a question at this time, please press star one one. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Siti Panagrahi from Mizzou Group. Your line is open, Mr. Panagrahi.
spk00: Thank you. Thanks for taking my question. Henry, just one comment you made about how ZoomInfo data and insights are relevant during this economic environment. Could you share also your past experience, last recess, and what you have seen? And also, could you talk about the cross-sell opportunity you're seeing now that you have workflow and other software applications on top of data that you can cross-sell into your base?
spk01: Yeah, thanks for the question today. I think what we saw in the early days of COVID was somewhat similar. We had an elongating sales cycle with larger deals, but then kind of immediately afterward, companies realized that they needed to be investing in their sales teams and in their go-to-market efforts, that they needed to be investing behind digital transformation. And I think kind of what we see today is is similar. We're seeing that same elongation in sales cycles on some deals, specifically larger deals and international deals. But then we are also seeing companies realize that if they are going to get more out of their sales resources, that they need to continue to invest in their go-to-market motions. They need to continue to invest in software that drives productivity specifically for their sales resources, specifically for their marketing resources. And we are just best positioned by a mile to be the provider for that.
spk09: That's great. Thank you.
spk10: Thank you. Our next question or comment comes from the line of Brad Zelnick from Deutsche Bank. I'm sorry.
spk05: our next question to come it comes from the line of mr michael turn from wells fargo your line is open sir hey thanks uh glad i stuck with that uh that introduction and was listening attentively um look nice nice job on the results from the team here um just a couple of quick ones from me henry we fielded some questions recently just everyone's stress testing models and so you had some commentary around just the the white space that's in front of you i'm wondering just from a diversification standpoint of the business Anything you can add just in terms of penetration or industry exposure to be mindful of? And then, Cameron, on the guide, can you just help us understand the type of environment you're assuming in the back half of the year? Is it something similar to what you're seeing currently, or are you taking potential for just added elongation or something else into account there? Thank you.
spk01: Yeah, I think just from a penetration perspective, we still feel like we're in very, very early innings. I get asked often, you know, what happens if sales hiring slows in these accounts? Are you limited by your ability to add user seats? When the vast majority, the overwhelming majority of the accounts that we operate inside of, we're not wall to wall across the sales team. And so we have this tremendous growth opportunity within sales organizations that we're executing against. And so we still feel like we're in the incredible early innings of the opportunity. And so we don't feel a special exposure across any industry or any customer size segment.
spk17: Great. And with respect to the guide, you know, when we develop our guidance, we examine a wide range of potential outcomes and set our guidance at a level that we feel confident that we'll be able to meet and exceed. And certainly that wide range of potential outcomes includes a macroeconomic environment that could be worse than what we're seeing today.
spk09: Thank you. Thank you.
spk10: Our next question or comment comes from the nine of Brad Zelnick from Deutsche Bank. Your line is open.
spk18: Excellent. Thank you. Congrats, guys, on the results and weathering a tough environment in particular today. crossing the 30,000 customer mark or at least disclosing that you have. Henry, I just wanted to follow up on the comments that you made about the tough environment and how well you guys are navigating, and in particular seeing some sales cycles elongate, and I think in the earlier question you said in larger and international deals. But with that in mind, what, if anything, are you doing in terms of your own go-to-market to adapt to a more uncertain environment?
spk01: Yeah, I think what we're focused on is making sure that our sellers are enabled to sell through this environment, that they understand the talk tracks and narratives to share with customers, that they give them the material and collateral that they need to sell internally around continuing to increase efficiency of the heads that you're keeping on the streets. So we're very focused on enablement and really advancing the ability of our sales teams, our account management teams. I think that's a big one. And look, we're looking to continue to invest in our go-to-market motion, especially in areas of incredibly high efficiency. We'll continue to hire and invest in those areas.
spk18: Thanks. Maybe just a follow-up for Cameron. Cameron, you know, it's good to see NRR steady, but are there any changes to gross retention in any specific customer segment that's worth calling out or expectations for how retention might trend just given the visibility and what you can see today? Thanks.
