ZoomInfo Technologies Inc.

Good day, and thank you for standing by. Welcome to the Zoom Info First Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll 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 is being recorded. I would now like to turn the conference over to Jerry Szczeski, Vice President of Investor Relations. Please go ahead.

Great. Thanks, Lisa. Welcome to ZoomInfo's financial results conference call for the first quarter 2025. With me on the call today as we announce our financial results live from the NASDAQ market site in Times Square, are Henry Schutt, founder and CEO of ZoomInfo, and Graham O'Brien, our interim CFO. Earlier today, we rang the closing bell at the NASDAQ, and we announced that tomorrow morning, ZoomInfo will begin trading under the symbol GTM. During this call, any forward-looking statements are made pursuant to the safe harbor provisions of US 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 the Investor Relations website at ir.zoominfo.com. All metrics on this call are non-YAP unless otherwise noted, or reconciliation can be found in the financial results press release or in the slides posted to our IR website. And with that, I'll turn the call over to Henry.

Thank you, Jerry, and welcome, everyone. We delivered another consecutive quarter of better-than-expected financial results, continued momentum upmarket, and improved net retention. We dramatically expanded the capabilities of our go-to-market intelligence platform to empower our customers to accelerate revenue growth. ZoomInfo now includes even more sophisticated AI-powered applications and agents with the technology, integrations, and intelligence for go-to-market teams. As we continue to drive innovation in the ways businesses market and sell, today we announced at the NASDAQ that we are changing our trading symbol from ZI to GTM to reflect our commitment to building the core software platform for go-to-market. Much like Workday is synonymous with enterprise HR and ServiceNow for enterprise IT, ZoomInfo will be synonymous with enterprise go-to-market. In Q1 2025, GAAP revenue was $306 million and adjusted operating income was $101 million, a margin of 33%, both above the high end of our guidance. Our shift up market continued on the right path during the quarter. We now have 1,868 customers with more than $100,000 in ACV, a sequential increase of one customer and a year-over-year increase of 108 customers. This is after a period of declines and marks our fourth straight quarter of sequential improvement. In our million-dollar cohort, we drove sequential and year-over-year growth in the total ACV as well as the average ACV per customer. This quarter, we again drove better-than-expected performance upmarket, which grew 3% year-over-year and now represents 71% of our business. With more than 70% of our business growing and accelerating growth, we are increasingly confident in our longer-term growth aspirations. Net revenue retention also improved in the quarter while rounding to 87% for the second consecutive quarter. During the quarter, we closed enterprise opportunities with Lionbridge, Wipro, Integrity Express Logistics, RSM, Sprinklr, Wiz, and Dice Career Solutions. Stripe is now deploying Zoom Info Copilot across more than 300 sellers to increase conversion, win rates, and deal size by leveraging real-time insights. Copilot will deliver better account prioritization, create more opportunities for upsell and cross-sell, and help to close more deals at higher price points. One of the largest food delivery vendors is activating our full go-to-market intelligence platform to support their expansion efforts and extend their reach into international markets. They have deployed thousands of ZoomInfo seats to drive account prioritization and more efficient prospecting, while our strategic account insights improve win rates. And we expanded our relationship with Intuit to become a more strategic partner on their outbound sales motion. We're helping them build durable and repeatable sales plays to mid-market accounts and helping them leverage intent data, implement advanced data tracking, integrate APIs for real-time data management, and build sophisticated audience segments for programmatic advertising. Our traction is powered by the increasing pace of innovation across data, intelligence, and go-to-market AI. Our Copilot product is successfully rolling out into our customer base and accelerating our expansion beyond SDR prospecting into AE and AM use cases. This persona represents a 3X opportunity in our customer base, and Copilot has converted AM and AE users on the platform to be as active as our SDR prospecting user. Earlier today, we launched GoToMarket Studio, to enable revenue leaders and operators to architect their go-to-market with intelligence and AI. The single biggest ask from our customers is to unify all go-to-market data so teams can target, prioritize, and execute in one place. Traditional CRM alone is no longer sufficient to run go-to-market. Critical signals like product usage, marketing engagement, and voice of customer insights sit fragmented across enterprise systems. Revenue teams need this data to effectively target, prioritize, and execute revenue campaigns. There are only two ways to solve this problem in modern GTM, either by building a complete in-house solution with a massive engineering investment, which is inaccessible to nearly all organizations, or by deploying ZoomInfo's best-in-class data platform, which was trained on billions of messy data problems and applying it to solve a customer's internal go-to-market environment. To launch GTM Studio, we expanded our data asset into core enterprise operations use cases running on our technology platform. Built through the successful integration of our acquisitions of Ringlead for data management, Chorus, Conversation Intelligence for unstructured go-to-market data, and SetSale for CRM attribution. This positions us as the only vendor with natively integrated data, orchestration, AI, and frontline execution. GTM Studio is the revenue leader and operator solution to run go-to-market. And then Copilot is the frontline activation that turns campaigns into revenue execution. Over the last two years, we have been fixated on making every sales rep more productive, every campaign more targeted, and every workflow more intelligent. This has resulted in record levels of NPS scores these last two quarters, with enterprise NPS up more than six points year over year in Q1. In our pursuit of this vision, ZoomInfo has become so much more to our customers than just a provider of company and contact lookup information. Our go to market intelligence platform supercharges CRM, giving our customers a living, breathing view of who's in market and where sales resources should be allocated across the entire total addressable market. Beyond sales, we continue expanding across the entire revenue cycle, increasing the number of and types of go to market professionals that use our platform every day. Zoom Info Marketing now generates 80% of its revenue upmarket and plays a key role in bringing sales and marketing into tighter, more strategic alignment on the go-to-market intelligence platform. With expanded workflow management, we're embedding our intelligence deeper into our customers' ecosystems, making their operations more connected, more creative, and more powerful. Our innovation is giving revenue teams the advantage they need to move faster, sell smarter, and win bigger. Our trading symbol change reflects our creation of a new category, go-to-market intelligence. This isn't just a name change. It's a commitment to building the best go-to-market engine for all companies. We're very pleased with our execution and how that has translated into strong financial results. We continue to reallocate resources upmarket where we are accelerating the transition as we successfully drive better growth and profitability outcomes. Today, 71% of our business is growing and accelerating growth with demonstrably better profitability than our downmarket business. We are being very intentional with the downmarket portion of our business as we continue to move our business upmarket and develop solutions that are defining the future of go-to-market. ZoomInfo now does what no other software company does. We unify first and third-party data, insights, and automation and execution to serve the entire go-to-market organization, not just sales, not just marketing, not just RevOps. That's what GTM means. It's not a department. It's the entire revenue engine. And go-to-market intelligence aligns and activates the whole engine in real time. Over the last two years, this is a vision we've been relentlessly focused on, and it's the future of go-to-market. With that, I'll turn over the call to Graham.

