ZoomInfo Technologies - Q2 2023
July 31, 2023
Transcript
Operator (participant)
Good day, and thank you for standing by. Welcome to the ZoomInfo Second Quarter 2023 Financial Results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jerry Sisitsky, Investor Relations. Please go ahead.
Jerry Sisitsky (VP of Investor Relations)
Thanks, Amy. Welcome to ZoomInfo's Financial Results conference call for the second quarter, 2023. With me on the call today are Henry Schuck, founder and CEO of ZoomInfo, and Cameron Hyzer, our CFO. 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 Factors section of our SEC filings. Actual results may differ materially from any forward-looking statements.
The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the cautionary statement in the slides posted to our investor relations website at ir.zoominfo.com. All metrics on this call are non-GAAP, unless otherwise noted. A reconciliation can be found in the financial results press release or in the slides posted to our IR website. With that, I'll turn the call over to Henry.
Henry Schuck (CEO)
Thank you, Jerry, and welcome everyone. We delivered $309 million in revenue in the second quarter and adjusted operating income of $126 million with a margin of 41%. Our customers, sales leaders, to sit disproportionately in the software vertical, are reducing spending in the context of a lower growth environment. For high-growth companies in particular, where the demand has been reduced and investors are expecting higher levels of profitability, these cuts have proved substantial and have meaningfully impacted ZoomInfo's ability to expand our solution. Over the last quarter, I've talked to dozens of our high-growth technology clients, all of which share a similar trajectory. I'll highlight one of them, a member of our 100K cohort, as an example.
In 2021, this SaaS company raised over $400 million of funding, was growing 70% year-over-year, had 50 sales reps, and expected that would grow to more than 100. They built that growth into their ZoomInfo agreement. In the back half of 2022, while on a path to get to break even in 2024 and while growing 40% year-over-year, their investors demanded something different: 40% free cash flow by the end of 2023 and scaled back growth to 5%-10% year-over-year. Their sale, their sales team, all ZoomInfo license holders, went from 100 to 20, effectively overnight. Our account managers have been managing through this headwind since the beginning of the year.
As we look forward, reviewing our customer health, we no longer believe that these budgetary pressures and their corresponding downward pressure on renewals will ease in the near term. Our adjusted expectations for the full year, which now call for 12% revenue growth, reflect this belief. While these results reflect a challenging time for our customers, I expected us to do better. The ZoomInfo platform delivers a compelling ROI to our customers, regardless of their growth environment, and we have not done a good, good enough job to date in demonstrating this value to them. There are several initiatives that we have been rolling out, which I'm confident will drive performance improvement. We know that our customers need the most accurate data, both domestically and internationally, with the most coverage. To deliver that for them, we've applied a fresh focus on data over the last few quarters.
We meaningfully increased our matching and phone number coverage since the beginning of the year, adding 37 million net new international contact profiles and surpassing coverage on over 300 million business professionals. We have invested in enterprise-grade engineering processes under the leadership of our new CTO, Ali Dasdan which has improved the stability and performance of our platform. SalesOS application load time decreased by 65%, and contact search latency decreased by 72% in the quarter. We've allocated sales resources to focus on our enterprise business, where we see larger contract values, our most loyal customers, and momentum in our $1 million cohort. In the SMB segment, where we see lower price and lower quality competitors, we still see strong performance, with more pipeline created, higher win rates, faster close times, and higher ASPs.
Metrics that also indicate our value proposition when compared to our competition remains obvious. We've been investing more in post-sales to drive retention rates around our more complex API and Data Cube offerings. We're intentionally growing our customer base among non-software businesses who are less impacted by the environment, and we're resourcing our sales team to match demand on new business, where we continue to see strong performance and where demand is coming in higher than we previously resourced for. We're also increasing our focus on customer adoption and engagement, knowing that customers who engage at the highest rates also retain at the highest rates. This focus has driven our NPS up six percentage points since the beginning of the year. In June, we adjusted staffing levels at the company, further streamlining the organization to operate and execute more efficiently.
We continue to make sure that we are resourced appropriately, and that we have the right team and the right roles to drive our long-term success. As we undertake these improvement efforts, we're also focused on pressing our core advantages to demonstrate the power of our solution across our large total addressable market. First, with growth among clients outside of the software vertical, a segment that is growing 20% year-over-year. Second, with our expansion in our $1 million customer cohort, which increased 40% year-over-year, a reflection that more customers are using the ZoomInfo platform as a critical component of their go-to-market infrastructure. Third, we believe that every AI initiative starts with data, and having an accurate and comprehensive data platform is more important now than ever.
We believe the highly accurate data and insights in the ZoomInfo platform can be the foundational data that companies will use to leverage AI and large language models in their go-to-market motion. I'll provide more details on recent customer stories that will help illustrate what we are doing to press these advantages and grow ZoomInfo for the long term. This quarter, we closed Cox Communications, Principal Financial Group, See's Candies, Singapore Telecom, Snapchat, TikTok, U.S. Cellular, and the Boston Celtics. These leading organizations across finance, telecommunications, social media, and the sporting world continue to choose ZoomInfo, a testament to the large market need that our platform addresses as organizations of all sizes and industries modernize their go-to-market motion. We saw especially strong growth among our transportation and logistics customers, a segment that grew 37% year-over-year.
This included a global logistics company, which, following a workforce reduction of 400 employees, increased their partnership with ZoomInfo by over $250,000 by deploying a centralized data strategy. Leveraging ZoomInfo's deep contact, company, and intent data, they improved demand generation, customer insights, and sales intelligence. As a result, the customer more effectively targeted their total addressable market and successfully integrated multiple CRM instances. We're looking for more opportunities to replicate this motion, helping customers who've experienced a reduction in force on their go-to-market teams redeploy ZoomInfo through a centralized data strategy, maintaining or increasing overall spend. We've also seen strong expansions within our customer base outside of software, including Hitachi, which leveraged ZoomInfo to enrich several data sets to drive more proactive marketing outreach.