spk17: Yeah, so there isn't anything worth calling out in terms of specific segments or anything else. I do think, you know, as we look forward, you know, macroeconomics, headwinds could create some pressure with respect to net retention, but we're still seeing our customers continue to want to invest into really enabling and creating a better environment for their sellers. So I think what we're seeing today gives us even more confidence in our ability to drive towards that $2 billion run rate revenue target that we've set for ourselves and continue to see retention over the long term continue to improve.
spk01: And Brad, I would add one thing there too. What you've heard from other companies that have already reported is that they're looking to rationalize and reprioritize spend But the one place where they're continuing to look to invest is within sales and within go-to-market. I mean, we are the best, most enterprise-grade platform to help go-to-market teams get better and better outcomes. And so they're not messing with this part of their business, the part of the business that drives demand and that closes that demand. Instead, what you're hearing from them is they'll continue to invest behind those areas.
spk09: Very, very clear. Thank you. Thank you.
spk10: Our next question or comment comes from the line of Mark Murphy from JP Morgan. Mr. Murphy, your line is open.
spk06: Yes, thank you very much, and congrats on raising the guide for the year. So, Henry, I would say that many software companies now are slowing the pace of their hiring. They're cutting back on some of the lower priority investments. They're doing that as a provisional step due to all the recession headlines. Is that something that you're contemplating doing as well, or would you need to see a bigger change in the environment? And then I have a quick follow-up.
spk17: Sure, Mick. Maybe I'll jump into that. I think we've consistently focused on efficiency within all of our investments historically. And so I think we're always looking for what are the best places to put incremental resources or invest incremental dollars. And so, I don't think that we have the same pressure to cut back on certain things that maybe weren't performing in the way that they had. I think as we continue to grow, we're going to continue to invest in the business. And like we have historically, continue to focus our investments with respect to sales and marketing capacity, as well as R&D innovation, but also continue to invest in all the underlying infrastructure to support growth as we move forward.
spk06: Okay, understood. And then as a quick follow-up, could you possibly update us on what portion of the revenue stream is seed-based versus the portions that might be database or API-based or just based on something else? I know... Henry, you touched on this a bit, but we're just trying to understand how much of a swing factor you might see when the employment cycle ebbs and flows a little bit for some of your customers.
spk17: Yeah, so our model is set up so that we have customers that pay a platform fee to start out with, and then we scale up with our customers based on the number of seats that they deploy as well as the amount of data that they might be integrating into our systems. And obviously, as they're taking on more and more functionality, all of that gets placed in there as well. I think when we go back and disaggregate that, and there is probably a little bit more art than science, but when we go back and disaggregate that to just look at seats versus platform or data or additional functionality, the seats are less than half of the revenue stream overall.
spk06: Excellent. Thank you very much.
spk10: Thank you. Our next question or comment comes from the line of Cash Rangan from Goldman Sachs.
spk09: Stand by. Mr. Rangan, your line is open.
spk20: Okay. Can you hear me now?
spk10: Yes, sir.
spk20: Yeah. Okay. Wonderful. Thank you. Thank you so much, Henry and Cameron. So it just looks like everybody's going through some level of tribulation, dislocation in sales cycles. And it's evident in your RPO, CRPO. If you look at the sequential rates of change, you can see it. I'm more interested in finding out what is happening to the deals that haven't put on hold or postponed. What are customers saying that they need to see in order to come back and re-engage with you guys on those deals? It looks like your acquisitions are doing better than expected. You seem to have very good synergies in your distribution. Something is obviously working. Maybe the certification of ZoomInfo is really at work here. But I'm curious to get your thoughts on the split deals, where you stand with them, and what is your assumption as to when these deals come back and close for you guys, Q3 or Q4 or next year?