Thanks, Henry. Q1 gap revenue was $306 million, and adjusted operating income was $101 million, a margin of 33%, above the guidance ranges we provided. Annualized sequential revenue growth of the quarter was 1.1%, and as Henry indicated, net revenue retention improved in the quarter while still rounding to 87%. We delivered strong results in the quarter, and while we remain as optimistic as ever about the trajectory of the business and have not seen any impact to customer behavior in the current environment, we are including an incremental layer of caution in our guidance, raising the low end of our full-year revenue guidance and reiterating our AOI and cash flow guidance. Over the past year, we've transformed the business from higher volumes of transactional new business to a place now where our growth foundation is rooted in more durable, upmarket customer relationships. This transition was notably evident in the first quarter as our upmarket growth of 3% year-over-year accelerated, while we intentionally continued on the path toward a smaller and healthier version of our downmarket business, with downmarket declining 10% year-over-year. In Q1, we lapped a significant volume of downmarket transactions from last year that predated the introduction of our new business risk model in Q2 2024. So as we progress further into 2025, a greater percentage of our first-year expiring population will have experienced more rigorous qualification during their initial purchase in 2024, potentially leading to better renewal outcomes. We see continued opportunity to drive upside in our upmarket business while continuing to aggressively manage the contribution from the downmarket. In Q1, we drove an acceleration in upmarket growth leading to a one-point shift in upmarket mix from 70 percent to 71 percent of the business. We are seeing returns from shifting resources upmarket while qualifying risk out of our downmarket revenue, evident in decreasing write-off activity, efficient cash collections, and more reasonable bad debt expenses. These are all signs that our strategy and execution are delivering the intended results. It's also important to note that upmarket also has better economics than our downmarket business, with a margin difference of several thousand basis points. As we expand more upmarket, that gives us more opportunities to expand margins while still resourcing for growth.

Zoom Info Copilot showed continued traction in the quarter, as did operations.