They needed accurate data to power their outreach, and we helped them realize the power of continuous enrichment by providing them with a steady stream of the latest, most highly accurate data. Our ongoing enrichment offering, combined with cleansing and routing of that high-quality data, is driving meaningful efficiencies for their go-to-market organization. A Fortune 50 financial services and banking company expanded its usage of ZoomInfo from $100K a year to a multimillion-dollar annual spend as they quickly standardized on ZoomInfo data for company and contact information across their business units. A multimillion-dollar IT services provider used ZoomInfo to clean up their data throughout their marketing automation and CRM systems, using our Data-as-a-Service solutions to decrease their email bounce rates by more than half and discovered that a third of their data in their marketing automation system was duplicative.
As these companies and many across our customer base have realized, ZoomInfo's data is an infrastructural element to their CRM systems, sales campaigns, Customer 360 initiatives, and their AI initiatives. With this, we see increased demand for our data and our Data-as-a-Service business. In response, we've recently dedicated intent Data Cubes to complement our firmographic, technographic, and contact Data Cubes. ZI Labs, our strategic services arm, is also launching an AI-focused practice in response to the growing demand for AI solutions. We have already contracted for service modules with multiple strategic customers, like the software company Boomi, which has leaned into incorporating AI into its go-to-market strategy to drive one-to-one personalization in their customer engagement strategies by leveraging ZoomInfo data. We're also leveraging generative AI to drive frontline efficiencies.
As we've discussed before, we are taking the burden of note-taking away from sellers with Chorus generative AI-generated meeting summaries. Following the release of this gen AI-powered functionality, our NPS on Chorus increased by more than 20 percentage points, hitting a high for the last 18 months. We've now delivered over 1 million meeting summaries since its release in May, and over 10% of our customer base has already integrated meeting summaries with Slack. We're also continuing to drive industry-leading profitability and remain steadfast in our commitment to compounding free cash flow growth. We expect to maintain a 40% margin while we invest in product excellence, strengthen our long-standing AI leadership, invest in data and platform expansion, and add more sales capacity on the new business side, where we see increasing levels of demand.
I remain confident in the value proposition of our platform, the ROI we are driving for our customers, and the improvements we're making to the product and our operations. Amid challenging conditions, we've seized the opportunity to prioritize enhancing our efficiency, refining our product offerings, and optimizing our go-to-market and post-sale strategies. By doing that, we aim to position ourselves to capitalize on the demand rebound as conditions in our customer base stabilize. With that, I'll turn the call over to Cameron.
Cameron Hyzer (CFO)
Thanks, Henry. In Q2, we delivered revenue of $309 million, up 16% year-over-year, and up 1.5% sequentially, as adjusted for days of revenue recognition. Adjusted operating income was $126 million in Q2, with a better-than-expected margin of 41%. GAAP net income was $38 million, and GAAP EPS was $0.09 per share. Non-GAAP EPS was $0.26 per share. As Henry indicated, the environment further degraded toward the end of the second quarter relative to expectations, putting incremental downward pressure on net retention. Software customers took further action to address the challenges in their business, renewing for even less than what we had expected.
This is particularly true of renewals that we are beginning to lap from last year, where some of the previous overbuying had already been addressed, as those customers, on average, further reduced spend this year. Given that we are beginning the second round of renewals in the current economic environment, we are prudently assuming that the renewal cycle through the end of the year continues to prove more challenging than last year. Additionally, during the quarter, we saw continued elevated write-offs for our smaller customers. The pressure on our software customers has manifested in revenue for those customers declining year-over-year, whereas ACV for the non-software industry grew 20+% relative to this time last year. The contribution from the software vertical now represents 35% of our overall business, down from 40% a year ago.
Meanwhile, many of our biggest customers are going deeper with the platform, as evidenced by the 40% increase in million-dollar-plus customers. They are leveraging more operating systems and increasing spend as they are getting tremendous value from the platform. Revenue from advanced functionality continues to help drive growth and now comprises a third of our total revenue. Digging deeper into net retention, we saw fewer upsells and more downsells in Q2, with the mid-market impacted the most. We saw customers for whom renewals were impacted last year further reduce their spend this year, with customers from the 2021 and 2022 cohorts being particularly challenged. Taken together, we are adjusting our guidance for the full year. We are assuming that the climate will become even more challenging in the third and fourth quarter this year.
As such, for the year, we expect to deliver 12% revenue growth at the midpoint, down from our prior guidance of 17% growth. We remain committed to profitability and expect to maintain a 40% adjusted operating margin, even with the lower than expected revenue. We will continue to focus on efficiency and selectively hiring where we expect the investments will make the greatest impact. Turning to cash flow. Operating cash flow in Q2 was $117 million, which included approximately $6 million of interest payments, with lower interest payments related to the successful repricing of our first lien credit agreement in Q1. Unlevered free cash flow for the quarter was $122 million, a 39% unlevered free cash flow margin and representing 97% of adjusted operating income.
For the full year, with lowered expectations for growth, we expect unlevered free cash flow conversion in the 90s as a percentage of adjusted operating income. With respect to the balance sheet, we ended the second quarter with $660 million in cash, cash equivalents, and short-term investments. The end of Q2, we carried approximately $1.25 billion in gross debt, all of which has fixed or hedged interest rates. We again drove an improvement in our leverage ratios with a net leverage ratio of 1.1x trailing 12 months adjusted EBITDA and 1.0x trailing 12 months cash EBITDA, which is defined as consolidated EBITDA on our credit agreements, down from 2.3x and 1.8x, respectively, as of June 2022.
During the second quarter, we repurchased 2.8 million shares of ZoomInfo stock at an average price of $21.99 per share. To date, we have deployed a total of $87 million of the $100 million share repurchase authorization approved in March, and today we announced that our board has authorized a new $500 million share repurchase program. Given our strong free cash flow generation and healthy balance sheet, we expect to continue to opportunistically repurchase shares. With respect to liabilities and future performance obligations, unearned revenue at the end of the quarter was $443 million, and remaining performance obligations, or RPO, were $1.1 billion, of which $849 million are expected to be delivered in the next 12 months. With that, let me turn to guidance.
For Q3, we expect revenue in the range of $309 million-$312 million, adjusted operating income in the range of $124 million-$126 million, and non-GAAP net income in the range of $0.24-$0.25 per share. For the full year, we now expect to deliver revenue in the range of $1.225 billion-$1.235 billion, and adjusted operating income in the range of $493 million-$498 million. We expect non-GAAP net income in the range of $0.99-$1.00 per share, based on 415 million weighted average diluted shares outstanding. We expect unlevered free cash flow in the range of $445 million-$455 million....