spk01: Yeah, thanks, Cash. I think what we're seeing is just an elevated level of scrutiny in those deals. And so those deals end up with an extra level of approvals at the C-suite, an extra level of approvals in procurement and finance. And so those are elongating those cycles. I can tell you that a number of deals, both on the new business and the retention side that were slated to close in June have already come in in July and early Q3. So we feel good about those deals getting to completion. But there is just more scrutiny, especially as deals get larger and on international deals where the cycle is elongating. But the conversations are not changed. The value proposition is not changed. And I think what companies are realizing is that when you're looking to deploy something that's quick time to value, we are the most obvious solution to deploy. You're By on a Monday, you're fully up and running on a Friday in many cases, and this is in the hands of your sales team driving immediate efficiency and actionability. And so companies are not looking for multi-year projects or software deployments. They're looking for quick time to value, and we can deliver that with Zoom Info. But we are jumping through the same hoops or the same additional hoops that every other software company has to jump through today.
spk20: Got it. So just follow up to that, Haley. Thank you so much. Do you think this could be just another U-shaped recovery as customers say, you know what, I'm factoring in higher cost of interest and whatever, inflation, et cetera, and then we get some kind of recovery either this year or next year? Or is it that these pressures could create a permanently lower but still attractive organic growth rate in your markets?
spk09: And that's for me. Thank you. So, Cash, I think that's a great question. I think
spk17: As we look forward in the future, I think there's certainly the potential that we'll be able to recover reasonably quickly. That being said, our crystal ball isn't that much clearer than a number of other people. And as people are continuing to look at overall economic growth, if that stays kind of relatively lower for a longer period of time. I think that that will impact just the number of companies that are continuing to invest in their growth prospects overall.
spk09: Thank you.
spk10: Our next question or comment comes from the line of Keith Weiss from Morgan Stanley. Mr. Weiss, your line is open.
spk11: Hi, this is Elizabeth Porter on for Keith. Congratulations on the strong quarter. I just wanted to double-click on the longer sales cycles and just implications for Zoom Info's advanced functionality. Just as these can drive larger deals, that can be a bit more complicated. So what are you seeing in terms of the uptake specifically for advanced functionality versus earlier this year? And how should we think about the ramp in adoption for advanced functionality? Just as IT budgets come under a little bit more, but clearly there's a need to drive efficiency. Thank you.
spk01: Yeah, I think a couple of things here. I think number one, we have the only consolidation play in the market. And so our ability to go into an account and have them consolidate numerous different platforms onto the ZoomInfo RevOS platform, that is happening. We saw it all across our SMB customers. We saw it across our enterprise customers where they were consolidating either multiple sales intelligence vendors and a conversation intelligence vendor and a sales automation vendor into Zoom Info's RevOS. I think you see that with Engage going up market. We have 3x more deals in the mid-market and enterprise with Engage, our sales automation solution. We've nearly tripled the growth rate, of course, into our customer base. Ring lead doubled. And those are all consolidation plays that we're able to bring with our data foundation at its core. And so I would say, you know, one thing that every company cares about right now is making sure that they're prioritizing investments in areas that drive sales growth and that get more out of the heads that they have on the street. And then the second thing that they're looking at is making sure that they're working with strategic vendors. And if there are opportunities to consolidate and repackage and provide a package that makes consolidation lucrative, then I think that our customers are stepping up to that. And we provide a great opportunity for them to do so.
spk17: Yeah, I'd actually add, Elizabeth, that in terms of the rate of change, in terms of the growth rate of advanced functionality, it's actually accelerated in the first half of this year relative to what we saw at the end of last year. So that's a really exciting thing that we're focusing on is continuing to drive that advanced functionality that ultimately drives better retention with our customers. It delivers them more value. and it enables even more and more of those consolidation discussions throughout the base.
spk11: Great. That's great to hear. And then just as a quick follow-up, I was wondering if you could provide some context for how new business performed in the quarter. I think last quarter there were some comments about the new customer team hitting new records, and just given the macro and uncertainty has changed a bit, any color to provide on how that new customer segment is performing now would be super helpful. Thank you.
spk17: Yeah, so the new sales team continues to perform well. They were right at the same level as what we did last quarter, just slightly below. So I think we're excited about that capability, and certainly it's the best second quarter that we've ever had in terms of sales to new customers.
spk09: Great. Thank you.
spk10: Thank you. Our next question or comment comes from the line of Koji Ikeda from Bank of America. Mr. Ikeda, your line is open.