Copilot continues to attract new to the franchise customers while we continue to achieve uplift on a per-suit basis via our customer migration motion, and we have an exciting product roadmap to finish out the year. Our operations business is growing double digits and continues to be one of the fastest areas of growth within Zoom Info. We expect that the launch of Go-To-Market Studio will further support that momentum in the back half of the year. Within operations, our data as a service solution is showing strong traction with new logos up 24% year over year and average ACB per customer up approximately 10% year over year. Performance was consistent across verticals. Retention in our software vertical improved sequentially for the fourth quarter in a row. From a macro perspective, we continue to monitor verticals to better understand any potential impacts from tariffs and if there's any measurable impact from the evolving economic environment. And while we do think businesses are looking for more clarity on the economic environment, we have not seen meaningful changes to the way our customers operate. Turning to share repurchases. In Q1, the company repurchased 8.6 million shares of common stock at an average price of $11.05 for an aggregate $95 million. With the Board of Directors approving an incremental $500 million share repurchase authorization in February, as of the close of Q1, there was $543 million in remaining share repurchase authorizations. As you will see in our 10-Q filing, following the close of the quarter, we have already deployed another $50 million plus in cash towards repurchases in Q2. As we use the dislocation in share price created over the past month, to retire nearly 7 million shares of stock at an average price of $8.27 per share. To date, we have retired approximately 85 million shares of common stock through share repurchases, one of the factors contributing to our expected growth in adjusted net income per share. Turn to cash flow. Operating cash flow was $119 million in Q1, and unlevered free cash flow for the quarter was $125 million, a margin of 41%. We expect to continue to primarily use the cash flow we generate to retire shares of ZoomInfo as we believe that will generate the best possible return for shareholders as we continue on our path to re-accelerating revenue growth. We ended the quarter with $143 million in cash, cash equivalents, and investments, and we carried $1.24 billion in gross debt. Our net leverage ratio is 2.5 times trailing 12 months adjusted EBITDA and 2.3 times trailing 12 months cash EBITDA. which is defined as consolidated EBITDA in our credit agreements. With respect to liabilities and future performance obligations, unearned revenue at the end of the quarter was $484 million and remaining performance obligations, or RPO, were $1.13 billion, of which $837 million are expected to be delivered in the next 12 months. Before I move to guidance, while our strong operating performance continues to underpin our confidence in the promising trajectory of the business, Given the unique current economic environment, we thought it prudent to add an incremental layer of caution into the guidance. With that, let me turn to guidance for Q2. We expect GAAP revenue in the range of $295 to $298 million. We expect adjusted operating income in the range of $101 to $104 million, and non-GAAP net income in the range of $0.22 to $0.24 per share. For the full year 2025, we are raising the low end of our revenue guidance, and with share account reductions from repurchase activity year to date, we now expect higher adjusted net income per share. For the full year 2025, we expect to deliver GAAP revenue in the range of $1.195 to $1.205 billion, representing negative 1.2% annual growth at the midpoint of guidance, and adjusted operating income in the range of $426 to $436 million, representing a 36% margin at the midpoint of guidance. We expect non-GAAP net income in the range of 96 to 98 cents per share, based on 352 million weighted average diluted shares outstanding. And we expect unlevered free cash flow in the range of $420 to $440 million.

Now, I will turn it over to the operator to open the call for questions.

Thank you. As a reminder, if you would like to ask a question, please press star 1-1 on your telephone. We also ask that you limit yourself to one question and wait for your name and company to be announced before proceeding with your question. One moment, please, while we compile the Q&A roster. The first question today will be coming from the line of Alex Zukin of Wolf Research. Your line is open.

Hey, guys. Thanks for taking the question and congrats on navigating a volatile macro environment. So maybe, Henry, just the first question, why now on the change around the name, the ticker, the category, what's making right now the moment to kind of go double down on this motion? And maybe what are you seeing from the changing conversations as you're having with customers that you're renewing, particularly up market that's driving the acceleration? And I've got a quick follow-up.

Sure, thanks for the question, Alex. I think there's a couple of things. One, we've expanded the platform broadly to not only be a platform for prospecting sellers, but also for account executives, account managers, customer success managers. When we launched Copilot last year, we saw ourselves being pulled into a much broader set of conversations across go-to-market, into marketing, into RevOps. And then we released today our go-to-market studio products which really allows any revenue operator, any revenue leader to bring their first and third party data together to leverage AI across that data asset and then to orchestrate campaigns with sellers, account managers, SDRs and marketing teams. So we're incredibly excited about the broad range of solutions that we're providing now beyond just sales and beyond just information, but throughout go to market. And so it felt fitting that our ticker symbol change to encompass the solutions that we're now offering. In the upmarket, I think what we're hearing from our customers is two things. One, they are thirsty for data to leverage inside of their go-to-market organizations, particularly as they look to leverage AI to drive efficiency and effectiveness of their sales team. And then when they see the power of that data, they want to leverage a front end application to help their frontline teams execute. And so when we're having conversations, whether it be with Stripe or Intuit or SEMrush, when we're talking with them, they're telling us, yes, we need this data because we know we can drive efficiency if we leverage this data with AI. But we also need the platform where our frontline team can actually execute on the insights that are coming from that data. And so they're investing in our data asset and then our co-pilot platform to execute against that data asset.