Our full year guidance implies 12% revenue growth at the midpoint and an adjusted operating margin of 40%. With that, let me turn it over to the operator to open the call for questions.
Operator (participant)
Thank you. As a reminder, to ask a question, please press star one, one on your telephone and wait for your name to be announced. To withdraw your question, please press star one, one again. Please be sure to limit to one question only. Please stand by while we compile a Q&A roster. Our first question comes from Mark Murphy with JPMorgan. Your line is open.
Mark Murphy (Head of U.S. Enterprise Software Research)
Yes, thank you very much.
Cameron Hyzer (CFO)
Yes.
Mark Murphy (Head of U.S. Enterprise Software Research)
I'm interested, when you look back in retrospect, why do you believe that the month of April or, or April and May together were seasonally stronger, and then demand sounds like it downshifted again thereafter? Because from the, from the standpoint of macro headlines, it's you know, we look around and we have the CPI readings are improving. You know, there's actually good GDP growth in Q2. The Fed is slowing rate hikes. The banking crisis didn't spread so far anyway. What do you think is you know, what is it that is causing incremental cautiousness for your customers later in Q2 or exiting out of Q2?
Cameron Hyzer (CFO)
Yeah. Thanks, Mark. The biggest driver in my mind is we started to lap those renewals that saw more scrutiny last year. Yeah, those, those renewals really started to tick down much more than we expected. I also feel that, you know, we focus really on that new growth segment of the of our customers, and that continues to be more challenging. I think people are focusing more on their existing businesses than necessarily finding new customers. While the kind of June impact had a, had a modest impact to Q2, we have many more of those renewals coming up that were impacted last year that we feel have some incremental risk at this point, based on, you know, this first cohort of renewals coming through.
Therefore, we wanna make sure that we're taking a prudent view of the rest of the year and assume that those renewal trends worsen, which we think is the right way to set expectations for the second half.
Mark Murphy (Head of U.S. Enterprise Software Research)
Yeah. Okay, that makes sense. Then, Henry, when, when we look at, you know, one of the items you're announcing in the earnings special is you have 28 number 1 grid rankings in G2 Crowd. I'm not sure how often we see that. It, it seems to convey industry leadership. Do you think that ZoomInfo's revenue growth of 12% this year is translating into higher or lower market share? Just when, when you compare across and you look, think about that universe of, you know, your direct competitors, whether they be public or private, because it, it feels like this market, you know, has seen kind of the double or triple lightning strike.
It's, you know, maybe at times, a little hard to just understand whether, you know, whether you're actually outperforming, quite possibly outperforming what's happening in the broader industry right now.
Henry Schuck (CEO)
Yeah. Thanks, Mark. I think, you know, first, when I talk to my peers in the front office, particularly, particularly around sales and marketing technology, I hear a very similar sentiment of really tough renewals, really tough selling environment. I mean, I think about our peers, and I think about LinkedIn, and if you look at LinkedIn, they came down from nearly 30% growth in a year ago to 5% growth today. It's largely the same buyers who are buying us for different reasons, but it is that front office sales and marketing side of the house.
I think as it relates to our broader competitive set, when I look at when I think about our selling ability against them and our market leadership, as you pointed out, through G2 or TrustRadius, what I see is when we're in competitive situations, our win rates are increasing, we're getting higher ASPs, our pipeline is increasing in the SMB segment where we see those competitors. I see us really reinforcing our competitive position more so than much more so than any sort of speculation around losing market share here.
Mark Murphy (Head of U.S. Enterprise Software Research)
Yeah. Thank you very much. That's very helpful to, to add that color around, around, LinkedIn, which we did see in the recent Microsoft results. Thank you for that, Henry.
Operator (participant)
One moment for our next question. Our next question comes from Elizabeth Porter with Morgan Stanley. Your line is open.
Elizabeth Porter (SVP of Wealth Management and Financial Advisor)
Great. Thank you very much. I was hoping to unpack retention a little bit more and, and get some color on what's happening on the growth retention side, particularly as some of the 100,000 ACD logos were down again quarter-over-quarter. You know, so does the incremental NRR downside, how much is that impacted by actually gross retention? Thank you.
Cameron Hyzer (CFO)
Yeah. We are seeing, you know, modestly more cancellations this year than we saw last year, so we do expect gross retention to tick down a little. More of the net retention in terms of our expectation is being impacted by, you know, fewer upsells and, and more downsells. It's, it's more we're keeping those customers, but we're seeing the, the renewals being more challenging. Yeah, I think that's the, the real focus with respect to, to gross retention in 2023.
Elizabeth Porter (SVP of Wealth Management and Financial Advisor)
... You got that. Just as a quick follow-up on, on sales efficiency, I believe last quarter, you started to see some stabilization in, in Q1. You know, how did that, that trend in, in Q2, and any sort of read-through as it relates to your investment, continued investment in sales and marketing heads? Thanks.
Cameron Hyzer (CFO)
Yeah. We did see that sales efficiency also tick down in, in June, more than any other month. I think a lot of that is based on more on retention than it is necessarily on new sales. We are planning to continue to grow our sales capacity, and particularly on the new sales side, to meet the demand that we see out there. We expect that, you know, overall sales and marketing spend should, you know, grow more or less in line with revenue during the foreseeable future.
Elizabeth Porter (SVP of Wealth Management and Financial Advisor)
Got it. Thank you.
Operator (participant)
One moment for our next question. Our next question comes from Kash Rangan with Goldman Sachs. Your line is open.
Kash Rangan (Managing Director, Co-Head of TMT Business Unit and Software Sector Analyst)
Hi, thank you very much. Henry, I'm curious to get your take on the composition of the renewals with existing customers versus the downshifting of SKUs versus lower capacity expansion. That is, there's a non-renewal factor, and then there is a shrinkage of the seats. If you could just dice up the three different variables there, how do those trends look? Also, what is the first quarter, maybe this is for Cameron, where the trends really start to normalize, and when you would comp against this compounding effect of these three factors, when do the trends bottom out? Thank you so much.
Cameron Hyzer (CFO)
Sure. I'll, I'll talk a little bit about the, kind of the full cancellations, which we are seeing a little bit more of that, particularly as our small business customers are challenged. The, the bigger issue is more downselling that we see, particularly in technology. A bunch of that is reducing seats, but we also have customers that are, you know, just looking to spend less as they're looking to optimize their cost structure. Oftentimes we'll see not only a seat reduction, but sometimes a, you know, downshift from a lead to advanced, or perhaps removing some of the other functionality that they, you know, either aren't using or don't perceive the same level of value in.