spk07: Yeah. Hey, guys. Thanks for taking the questions. Wanted to kind of shift gears a little bit and ask you a question on some of the new executive hires that we've been kind of seeing through the press releases. So, you know, kind of really focusing on compliance and security. Earlier this year, you know, you brought on Simon McDougall as the Chief Compliance Officer, and we got to hear him speak a lot about compliance at the Analyst Day. And then last week, you know, new Chief Security Officer Tomer Gershoni was brought in. So, you know, we, of course, are very appreciative of the increased leadership and compliance and security. But it also just kind of brings up the question, you know, is the reason for these hires because it's just becoming really challenging to stay in compliance and be secure as a company continues to grow. So just really curious to hear your thoughts on the reasons for some of these big executive hires. executive hires on compliance and security. Thank you.
spk01: We're always looking to scale and build a world-class team around us. I think that what you're seeing us do is invest in areas that are important to our customers. And customers care about security. Customers care about privacy. And so when we have an opportunity in the marketplace to bring in a world-class leader to step into those roles, we know that that's important for our customers and we're willing to invest behind those areas. And I think that's what you're seeing us do with Simon at the beginning of the year and then Tomer today.
spk07: Got it. Got it. Thanks, Henry. And then just one follow-up, if I may, here. Just kind of thinking about the future levers for growth, you know, it sounds like there's two kind of big picture opportunities here that the consolidation of, you know, other tools that these enterprises consolidating autism info, and then new spend just with new strategic sales optimization initiatives. So I guess thinking about the two levers, you know, where's the growth coming from? Or how are you expecting that growth from the split between those two to really drive the growth here for the next 12 to 18 months? Thanks, guys.
spk17: Yeah, so I think consistent with what we've seen historically and continue to see throughout the year, new sales continues to be a really strong driver of growth and is more than half of the growth that we see. I think that we're in such early innings in terms of the penetration of the overall market. Ultimately, every business that's selling to another business can and should use Zoom Info to do a better job of that. And we have 30,000 customers today. There are over 700 potential customers that we can go out and get. So we have a lot of excitement about our ability to go out and continue to bring on new customers and help them be successful. At the same time, within our existing customers, I think the consolidation play is an important lever that we can continue to use. But there's also a tremendous amount of white space expansion within those customers. whether it's adding on new users to go wall to wall, whether it's helping their data teams really get to higher quality data, or honestly, a lot of the advanced functionality that we offer is still relatively nascent out in the market. And there are a number of large enterprise customers where we can double, triple, quadruple the amount of revenue that we're getting in a white space way as opposed to consolidating other spend that's out there. And I think, you know, in a challenging macroeconomic environment, that replacement might be the easiest thing for us. But over the long term, there's a lot more opportunity for the white space opportunity within our existing customers as well.
spk07: Got it. Thanks, Cameron. Thanks, Henry. Thanks for taking the questions.
spk09: Thanks, Cody.
spk00: Thanks.
spk10: Thank you. Our next question or comment comes from the line of Alex Zukin from Wolf Research. Mr. Zukin, your line is open.
spk03: Hey, guys. Interesting question. So, Henry, I guess maybe I'll ask the question everybody's asking a different way. It definitely seems like you guys are seeing a combination of headwinds and tailwinds in the current macroeconomic environment. I think you mentioned the sales cycles lengthening headwinds in large enterprise accounts in Europe, but then tailwinds from your time to ROI versus other enterprise software solutions and even other, you know, sales solutions is quite low in terms of the time it takes to deliver ROI. And you're seeing those consolidation deals where more companies are buying more of the suite. So what's the net effect of those cross currents? Are you seeing, is this environment changing? you know, easier to sell into because of those factors or a little bit difficult, more difficult, then I got a quick follow-up.
spk01: Yeah, I think the way to think about that, Alex, we're pretty, we feel pretty good about the quarter we put up this quarter. We beat and raised the quarter. We put up a rule in 94 quarter and we raised our full year guidance. And so we feel pretty good about our ability to continue to execute in this environment. We've,
spk09: Hey, guys, are you still here? Alex, did you have a follow-up? Yeah.