Makes total sense. And then Graham, maybe just one for you on NRR. Could you maybe just bifurcate that by what you're seeing with up market versus down market? And then is there any sign of improvements in NRR from here, either in the guidance and kind of what you're thinking and seeing in the pipeline and renewal activity for the year?

Sure. You know, retention upmarket continues to improve. You know, that's something we're really focused on. And downmarket continues to be impaired, but, you know, not getting significantly worse. When we think about improvement going forward, we really think about it from a growth perspective, upmarket versus downmarket. The last time we talked about the upmarket business growing mid-single digits in 2025 in the guidance. I think we're definitely on that path. And then down market, we were down 9% last year. We're down 10% year over year in Q1. And we had an expectation that that would get worse in 2025, and we still feel really comfortable managing the down market business within those original parameters.

Perfect. Thanks, Gus.

Thank you. One moment for the next question. And the next question will be coming from the line of Mark Murphy of JP Morgan. Your line is open.

Thank you very much. I'll add my congrats as well. I'm curious where the co-pilot ACV might have reached in Q1. Was that something that you mentioned and or any thought on kind of overall glide path of that ACV stream for this year?

I can take that one. You know, Copilot continued to grow, you know, at kind of a rate that we expect. I think we're going to disclose milestones as we get to those milestones in the future. But we're really happy with not only the migration pattern, but also just the upsell opportunity that we continue to see there in Q1.

Okay. And how do you feel about this earlier stage Copilot development? because I think commonly we've seen with other co-pilots and agents out there that companies will run into some hurdles. You're trying to understand the security policies, looking at the governance and the data retention, and sometimes they're encountering some bugginess. Are you seeing any of those typical kind of speed bumps, or does it feel like it's full steam ahead?

We feel really good about the trajectory of Copilot, particularly in the upmarket. This was Q1 was a quarter where we saw the most upmarket deals for Copilot that we've seen. And so we're getting much better at the motion of navigating data privacy, data security, and AI governance boards within our clients. And that's not creating a real speed bump for us today.

Thank you very much.

Thank you. One moment for the next question. The next question will be coming from the line of Elizabeth Porter of Morgan Stanley. Your line is open.

Great. Thanks so much for the question. I first want to just ask a little bit on the expense side, just given the better top line, but operating income and free cash flow guidance looked like it was pretty unchanged for the year. So just given the continued shift up market with better profitability and better top line in the full year target, Is there anything to consider as it relates to investment priorities that may be limiting some of the flow through? And then as a follow-up, just as you leverage your own tools, could you speak to the internal efficiencies that you're seeing and how that may be reinvested or passed through over time?

Yeah, I can cover the guidance up front. So I want to reiterate that we saw no impact to the overall business in Q1 from the economic environment. And in a more normal economic environment, we probably would have felt comfortable flowing through more of the beat into the full year guide. So, you know, for the avoidance of doubt, we're not seeing anything material in how our customers behave. This approach to guidance is 100% driven by caution as it relates to the uncertain environment. When we think about revenue versus adjusted operating income versus cash flow, We looked at revenue, and the low end of the range was de-risked by the magnitude of the beat in Q1. We're still expecting to deliver 36% margins in 2025. And then on margins specifically, the seasonality of our business has evolved. I think we've talked about this some over the past few quarters. We expected margins to be several points lower below full-year margins in Q1 and several points above the full-year margin in the back half of the year. So in line with our expectations.

We've deployed Copilot across all of our go-to-market teams. I think what that's really allowed us to do is take the efficiencies gained by that deployment and their use of the platform and allowed us to invest more in our upmarket growth and our upmarket sales resource allocation. And so we feel really good about our continued opportunity to shift more and more resources upmarket as we get efficiencies across the sales team.

Great. Thank you.

Thank you. One moment for the next question. The next question will be coming from the line of Ramo Linschau of Barclays. Your line is open.

Perfect. Thank you. Could I stay on that topic, please? You talked about the extra buffer where you kind of put it in. If you think about a downturn or like kind of tougher times in selling, where did you think the issue is going to be more on down markets? that there you had already like quite a few years of issues or more on the upmarket and how do you brace for that?

Yeah, I think the down market would be more reactive to, um, you know, a macro slowdown than, than our upmarket business. I think we're, I think we feel like we're in better, probably the best shape we've really ever been in from an upmarket downmarket mixed perspective to whether something. So worth reminding, our initial guidance provided an opportunity for down market to decline and be managed down at an acceleration relative to where we were in 2024. And our guidance today continues to allow for that. So we continue to feel comfortable managing the down market business to a place where it's a smaller and healthier version of itself.