Kash Rangan (Managing Director, Co-Head of TMT Business Unit and Software Sector Analyst)
Yeah, thank you.
Cameron Hyzer (CFO)
The softness for us is more focused on seats, but we do see it in other places in terms of people trying to reduce their spend and really just trying to get to a spend point, particularly as it relates to new sales for them. You know, they're trying to take that down as much as they can, and I think, you know, for us, when does that bottom? We're expecting a, you know, worsening environment through the remainder of the year in this renewal cycle.
Then, you know, our belief is that once we see the other side of that, and once these customers are kind of fully, call it, lapping their higher, layoff watermarks and the rethinking of their cost structure, that there is the opportunity for us to accelerate that sequential growth, particularly in a world where, you know, ideally we'll see a stabilization and improvement in the macro environment as well.
Operator (participant)
Thank you. One moment for our next question. Our next question comes from Joshua Reilly with Needham. Your line is open.
Joshua Reilly (Managing Director and Senior Research Analyst)
Yeah, thanks, thanks for taking my questions here. If you look at the churn that's kind of coming online here, a little bit more than expected, how much of that is seats within the company and contact database subscriptions versus the advanced functionality products? How should we think about the growth trajectory of advanced functionality here relative to the company and contact database subscriptions for the balance of the year?
Cameron Hyzer (CFO)
Certainly we do see a fair amount of pressure within, I'll call it, the core functionality that we offer. You know, a big part of that is seat reductions from clients that are, you know, looking to optimize their spend levels. There is some pressure on what I think of as advanced functionality, but advanced functionality does continue to grow much more quickly than the core data functionality that we offer, as evidenced by the fact that it's now, you know, a third of our kind of total revenue. I think that as we think forward, I think the renewal opportunity for us will continue to be challenged through the remainder of the year based on our guidance.
I'd expect a, a similar dynamic where customers will be looking to optimize their spend, and some of that will come from reducing the, the seats that they're utilizing. I think that when they have the opportunities, they may also look to, you know, reducing some of their advanced functionality, you know, where they can.
Joshua Reilly (Managing Director and Senior Research Analyst)
Just a quick follow-up on that. When these customers, like the one in the opening example, come to you and say, "I want to reduce my seats from 100 to 20," are you letting them cut their contracts before renewal? Or how are you managing these downsells as, maybe more coming in in the near term here than you previously expected?
Henry Schuck (CEO)
Yeah, pre-renew, pre-renewal, what we're trying to do with them, if they've laid off their laid off a chunk of their go-to-market teams, which, you know, we're obviously seeing a lot of, what we're trying to work through with them is this kind of centralized data strategy that I talked about with the transportation and logistics company, where they can exchange essentially their seats in SalesOS for data that cleanses and enriches their CRM marketing automation systems, their Snowflake or Databricks databases. So we're driving them to this centralized data strategy, which, with that transportation and logistics firm, actually increased overall spend with ZoomInfo.
Our goal is to maintain that spend when there is a drastic cut until renewal, and we know that at renewal time, if we can swap in data as a service and enrichment, then we can maintain that spend.
Cameron Hyzer (CFO)
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Joshua Reilly (Managing Director and Senior Research Analyst)
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Cameron Hyzer (CFO)
Yeah, just to be clear, we don't allow customers to reduce their spend before the renewal, but we do encourage people to swap in services that they can use if they're not using all of their seats or some other portion of their functionality.
Operator (participant)
One moment for our next question. Our next question comes from Koji Ikeda with Bank of America. Your line is open.
Koji Ikeda (Enterprise Software Equity Research)
Hey, guys. Thank, thanks for taking the question. I wanted to ask you a question on how to think about when revenue growth could bottom and potentially re-accelerate. When we look at the full year guidance here, the implied exit growth rate is right about 3%. If that proves true, and we look at the setup for 2024, you know, the first half of 2024 really has some tough, tough comps here. I realize you're not guiding to 2024 today, just how should we be thinking about when revenue growth could bottom and start to re-accelerate?
Cameron Hyzer (CFO)
Yeah. At this point, we are not guiding to 2024. Yeah, we do continue to believe that the current momentum in the business is best measured by the sequential revenue growth that we generate. We're expecting that we will have challenging renewal cycles through the end of the year. We do believe that once we get through these renewal cycles and, you know, realistically, I view the peak of kind of layoffs and negativity as being probably Q1 of 2023. Once we're through the renewal cycle that, you know, laps that, I do believe that there's the opportunity to re-accelerate growth, particularly as the macroeconomic environment potentially stabilizes or improves in that time period as well.
Koji Ikeda (Enterprise Software Equity Research)
Got it. Thanks, Cam. Just maybe 1 follow-up here. Net revenue retention, and I realize it was a 104 exit in 2022, and I know you guys don't give it on a quarterly basis, but any sort of commentary or color on, on, you know, what did it look like in the second quarter, and, and maybe even bifurcated between software and other verticals too? Thanks, guys.
Cameron Hyzer (CFO)
Yeah, we continue to see pressure, particularly in the software world. I think if you back into the guidance, you'd see that our expectations for net revenue retention are, you know, closer to 90 or even in the high 80s, you know, through the end of the year, assuming the, you know, incremental pressure that we expect in Q3 and Q4.
Koji Ikeda (Enterprise Software Equity Research)
Got it. Thanks, Cam. Thanks for taking the questions.
Operator (participant)
One moment for our next question. Our next question comes from DJ Hynes with Canaccord Genuity. Your line is open.
DJ Hynes (Managing Director of Equity Research)
Hey, guys. Henry, did, did the advancements in AI in any way, make it easier for data upstarts to ramp up or, or, or companies themselves to, to source more of their B2B data independently with- without the need for a third-party solution? I'm trying to assess, like, whether AI could actually create a competitive shift against you guys in any way.
Henry Schuck (CEO)
DJ, I have spent a ton of time trying to really understand that question and try to really understand how generative AI could help a startup sort of, you know, jump out of the gates with something that was, you know, maybe more unique or accurate or had more coverage. I've had the smartest people here at ZoomInfo spend time on that as well.