spk03: Yeah, sure. The follow-up, I guess, Cameron, for you would be, during COVID, there was also some flexibility around payment terms with certain customers, and we're starting to hear that from other companies and enterprise software. To the extent that that is either happening already or potential – you know, situation, do you anticipate any kind of headwind to free cash flow margins from payment term flexibility? And then any, you know, from a recessionary playbook perspective, any, I would say, incremental focus either on margins or, you know, maybe less M&A or, you know, more opportunity for strategic capital allocations?
spk17: So with respect to the free cash flow part of the question, you know, we're certainly here to help our customers be more successful. And, you know, while there could be some opportunities for us to be more flexible with payment terms, it's nowhere near what we've seen, you know, back in 2020. It's just a completely different discussion in terms of how we would approach that. So I'd say, you know, really modest, but not a ton of potential with respect to free cash flow in the second half of the year on that. And then, you know, as we think about, you know, a recessionary playbook, if you want to call it that, you know, we've always operated a tremendously efficient, you know, company. I think if you talk to a lot of other software companies that are, you know, fast growing companies, it's really hard to get to that 40% margin level. And that's something that we've always focused on. So we're going to continue to run the company in a way where we're going to focus on the most positive investments that we can that are creating the best ROI in terms of helping to drive growth and maintain efficiency. And I think as we've demonstrated in the past, as growth moderates when we're growing off a larger and larger base out in the future, we will see margins naturally increase through a through operating leverage and less requirements for that upfront costs around sales and marketing capacity and client service capacity to bring on clients at a higher level.
spk09: Perfect. Thank you guys. Congrats again. Thanks.
spk10: Thank you. Our next question or comment comes from the line of Brian Peterson from Raymond James. Hi, Dylan. Peterson, your line is open.
spk21: Oh, great. Thank you. Hi, Dylan. Thanks for taking my question. So just one for me on linearity. You know, we've heard some comments on sales cycles extending, also some really strong execution on M&A. You know, I'd just be curious. you know, on the linearity throughout the quarter? Did things get better? Did things get worse? And, you know, as we're, you know, we've been to the month of July, anything that you can say in terms of the third quarter and how the linearity has progressed?
spk17: Yeah, I think throughout the quarter, it was pretty stable. You know, I think relatively early on, we started talking about the elongation of some sales cycles. And, you know, part of that is that we're just really close to our, uh, sales cycles. They're short, they're short to begin with. And we're, you know, instrumented to really focus on those. And I guess we've seen in July, pretty much the same environment that we saw throughout the second quarter, uh, which, you know, I think we feel really good about continuing to be able to execute. And particularly as, you know, one of the things that I've talked to some people about before is, Oftentimes, it's the rate of change that causes a problem. So when people are surprised by the macroeconomic environment, they tend to make decisions less quickly. As we see stability in that macroeconomic environment, I actually view that as a modest tailwind for us.
spk09: Thank you.
spk10: Thank you. Our next question or comment comes from the line of Ramo Linschow from Barclays. Mr. Linschow, your line is open.
spk15: Thank you. Congrats for me as well, by the way. Great execution in this environment. Can we talk a little bit about the European expansion that you have planned for this year? With what we see in the macro environment, are you shifting resources in terms of focusing on other areas or other regions, other geographies, maybe. That's question one. And question two is like, what do you see in terms of uptake on the newer product in the more mid-market accounts? Is that kind of, you know, on the enterprise side, I get it, on the mid-market side, what's the progress there? Thank you. Bye.
spk17: So on the European expansion, know we'll continue to invest into our european office and continue to drive capacity there i think we're really excited about the opportunity long term in europe and uh you know there may be some short-term crosswinds but i think having the right capacity to drive um to drive you know serious growth there over the long term is the right uh the right path for us and then With respect to the advanced functionality, I think in the mid-market, we see great opportunity there, and there are a number of clients that are really stepping up to drive better and better go-to-market motions. Realistically, the real focus of our efforts historically have been to develop and acquire advanced functionality that's similarly easy to use as our core data platform. And so, you know, it's really easy for clients to step into Chorus or step into Engage and really drive value very quickly, whether you're a small business or a mid-sized business or an enterprise client. And I think we've seen a really good uptake throughout the spectrum.