And then one follow-up for Henry is like, obviously in the front office space, there's a lot of talk on agents, co-pilots, etc., Like, what do you see in terms of customer understanding or where the different vendors with the different offerings fit in? And what can you do to kind of improve your standing there?

Thank you. I think, look, I think of all the departments in corporate America, go-to-market has been the slowest to leverage AI and agents in their motions. And I think the big reason for that is that It is necessary for you to leverage third-party data and third-party insights in order for you to build an AI agent that's relevant to go-to-market professionals. You can't just rely on your first-party data the same way that you could rely on first-party data to build a support ticket agent or a customer service agent. The data that go-to-market professionals need exists now. outside of their first-party data. Now, that first-party data is incredibly important and it needs to be married to third-party data to actually execute an AI-driven motion, which is why we built GTM Studio is to allow our customers to bring what was historically very siloed go-to-market data together with third-party data and then build those AI motions and AI agents off of perfected, enriched, and a broad data asset that includes both first and third-party data. We think this is the unlock for go-to-market teams to actually go to market with AI.

Makes total sense. Thank you.

Thank you. And our next question will be coming from the line of Cash Reagan of Goldman Sachs. Your line is open.

Hi. Thank you very much. My question would be, With respect to the new emphasis of the company, go-to-market, Henry, which I can certainly appreciate, what new budgets can you go after with this new positioning? And what are the new terms you can go after as a result of that? And also, moving upmarket is laudable, but it's also higher cost of acquiring business. So as you move upmarket, what is the trade-off with respect to profitability that you might be making Investing in new markets, new enterprise customers, new distribution can be a bit of a trade off in the near term. How do you weigh the near term versus the longer term payoff? Thank you so much.

A lot in there. I think the first thing is in the down market, we've been moving more and more of our business to digital self-service. And so in the micro SMB today, we are pushing micro SMB to digital self-service where they're transacting without the aid of or help of a seller. That's new in our go-to-market motion. We feel good about the trajectory that's happening there. That has already allowed us to move and reallocate resources from the down market and move those resources up market. I should remind everybody that our up market business is meaningfully more profitable than our down market business. And so as we move more and more of the business up market, we have the opportunity to increase margins as that business is far more profitable than our down market business. And then on the question of expanding within the enterprise and other budgets that we would unlock, I think our big opportunity that we have a number of opportunities there, first with our go-to-market studio product, that we launched this week. We have the opportunity to bring RevOps professionals, SalesOps professionals, and sales leadership into the ZoomInfo platform to help them build the go-to-market motions and go-to-market campaigns that they've always had trapped in their heads, but would have to sit in a long queue with IT and data science to actually bring to life. And so we're really excited about bringing a much broader spectrum of go-to-market leadership into the ZoomInfo platform. And then also, I mentioned this, but usage of our platform by account executives and account managers who are on Copilot now matches the utilization of our platform by our heaviest SDR prospecting use case. And so that gives us real expansion to bring in a much broader spectrum of the go-to-market teams into Zoom Info and to get more than just top-of-the-funnel prospecting use cases and broaden that to account executive and account manager and CSM use cases.

Super. All the best for the journey, Kendri. Thank you so much. Thank you, Cash.

Thank you. And our next question will be coming from the line of Brad Zelnick of Deutsche Bank. Your line is open.

Great. Thanks so much for taking the question. It's so great that you guys are right here in New York. Nice to see the upmarket momentum here in Q1. I've got two questions. Maybe first for Henry, I was really intrigued by the Intuit relationship that you talked about. I want to understand, is that specific to Intuit Enterprise Suite, their upmarket product? And can you maybe talk more about the economic relationship, what this can develop into, and how many more such relationships are out there that you can go after?

Thanks, Brad. We are really excited about our partnership with Intuit. It's a partnership that has grown with merit over time, and we continue to find new and broadening use cases there. It's not just limited to the enterprise suite at Intuit. It's much broader than that. Particularly, we've been helping them with their mid-market focused business and their outbound outreach and think that we can expand much further to more data management, data cleanliness opportunities within the company. Look, I think Intuit is a good example of what we see across all of our enterprise customers. We are likely penetrated into our enterprise customers, our upmarket customers, and we see no demand ceiling today in our ability to continue to grow within the enterprises. And so our job now is to execute on that opportunity to learn from the way that we're deploying solutions and enabling our enterprise customers and then bring that across the enterprise base. But we don't see any demand difficulties in continuing to grow that upmarket business because we're so lightly penetrated across the enterprise.