Everywhere we look, what we realize is that ultimately, what generative what the large language model, whether it's Bard or OpenAI or anything else, are doing, is that they're collecting data from the public web. We collect data from the public web, too, and we incorporate it into our platform. It's additive, but it's not the reason why customers buy ZoomInfo. They buy ZoomInfo for all of the proprietary data, all the proprietary signals, and the proprietary data assets that we're able to put together through our Community Edition, through our customer contributory network, through our DSP that collects intent data, through our social graphs that gather IP to company data. These are unique proprietary data signals across billions and billions of data points that are not available publicly, and they're not available on the LLM.
If you want to know the 10 largest companies in Atlanta, the LLM is pretty good at telling you that. Any further than that, you get really stuck with sort of, you know, either junky data, not available data, not accurate data. What we know from 17 years of operating in this space is that 70% accuracy, 80% accuracy data just does not do the trick for B2B sellers and B2B marketers. Not only is the data set incredibly proprietary and not available, but also that additional work that we've done to take data sets to 90%, 95% accuracy, that work is necessary for sales and marketing professionals, and it's where we make a really big difference.
DJ Hynes (Managing Director of Equity Research)
Yep. Yeah. Okay, that makes sense. Cameron, one quick one for you, just on guidance philosophy. I mean, I, I hear you talk, it sounds like, you know, you're taking a pretty cautious outlook at the back half of the year. Would you say there's more conservatism in there than may have been contemplated in prior periods?
Cameron Hyzer (CFO)
Yeah, there's more conservatism in there than may have been contemplated in prior periods. I think, you know, we are seeing we're continuing to see a degradation in the trend, particularly with respect to software and technology clients, but just overall renewals. And we think it's a healthy point of view to expect that to degrade in the second half of the year versus, you know, our prior, our prior guidance that assumed a stabilization, which, you know, we did see at the end of Q1 and beginning of Q2. But I think that, given what we saw in June, it's a healthy view to insert more conservatism into the second half.
DJ Hynes (Managing Director of Equity Research)
Yep, understood. Thank you, guys.
Operator (participant)
One moment for our next question. Our next question comes from Michael Turrin with Wells Fargo. Your line is open.
Michael Turrin (Managing Director and Software Equity Research Analyst)
Hey, thanks. I appreciate you taking the question. I just want to go back to the commentary on renewal impacts and the degradation and just see if we can spend some more time just understanding what to assume for the back half, and maybe if there's any way to think through how that compares to today. Part of the question is just intended to understand the software cohort. Is it fair to assume that that sector is more biased towards the end of year? If that seasonal shape is right, just help us think through how you're approaching forecasts into that group with what's embedded here for the rest of the year. Thanks.
Cameron Hyzer (CFO)
Yeah, sure. Yes, the software cohort is a little bit more weighted towards Q4 than, you know, other quarters, but we do see, you know, software expirations and renewals, obviously, in every quarter. What we really began to see at the end of Q2 was that those renewals that were more challenging last year and, you know, where some people had taken out some of the overbuying from previous time frames. Yeah, I think you naturally would have assumed that those might have been a little bit more stable in the kind of, as we come into that second renewal with them. What we've seen is that they've renewed for even less, and part of that is that, you know, their view of the world has probably degraded since, you know, they first saw the kind of challenges in their business.
I think that for many companies, that view of the world continued to degrade through to Q1 of 2023. Based on that evidence, where we're seeing, you know, more challenging renewals for those customers in this kind of first set that we're really renewing at the end of Q2, we think it's a prudent way to view the world, to assume that that gets even worse in Q3 and Q4 as we go forward. That is the assumption that we're, you know, built the guidance off of.
Michael Turrin (Managing Director and Software Equity Research Analyst)
A tiny follow-up. You mentioned June worsening. Is there anything you can add, just if that is held consistent through July or where we currently sit?
Cameron Hyzer (CFO)
I think July is consistent with June, so hasn't necessarily worsened, but it's not certainly not gotten better, and I'd say consistent with where we ended the quarter.
Michael Turrin (Managing Director and Software Equity Research Analyst)
Thank you.
Operator (participant)
One moment for our next question. Our next question comes from Parker Lane with Stifel. Your line is open.
J. Parker Lane (Managing Director and Equity Research)
Yeah, hi, guys. Thanks for taking the question. Henry, when we look at the 40% growth in million-plus customers this quarter, I was wondering if you could give us a better understanding of the composition of those customers. Obviously, there's a lot of headwinds in the technology and software space, when you look at the uptick there, is that primarily that cohort that is evolving into million plus, or are you seeing a healthy amount of sort of non-software and technology companies coming in there as well?
Henry Schuck (CEO)
Yeah, we're seeing a good amount of financial services companies come in there. We're seeing transportation and logistics companies find their way in there. Then, and then we are still seeing sort of large enterprise tech has weathered this storm in a very different way. You know, they're not going from 100 sales reps to 20 sales reps, like the example that I talked about. They continue, they continue to be large customers in our million-dollar cohort. Then that cohort is buying a multitude of our platforms. They're buying SalesOS, they're buying Data-as-a-Service, they're buying MarketingOS. There's not a single customer in the million-dollar cohort that's buying just one platform or one product offering from ZoomInfo, and so they're buying multiple of the products.
In the strategic enterprise, we're seeing that multi-product strategy really play out for us. It's there still continues to be a decent amount of software and technology companies in the million-dollar cohort, we're also seeing these new entrants come in as well.
J. Parker Lane (Managing Director and Equity Research)
Got it. Thanks for the color. I'll jump back in the queue.
Operator (participant)
One moment for our next question. Our next question comes from Alex Zukin with Wolfe Research. Your line is open.
Alex Zukin (Managing Director and Senior Analyst)
Hey, guys, thanks for taking the question. Maybe just at a high level, if we think about the percentage of the business in the tech co- vertical, the 35% down from 40 a year ago, where does that, like, as you exit the year, if we think about, you know, kind of a low single digit growth rate to exit the year, as we think about the rest of, you know, the non-tech cohort growing ACV at 20%, like, I know you're not giving guidance-
... for, for calendar 2024. At a high level, you know, we're trying to all get a sense around the magnitude of the deceleration and at least a map on how it gets back on track. Is the thought process here that, look, tech overbought, they pre-bought, and now, you know, they're right-sizing, and over the next 12 months, you know, tech is gonna go from, you know, 40 to, you know, 10% of the business, and then this 20% that the- that's the rest of the business, is gonna drive a re-acceleration back into the, into the teens? What's, like, build us the map, if you will, at least conceptually, for how you, you know, don't grow low single digits next year.