spk01: And I think what we talked about is in Engage, we actually saw, compared to Q2 of 2021, three times as many deals for Engage inside the mid-market and enterprise than we saw last year, where we kind of rolled Engage out to the SMB, did a bunch of learning, continued to get the product to parity with competitors in the market, and then now we're seeing a real uptake in the mid-market. I think what you'll also continue to see us do there is as we integrate Engage more closely into the core platform, and as we rolled out significant functionality to do just that, it becomes easier and easier for companies to continue to take on new products as it sits centrally inside of the core platform they're used to using.
spk09: Okay, perfect. Makes sense. Thank you, Congress. Thanks, Rob.
spk10: Thank you. Our next question or comment comes from the line of Terry Tillman from Truist Company. Mr. Tillman, your line is open.
spk04: Great. This is Robert Dion for Terry. Thanks for taking the question. Just one for me. Cameron, in the past, I believe you've mentioned that a little over half of sales come from the company's inbound motion. Has that been fairly consistent over time? And anything you can share about trends in that statistic this quarter? Thanks.
spk17: Yeah, that's definitely been consistent over time. And we continue to see, you know, solid growth in terms of that inbound pipeline is pretty consistent in Q2. So we're continuing to invest both in, you know, the inbound capacity and demand generation, as well as our outbound motion as well to continue to drive new sales and attack that really large market that's out there.
spk09: Thanks. Congrats on the quarter.
spk10: Thank you. Our next question or comment comes from the line of Rishi Jaluria from RBC Capital Markets. Mr. Jaluria, your line is open.
spk08: Wonderful. Thanks so much for taking my questions. In the interest of time, I'll make it one question. Which is, you know, look, you talked about how important the software vertical is, right? I think 45% of the business comes from software companies, mostly larger ones, definitely not VC-backed ones. But, you know, we are seeing, you know, software companies putting on hiring freezes or at the very least slowing down hiring, including at the sales level. Can you maybe just help us understand as we think your growth algorithm specifically, especially within that vertical area? You know, given the slowing down of hiring, how should we think about the impact there? Or is there just still so much greenfield opportunity with sales reps, you know, even within your existing customer base that that's not too much of an issue? Thank you.
spk01: Let me take it from a high level and see if Cameron wants to chime in. I think the first point there is the overwhelming majority of our customers are not deployed wall to wall across their sales teams. And so we have this land and expand motion where we land in an incredibly efficient way up front and then we grow those accounts on the account management side. And so we are almost never going wall to wall when we sign a customer and then we look to get sort of more and more incremental seats as we prove out value and they become customers. The next thing that I would say is of any industry, Software today is the one where go-to-market efficiency and better unit economics are more in focus than they've ever been. And because we run arguably the most efficient go-to-market motion, more and more software companies are coming to us asking us how we do it. That gives us a great opportunity to put RevOS front and center.
spk17: Yeah, I don't have much data, although I do think it might be worth noting that Software continues to grow well. We still have a number of customers that are continuing to grow. But in almost every other industry, it's growing much faster because we're less penetrated. So I actually think your 45% number is a little outdated. I think we're below 40% today in terms of software concentration. And we continue to see, while that continues to grow, all of the other industries are growing even more quickly, and it'll continue to become a bigger portion of the pie.
spk09: All right, wonderful. Thank you so much.
spk10: Thank you. Our next question or comment comes from the line of DJ Hines from Canaccord Genuity. Mr. Hines, your line is open.
spk19: Hey, thanks, guys. Congrats on the results. Just one from me. So with the introduction of all the additional advanced functionality and the new personas, I'm wondering, have you seen any material changes in the timeline to the typical customer's first follow-on sale? In other words, are they getting a flavor for Zoom Info and coming back and transacting any faster now?
spk01: Yeah, I don't think we've seen any material change in how fast they transact with us again. I think there are a number of examples of customers signing on for SalesOS and then immediately adding on Engage or Chorus, but I don't think the overall metrics changed over time.
spk20: Yep. Got it. Thank you.
spk10: Thank you. Our next question or comment comes from the line of Taylor McGinnis from UBS. Mr. McGinnis, your line is open.