Huge opportunity. If I can follow up for you, Graham, as we think about your comments and the forecasts that you put together in the conservatism, the embedded caution, given the backdrop. I just want to be clear that in terms of close rates, pipeline build, or anything, average discount trends, is there anything in the last six weeks here into Q2 that you're seeing that is informing the way that you think about the forecast? And if we think up market versus down market, is there one versus the other that you're perhaps more concerned about?

You know, I don't think we've, we haven't seen anything in the past six weeks with our customers that is different. I think that our caution is informed by the broader uncertainty. And, you know, I think that's really what's informing this, you know, reiteration and slight raise on revenue. What was the last part of the question, Brad?

Just thinking upmarket versus downmarket, if there's one or the other you're more concerned about as you look to the remainder of the year.

Yeah, we continue to feel really bullish around the upmarket opportunity. We got to 3% growth in Q1, and we're really excited about the path we're on to mid-single digits in 2025. Downmarket would probably be earlier to react to some macro worsening. So I think that we recognize that our initial guidance accounted or gave us a lot of room to manage that part of the business. And we're just not going to really rely on down market to contribute to our revenue guidance in any significant way.

Makes perfect sense. Thanks so much, guys.

Thank you. And our next question will be coming from the line of Jackson Adler of KeyBank Capital Markets. Your line is open.

Thanks for taking our questions, guys. Henry, on the upmarket growth, how much of that growth is coming from some of those customers that are actually hiring sales reps and adding new seats to the platform?

I can take that.

It's a mix. Some of our customers are hiring sales reps. A lot of our upmarket growth comes from our operations product, which is up you know, double digits year over year. That's not really a seat-based model. That's usually a, you know, data delivery model on a subscription basis. So we definitely have a mix of customers and prospects that are growing seats. We have a mix of customers that are, you know, signing up for our operations business.

And then also, I mentioned this, we are expanding our use cases across account executive, account manager, and CSMs. seats as well, where historically we may have been limited just to the top of the funnel SDR use case. Today with Copilot, we're able to expand beyond just that top of the funnel use case. And so those seats existed within our customer base. They don't need to be hired for us to sell into, but now we have product that delivers a use case and value proposition for them. And then the product itself is bringing them in and having them engage with the product at levels that are the same as our SDR prospecting use case.

Okay. So, I mean, would it be fair to characterize it as like, you know, sales hiring is not yet a tailwind for you guys at the moment? Like it could be kind of upside as if things improve through the year? Yes, definitely.

Okay, okay, cool.

And then my follow-up, on remaining performance obligation, when should we expect the growth in those, whether it's total or current, when should we expect those to kind of more reflect what you're seeing in the upmarket motion? Thank you.

Yeah, I think, you know, when I look at the current bookiness growth, we've been negative. And then I think we were at 0% in Q1. So the trajectory there is improving. I would expect to get back to positive there. It's mostly a matter of time. Q1 was the last quarter where we were lapping a compare last year where we had a high volume of down market new business transactions that didn't go through our more rigorous qualification process. So we didn't really fill the bucket up again with the same for similar transactions in Q1. Once we get into Q2 of this year, where we start lapping the introduction of the new business risk model last year, and we start to get into heavier upmarket quarters, we should have an opportunity to start to get back to positive current bookings growth.

Got it. All right. Thank you very much.

Thank you. And our next question will be coming from the line of Brent Braslin of Piper Sandler. Your line is open.

Thank you. Good afternoon. Graham, I wanted to double-click into the down market business. I get that you're seeing a good, healthy acceleration up market, but the down market business still looks like it's a $350 million ARR business. How much do you think that business could contract? Do you see that contracting for the next year, for the next couple of years? I think it makes sense to focus up market, but any color on the duration of that business and how it contracts over time. And one quick follow-up for Henry, thanks.

Sure. We expected it to contract in 2025 and contract at a faster pace than it did in 2024. In 2024, it was down 9%. Our guidance in 2025 implied that it would be down in the high negative teens. I think the way we would think about this is getting to an optimal mix up market versus down market of the business. We're at 71%, 29% right now. That first milestone is let's get to 75%. And I think once we get to 80%, that would be, you know, my, my assumption around where down market would probably stabilize as the healthier and smaller version that we have been talking about.

Totally makes sense. Kind of more of an 80, 20 model. And then Henry, for you, um, The company's generating over $100 million a quarter in cash on average here. You've done a dozen acquisitions over the last 10 years, really helping kind of reposition the company. What's your appetite to do both buyback and tuck-in M&A? We'd love to get your thoughts there. Thanks.