Cameron Hyzer (CFO)
You know, I would continue to think of the world, Alex, in terms of sequential growth. I think as we, you know, think about sequential growth, certainly through the current renewal cycle, which, you know, would take us through Q4 and maybe Q1, I do think that we're going to have, you know, a, a challenging timeframe. I think that after that, there is the potential for, you know, tech to have cleared out their historical overbuying. Yeah, depending on, on where that business- where their, their own business goes, you know, to the extent that they start thinking about growth in their business again, you know, there's the potential for that segment of our business to improve.
I think with respect to the other industries that are out there, those are industries that we are still very lightly penetrated in, that there's a ton of opportunity for us to, you know, continue to help people modernize and improve their go-to-market motions. You know, while there's inertia, many of those businesses have been around for decades, sometimes centuries, you know, we have good success in helping them go to market in a, in a more advanced way. I think that, yeah, we'd like to, to see that part of the business continue to, to grow at a, at a good clip, that, you know, overall, between those two, we do see some opportunity to accelerate from the, you know, from the sequential growth that we'll see in the second half of this year.
Henry Schuck (CEO)
I think, Alex, one of the things that we're doing internally, operationally, is working with those customers as they downsize so that they stay with us, and we have an opportunity to grow with them in the future. We have another customer example that had literally 600 salespeople in 2021, has 20 today. That's a contract that was in our 100K cohort and is now, you know, a $30,000 a year contract. Our mentality around that is, let's work with this customer, let's keep the contract. We're both on the same page about growing back up with them in the future.
From a gross retention perspective, we're doing everything we can to hold on to those customers so that as they turn the corner and start thinking about growth again, that we're a trusted partner on that journey.
Alex Zukin (Managing Director and Senior Analyst)
That makes sense. Then I guess maybe just from, from the AI angle, but a lot of companies have either talked about products or SKUs or strategies. As I kind of sit back and think about ZoomInfo, you know, you're kind of at the center of making sure that the data pipeline is healthy, that the data is clean, that the data is accurate. When you think about your ability to monetize, productize, and create a new growth lever, you know, from your, what looks like strategic positioning, is that a six months? Is that a quarter? Is that a year? Is that, you know, part of the advanced SKU? Like, how does that ultimately look for you guys?
Henry Schuck (CEO)
Yeah, look, I think about this in a couple of ways. One is everybody is pretty focused on the last mile when it comes to generative AI and go-to-market. So when you hear people talking about it, "Can you write the email for me? Can you contextualize the email for me? Can you make it personalized and one-on-one to my customers for me?" They get really wrapped around and excited about that last mile of generative AI, which, by the way, generative AI, AI is the best at being able to kinda write things when fed the right prompts. What they lose focus on is everything that has to go into the model to actually get you good context, good content on the way out.
We think we're really well positioned, number one, to say, "Hey, if you really focus on that last mile, then you can't get there without an infrastructural element of our data, feeding that, feeding that continuously, keeping it enriched and up-to-date, and giving you a full view of the customer that you're reaching out to." I think secondly, we think we're in a pretty interesting position to actually deliver the last mile as well. Internally, we have a number of generative AI projects that are already out in beta in our customers' hands, that they're testing. Everything from search in our platform to contextualized emails based on Chorus conversations and ZoomInfo data. Those are already out with customers, and the ones that we believe will drive the most value for our end users, we're gonna, we're gonna release.
We expect to have a number of releases in the back half of this year around that.
Alex Zukin (Managing Director and Senior Analyst)
Perfect. Thank you, guys.
Operator (participant)
One moment for our next question. Our next question comes from Taylor McGinnis with UBS. Your line is open.
Taylor McGinns (Research Analyst)
... Yeah, hi. Thanks, so much for taking my question. This might be a tough, tough one to answer, but Cameron, you mentioned some of these customers that may have overbought. As we look throughout the rest of the year, I guess, where do we stand in terms of innings, maybe, and, you know, working through those renewals where customers may have overbought or still rightsizing? Is there still a fair amount of those customers that are coming up for renewal in 3Q and 4Q of this year? Maybe any color you can give on how this upcoming renewal base might compare to what we saw in the first half of this year and 4Q of last year? Thanks.
Cameron Hyzer (CFO)
Yeah. You know, certainly, I think based on our guidance and the view that, you know, the renewal environment could get more challenging as we go into this third and fourth quarter, there are definitely a bunch of clients who still have the potential to, to downsell in the, in the second half. Yeah, I think that when you think about their overbuying, you know, part of this is a question of overbuying against what's their base.
To the extent that their view of the world changed between when they, you know, renewed perhaps in September, November, December, versus where it is coming this year, yeah, I think that's the, that's the conservatives that we want to make sure that we've built in, because we're seeing those customers that, you know, did put additional scrutiny on renewals in June of last year as the environment started to, you know, degrade for most customers. Then we're seeing them come back and further reducing their spend with us. Yeah, I think in terms of this renewal cycle, this renewal cycle probably goes through Q4, if not Q1, and I think that, you know, you can, you can decide what inning that is, but it's certainly not the, you know, seventh or eighth.
Taylor McGinns (Research Analyst)
Great, thank you so much.
Operator (participant)
One moment for our next question. Our next question comes from Raimo Lenschow with Barclays. Your line is open.
Raimo Lenschow (Managing Director and Senior Equity Research Analyst)
Hey, thank you. I'm sorry to kind of beat a dead horse here, if you think about, Cameron, what you saw in Q1, Q2 on renewals and, you know, the day fees of spending that you delivered in that. Then if I think about the second half, where you, you know, kind of hitting some comps, that, that already kind of, you know, had kind of peaking down numbers, why would it get worse? You know, like, you know, at the moment, you are renewing clean renewals, you know, from people that had never cut anything, and you're getting, like, a certain number out there. In the second half, you kind of renew people that already kind of cut once and kind of might cut again. Like, why is it getting worse?
Like, I might have a mental blockage here.