spk13: Hi. Thanks so much for taking my question. Cameron, you mentioned earlier that flexible payment terms aren't having much of an impact at the moment. And I know billings can be a noisy metric, but it looks like calculated billings have declined sequentially these past two quarters. And I think this quarter would have gotten some benefit from comparably in dogpatch. So anything you can just add on what might be impacting that metric, if there's any co-terming or anything like that, and if there's any read-through here to the lighter free cash flow raised relative to operating income.
spk17: Yeah, so I think As you said, billings and bookings can be imprecise metrics. Realistically, to really compare, you need to look back not just at the last quarter, but everything that was happening before that. And if you remember, you know, really the first half of 2021 got a real benefit from a book billings perspective because of the payment flexibility that we provided to customers in 2020. So I would be, again, careful with that and certainly focus much more on the sequential revenue growth in terms of thinking about in-period activity. As we think about unlevered free cash flow, certainly we look at a wide range of potential outcomes. And I think those outcomes would include some incremental flexibility that we're not seeing yet, but may need to provide to customers, and certainly that influenced our home over free cash flow guidance as well.
spk09: Great. Thanks so much. Yep.
spk10: Thank you. Our next question or comment comes from the line of Parker Lane from Stiefel. Mr. Lane, your line is open.
spk12: Yeah, hi, guys. Thanks for taking the question. Curious if you could provide some context on the recent growth of the Community Edition user base. how you'd expect that to trend in a recession. And then lastly, just, you know, if that does slow down, what impact does that have on the company's ability to expand the core data asset? Thank you.
spk01: Yeah, look, the community addition is just one of many different data sources that we use to build out the data asset. We've seen pretty consistent results of community members. And so we don't anticipate that slowing down. or changing. I think that there are a number of additional data sources that come together with the Community Edition to deliver the data in our platform. And so it's pretty much a big mosaic of data that comes together. No one data source is a majority of the data that comes into our platform.
spk12: Understood. Thanks again.
spk10: Thank you. Our next question or comment comes from the line of Brent Braceland from Piper Sandler. Just a second. Mr. Braceland, your line is open.
spk16: Thank you. Good afternoon, Henry. I wanted to go back to the new ACV build, particularly coming from the new products. You called out the momentum around Chorus and Engage and RingLead and MarketingOS. What's driving that as an offset to potential headwinds on the sales OS or seat side? Is it a change in sales incentives that's kind of driving kind of improvement internally? Is it just resonating externally with customers? And how sustainable is that new ACV build from these new products looking out over the next six to nine months? Thanks.
spk01: Yeah, I think when we go out to either make an acquisition or build a new product line, one of the things that we're really focused on is, is this a product line that the vast majority of our customers are going to want? Is this a product or a piece of software that is critical to a go-to-market motion? And when you think about Engage and you think about Chorus with Conversation Intelligence, when we built Engage, when we acquired Chorus and integrated into the product, We had tremendous conviction that these were software platforms that every sales team was going to need to use in the relatively near future. And so when we add those products, what you're seeing is that actually just come to fruition. When a company makes an investment in sales intelligence into the core sales OS platform, The next thing that they want to do is to activate that data and they're using gauge to do that. And the next thing they're going to want to do is to optimize the middle of the funnel and the bottom of the funnel. And they're using chorus to do just that. And so we have a lot of conviction around the products. We bring the market, we use them internally. We're the first alpha and beta customers. And so once we get in the hands of our sales reps, they're able to take it to market in an incredibly effective way. And you're seeing that in our numbers with those products and, Those are even an earlier inning than sort of the core sales intelligence platform that we're selling.
spk16: Helpful color. Thank you.
spk10: Thank you. I'm sure no additional questions in the queue at this time. I'd like to turn the conference back over to Mr. Henry Shuck for any closing remarks.
spk09: Great. Thank you.
spk01: I know that a number of technology companies have been in the news lately about their hiring plans. But if people are out there and looking for opportunities, we are growing. We are hiring. We are a great place to work. And you should visit zoominfo.com backslash careers. Come join our winning team. Thanks for everyone to everyone tonight.
spk10: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.
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