Look, I think that we're going to be opportunistic with M&A, particularly talking M&A. But look, right now, we're going to continue to aggressively reduce the share count at these levels, given how much greater our intrinsic value is. than the market value today. We have great confidence. I have tremendous confidence in the future of Zoom Info. And I really believe that the best company to do M&A against today is Zoom Info. And we're going to use our cash to buy back shares of what we believe is the lowest priced, most opportunistic company to buy shares against. Makes sense. Thank you.

Thank you. And our next question will be coming from the line of Taylor McGinnis of VBS. Your line is open.

Yeah, hi. Thanks so much for taking my question. Graham, one for you. So when we think about the evolution of NRR this year, how much of it is an improvement that you're seeing in the different customer segments starting to emerge? So those specific NRRs versus mix. So maybe you could talk a little bit about that. And part of the reason I ask is, as you start to lap the SMB go-to-market changes that you made, I guess how much of a tailwind could that be to SMB NRR and therefore the total too? And then to the extent you can share what NRR is being baked into the guide, I think that would be helpful as well.

Yeah, when I think about the proportion of just better upmarket mix versus improvements within those segments, Right now, it's really being driven by better upmarket retention. If you look back to when we were at 85% for several quarters there, the sequential uptick is coming from better retention upmarket. We are not getting a large tailwind yet from the better mix. I think over time, as we continue to improve upmarket retention, as we take the upmarket mix from the low 70s to the mid 70s, then it starts to become more 50-50. But right now, the biggest driver of our retention improvement is upmarket retention improvement. And then, you know, I don't think we're going to talk or disclose explicitly the retention in the guide. I think you can just think about it as mid-single-digit upmarket growth that is being driven by improving retention in upmarkets, and then downmarket, you know, eight to nine points degradation in year-over-year growth, where we see lower retention and the potential for, you know, that to remain lower than it's been.

Great. Thank you so much.

Thank you. And the next question will be coming from the line of Michael Turin of Wells Fargo Securities. Your line is open.

Hey, great. Thanks very much. I appreciate you taking the question. It's the second straight quarter we've seen of pretty good consistent top line upsides. So I wanted to spend some time just on the commentary you're making around incremental conservatism and the rest of your forecast. Is there any more color you can add on which inputs are changing relative to what you were assuming at the start of the year? And maybe any added commentary you have just around the visibility into rest of your targets, at least on the upmarket side, is just helpful context as we roll it all together.

Thank you.

I think that the methodology and how we develop the guidance hasn't really changed. We basically went through the same process for revenue, profitability, cash flow, adjusted earnings per share. And then considering kind of the unique environment that we're in right now, we just essentially the last step was layer on an incremental amount of caution around the guidance. So I don't I don't think there's one or two things I would point to. I think you should still expect in the guide mid-single-digit upmarket growth, a decline in the downmarket growth trajectory, and consistent margins.

Thank you.

Thank you. Our next question will be coming from the line of Brian Peterson of Raymond James. Your line is open.

Thanks, gentlemen, and congrats on the quarter. Henry, you've mentioned a few times that you're extending the roles that you're addressing. I'm curious if there's one role in particular where you're most excited about in terms of incremental adoption in 2025. And maybe just remind us any sense of what your seat penetration is with your enterprise customers. Thanks, guys.

Sure. Seat penetration in enterprise customers is very low. I would tell you like maybe high single digits, low double digits. And then on roles that we're most excited about, I don't think there's one. Let me give you a couple. I think first, expanding into the account executive and account manager workforce, we think is a huge opportunity. It represents three times the seat opportunity as sdrs and top of the funnel sellers represent and we have a great solution for them that they are leveraging and using um with co-pilots so we're excited about continuing our journey to expand into that area then i would tell you that rev ops sales ops and then by extension sales leadership with GTM Studio will be a target audience of ours. These are people in the company who have the most creative ideas about how to go to market, but they get stuck in a long line with IT and data science and engineering just to see those ideas come to life. And that's a pretty painful experience that we've been really focused on. building around and giving them a solution to be able to get those creative ideas in the market and execute it on as fast as possible. And when we're showing GTM Studio to those leaders, they're incredibly excited about getting their hands on the platform. And we think we're going to continue to have moments where we get to delight our customers like that and are excited to have that opportunity.

Thanks, Henry.

Thank you. And the next question will be coming from the line of Patrick Walraven of Citizens. Your line is open.

Great. This is Austin Cole on for Pat Walraven. Henry, I'm wondering about the kind of genesis for this new chapter of the Zoom info story, if you will. When did you start coming up with this larger go-to-market vision? It seems in some sense like a kind of natural evolution of the platform, but Wondering if there were some maybe potential buyers out there that were inquiring about these kind of capabilities that GoToMarket Studio cannot provide.