Cameron Hyzer (CFO)
That is that is, you know, what we're laying out, Raimo, is that, you know, a normal mental model of they cut once last year, and therefore that has the potential to be, you know, more smooth this year. That created room in our kind of pre-previous view, that there are other ones that didn't cut last year that we have room to reduce against, and that we should see a kind of stable environment in terms of sales efficiency. What we're saying is that the June cohort, which are really the first ones that, you know, really were able to apply that, that additional scrutiny based on, you know, pressure they were seeing in their businesses last year, those are renewing worse.
In a world where those are renewing worse and the ones that didn't have that sort of scrutiny last year, were a little late to the game, also have potential risks to them, that creates a harder environment than, than we had last year.
Raimo Lenschow (Managing Director and Senior Equity Research Analyst)
Yeah. Okay, perfect. Okay, that's all I had, actually. Thank you.
Cameron Hyzer (CFO)
Sure. Sure.
Operator (participant)
One moment for our next question. Our next question comes from Brad Zelnick with Deutsche Bank. Your line is open.
Brad Zelnick (Managing Director and Senior U.S Software Equity Research)
Great. Thanks so much for taking my questions. You know, Henry, I appreciate your answer to Alex's question about generative AI and delivering the last mile. In a world that's moving pretty fast with Sales Copilot from Microsoft, Sales GPT from Salesforce, and everybody singing the AI song, is there any reason to believe this is maybe another factor slowing down customer decisions as they acclimate to all this change that's happening around them?
Henry Schuck (CEO)
I haven't seen any evidence of that. When I talk to our customers, I haven't seen any evidence that the pace of change with generative AI is driving a slowdown in their decision making. I couldn't tell you that that's something that is happening today or a trend that I would see in the future.
What I will tell you is, whether you're using Microsoft's Copilot or you're using Salesforce's Einstein, or you're using anything else from a generative AI perspective in your go-to-market motion, it has to go grab data that exists somewhere in your systems in order to generate who you should be reaching out to, why you should be reaching out to them, when you should be reaching out to them, what you should be saying to them, what technologies and partners they currently use, whether they just raised funding, how big they are, who the CIO is, who the direct reports to the CIO is, how to actually get in contact with them. So all of that gets forgotten because the LLM can write a really great message. But what goes into it is largely going to be leveraged from the systems you already have.
If you go around any customer and you ask them, How do you feel about the data in your CRM? How do you feel about the data in your marketing automation system? How do you feel about the data accuracy in your data warehouses? Not a single one of them will tell you it's good enough to put into a generative AI model to spit out automated content that gets sent out to their most important customers. We sit in a really important position today as customers go to leverage those tools and begin realizing that they actually can't leverage them in a real way unless they're coming to ZoomInfo. We have a large this quarter, a large multinational media company came to us with exactly that vision. We want bespoke messages sent out to our customers using generative AI.
As soon as they came up to try to deliver that, they realized, well, we don't really have the data to be able to write bespoke messages to the right customers at the right time with the right messaging. We become that infrastructural element. Now, it's incumbent on us to make sure customers understand us for that, but that is a meaningful change in the world that should be a tailwind for us in the future.
Brent Bracelin (Co-Head of Technology Research and Managing Director)
Thanks for that color, Henry. That's, that's really helpful. Cameron, a quick one for you. Is it fair to assume your average discount is actually improving as customers cut seats? Because I have to believe it's critical that the reps your customers have left, that they, they be as productive as possible. Are you able to renegotiate pricing up in the direction of list price as seats compress? Thank you.
Cameron Hyzer (CFO)
At this point, we, we haven't seen a material improvement with respect to that. I think a big part of that is that we have a number of customers that are struggling with their business, and we want to make sure that we continue to be good partners with them. You know, we've gone out to our AM team and started to give them more prescriptive pricing, which is, if it's a company that's growing and using the platform a lot, yes, we're going to, you know, drive a price increase.
If it's a customer that's really struggling and, you know, has lowered their headcount and therefore lowered their usage and everything else, we're going to work with that customer to get them a price point that makes sense for them and that we can grow with them in the future once they, you know, turn that around.
Brent Bracelin (Co-Head of Technology Research and Managing Director)
Okay. Thank you so much.
Operator (participant)
One moment for our next question. Our next question comes from Brian Peterson with Raymond James. Your line is open.
Jonathan McCarty (Analyst)
Thank you. This is Jonathan McCarty on for Brian Peterson. It's kind of related to some of the previous questions. I know there's a lot of time spent on software, but hoping we could touch on some of the other verticals. How have those trended in terms of linearity? I know you mentioned that non-software is now 65% of total revenue. How much of that is business services versus other industries? Any color there would, would be helpful. Thanks, guys.
Cameron Hyzer (CFO)
Yeah, so, so business services actually continues to, to do reasonably well, kind of in line with that, you know, 20+% growth rate. Really depends on the, on the vertical. The best-performing verticals are things like transportation, logistics, and financial services. But we do see that, you know, a number of those, I'll call them more traditional industries, continue to do much better and, you know, continue to look for ways to improve their efficiency with respect to go-to-market.
Operator (participant)
One moment for our next question. Our next question comes from Brent Bracelin with Piper Sandler. Your line is open.
Brent Bracelin (Co-Head of Technology Research and Managing Director)
Good, good afternoon. Henry, I'm going to step back from some of the near-term challenges and, and try to get your, your view on the industry as a whole. How much vendor disruption, given some of the challenges you're seeing, do you think occurs? There's a plethora of sales tech apps out there. Sounds like software industry conditions are challenging and will persist here. Consolidation was a really important tool helping you build this billion-dollar software platform over the last 17 years. How important and how much will you lean in on consolidation going forward? Thanks.
Henry Schuck (CEO)
Thanks, Brent. I think, look, right now, we did a lot of acquisitions over the last 24 months.. We feel really good about those acquisitions, but we're really focused on driving value for our customers against those acquisitions. I think we get there by having an incredibly integrated suite of those applications. Right now, we're not focused on M&A from a consolidation perspective. We do think that there are a tremendous amount of tools in sales tech land, and the most important tools, we believe, are those that drive, drive really obvious value to sales development reps, account executives, and account managers. We think we have a real opportunity to be the single pane of glass for those for those end users. I think we get there by having data insights, by having the ability to use our platform to engage with your customers, and then be able to use tools like Chorus to win faster with those customers.