I think probably the big thing that we realized was no matter how great of an email you put together, no matter how personalized it is, no matter if it brings in insights from the most rare bespoke sources and is perfectly crafted, that unless a frontline seller or a marketer takes action against that perfect audience, no revenue is generated. And so we were hearing from our customers, hey, I'm pulling in intent and website visitors and all of these different unique data points, but I'm not seeing it turn into revenue the way that I anticipated it would. Yes, it performs better than our last campaigns that were less personalized, but we want to see this move exponentially. And so when we were able to bring GoToMarket Studio together and marry that to Copilot in a way that gives Copilot the ability to be in front of a frontline seller, connected to their Slack, connected to their teams, connected to their email, connected to their text messages, designed so that they could take action quickly with those audiences that their sales leaders and their rev ops and sales ops professionals are putting together for them, we recognize that once you marry frontline execution with that perfect personalized insight created email and insight created talk track, that that's where you can really move the needle and go to market. And so that was sort of the learning that we had that drove us down this road to put those together.

Super interesting. Thank you.

Thank you. And our next question will come from the line of Surinder Finn of Jefferies. Your line is open.

Thank you. When you guys were thinking about kind of the pipeline and the idea that, you know, you're excited about what you see in the upmarket, can you maybe talk about the mix itself? Copilot adoption early on was primarily newer customers, but it sounds like the increase in NRR at existing clients has been a more recent driver. Just how are you thinking about the different, those two cohorts and kind of what's ahead?

Yeah, you know, I think we'd view the net revenue retention as the primary driver of, you know, stabilization and a return to re-acceleration of revenue. Our new business pipeline is more segmented than it's ever been. We introduced this in 2024, but for the down market customers, we're able to score them, qualify them, figure out whether it should be going to a PLG digital motion or if it's more of the higher end of down market, whether we should keep a sales rep in that sales cycle. And then up market, we've really specialized and segmented our account executive base so that we are investing behind some of these longer sales cycles for these larger customers. So we're much more prescriptive and scientific with our customer acquisition engine. And that will eventually, that's starting to show up in improving retention outcomes.

But improvement in retention is the key driver in getting back to our growth goals. Thank you.

Thank you. And our next question will come from the line of Rishi Jaluria of RBC. Your line is open.

Oh, wonderful. Hey, Henry. Hey, Graham. Thanks so much for taking my question. Just one for me. I want to go back to the Q2 revenue guidance and maybe unpack some of the set of assumptions behind it. You saw in this quarter above 1% days adjusted sequential growth. Your guide calls for negative 4% days adjusted sequential growth by my math. At the same time, you are seeing improving momentum upmarket. Your prompts aren't super difficult. And you're seeing success with Copilot as well. Maybe just walk us through kind of the set of assumptions you have behind it. How much of it is conservatism? Especially as you're saying that the guidance philosophy is pretty similar as before. Thank you so much.

Sure. You know, the incremental caution I've talked about was baked into both the full year and the quarterly guides. You know, of course, the magnitude is bigger by nature with the full year than the quarter. But yeah, you know, Q1 was another great revenue quarter. That was driven by great Q4 sales performance and continuing better cash collection and write-off outcomes. So there is a little bit of seasonality in there relative to our market opportunity, which we usually are starting to see more and more at the end of Q2 and Q4. But you could think about this incremental caution that we've layered in as applicable to the full year as well as to Q2.

Got it. Thank you.

Thank you. And our next question will be coming from the line of Allen versus Husky of Scotiabank. Your line is open.

Hey, guys. Thanks for taking the question. Great to hear retention in the software vertical improved sequentially for the fourth quarter in a row. Can you just go a layer deeper on what trends you saw in this segment the past few months? And can you update us on how this vertical is impacting ZoomInfo's total revenue growth? Thanks.

Yeah, so we saw retention in the software vertical improve sequentially for the fourth quarter in a row. Software vertical was one of the largest contributors to the deceleration and decline in growth that we saw starting in 2022. We experienced a lot of downsell pressure there. So in general, we were able to keep most of those logos, but at lower annual spends. As we got into the middle of 2024 and more so now, We don't have that level of downsell pressure, and in fact, we're starting to get to more of an upsell opportunity place again with the software vertical. So the retention improvement is really positive for four quarters in a row. We think we're almost at that place now where software is actually contributing back or back contributing to our aggregate growth as opposed to impairing it.

Great. Thank you, everybody, for joining us tonight. We appreciate it.

Thank you for participating in today's conference call. You may all now disconnect.