We're really focused on making all of that really, really easy to use for our customers. I think finally, when it comes to generative AI in this space, one of the places where we really think we can get a lot of value out of it is by simplifying the user experience. A number of the betas that we have out today with customers, we can see opportunities to take something that would take 10, 15, 20 clicks and bring that down to one or two clicks by leveraging generative AI and the user experience. We're pretty excited about that and how that can drive better usage and adoption and engagement amongst our customers.
Brent Bracelin (Co-Head of Technology Research and Managing Director)
Helpful color. My last question here for Cameron is back on the renewals. Are you seeing the downgrades across all software cohorts? Is it concentrated within smaller venture-backed cohorts that are, you know, focusing on profitability? Just trying to understand how broad-based and pervasive the renewal downgrades are across that whole software cohort. Thanks.
Cameron Hyzer (CFO)
It is more focused in the mid-market and, you know, maybe a little less so, but still, you know, we see it in kind of small software companies as well as the smaller end of enterprise. I do think once you get up to larger enterprise software customers, they tend to act like larger enterprise companies in general. Yeah, more focused in kind of the mid-market than anywhere else.
Brent Bracelin (Co-Head of Technology Research and Managing Director)
Helpful color. Thank you.
Operator (participant)
One moment for our next question. Our next question comes from Rishi Jaluria with RBC Capital Markets. Your line is open.
Rishi Jaluria (Managing Director and Senior Equity Analyst)
Oh, wonderful. Thanks so much for squeezing me in. Just one question on my side. How would you think about any potential changes in pricing and packaging, given the tough demand environment and, and continued macro challenges? The reason I ask that is some customers and, and partners we've talked to have maybe balked at the high ticket price in this economy. Would you maybe consider making some changes there, especially just to make the on-ramp for new customers and new use cases a little easier and a little less daunting at first glance? Thank you.
Henry Schuck (CEO)
Hey, Rishi. Thank you for the question. I think look, I think of this in two ways. Number one, we have to do a better job of demonstrating the value that we're creating for our customers, and so we have to do a better job of showing them how our data, our insights, our platform is driving value for them. I think the disconnect around pricing maybe that you're hearing, is that we're not doing a better job in quarterly business reviews and executive conversations to really highlight the to really highlight the value that we're driving for our customers.
That being said, I think there is an opportunity in our SMB, particularly in our SMB segment, to simplify pricing and packaging, to bring together a number of the areas in our platform that we think drive the most value for our customers, and can get them to a higher sense of that value faster by simplifying pricing and packaging. We're, we'll be out in market testing that with a number of our SMB customers in the quarter.
Rishi Jaluria (Managing Director and Senior Equity Analyst)
Wonderful. Thank you so much.
Operator (participant)
One moment for our next question. Our next question comes from Siddhi Panigrahi with Mizuho. Your line is open.
Siddhi Panigrahi (Research Analyst)
Thanks for taking my question. You, you guys talked about you know, renewal was somewhere mid-90s, but now we're expecting maybe high 80s. That means your new sales has to really grow either in line to better what you expected in the beginning of the year. We're wondering, what sort of changes you guys have done after Dave joined, and that gives you increased confidence on achieving that target?
Cameron Hyzer (CFO)
Yeah, Siddhi, you know, I think if when, when I run the model and the, the guidance, I do see that new sales would also be down, you know, modestly from where we were at the, at the beginning of the year. We do see that new sales continues to, to do reasonably well, but the assumption would still be that it's, you know, down from, from last year based on how I run out the guidance model.
Siddhi Panigrahi (Research Analyst)
Okay. Thank you.
Operator (participant)
One moment for our next question. Our next question comes from Patrick Walravens with JMP Securities. Your line is open.
Patrick Walravens (Director of Technology Research and Senior Analyst)
Oh, great. Thank you. Henry, one of the comments we got from a customer was, and I'm sure you've heard similar things to this. They said, "We are locked down on all spending until the market turns the corner." What do you think they, what are these companies thinking? Like, what is it they're looking for? What is turning the corner for them? When do they start to feel like they can spend it?
Henry Schuck (CEO)
Well, if I had that crystal ball, Pat, that would be, we could have a lot more visibility. I think that what they mean is. Here's what I see those types of customers doing. They've basically decided there's no opportunity for growth in the new customer segment, we're not gonna go out and try to try to acquire new logos and new customers. Instead, we're gonna take all of the resources away from new business, we're gonna focus them on the customer business. We're gonna just make sure that we keep all of our customers and that we can grow them marginally, once we see that trend changing in our customer base, maybe we'll start to add more resources on the new business side.
My expectation is that they are trying to see stabilization in their customer base before they go spend resources on acquiring the next logo. I think as they start seeing that, we're obviously in a really strong position to help them. For those types of customers, what we want to be able to do, I mentioned to Alex, is: Let's keep you as a customer. We can do it in a smaller way, and when you get to that point where you're starting to think about new customer acquisition in a more meaningful way, let us step in and help you there again.
In the meantime, from a product perspective, what that means for us and where we're spending a lot of time this quarter and for the back half of the year, is to make sure that our products are designed with a user experience that lends itself really well to growing in your account base. So that there's an account manager interface and user experience, that account managers can plug in the accounts in their customer base, can start getting insights on them, who's growing, who's shrinking, who's hiring new CIO, CMO, CFO, who's raising money, who's got a project relevant to your business?
I think that if over the back half of the year, we can start releasing those types of products, it puts us in a great position to help companies grow their customer base in a more simplified way, and then be in the right place when they go, start growing their new logo acquisition side of the business as well.
Patrick Walravens (Director of Technology Research and Senior Analyst)
All right, great. Thanks for that perspective.
Operator (participant)
One moment for our next question. Our next question comes from Terry Tillman with Truist Securities. Your line is open.
Joe Meares (Analyst)
Hey, guys. Thanks for taking the question. This is Joe Meares on for Terry. I'm just curious, around the Databricks partnership, if you could go into a little bit of detail around the strategic rationale there, and then just from a broader view, how you're thinking about partner strategy currently. Thanks so much.
Henry Schuck (CEO)
Great, thanks for the question. Look, we think that when customers go to run, propensity to buy models internally at their companies, when they go to get a Customer 360 view of their customers, when they, when they wanna use generative AI, that the data that they're using to do that is gonna exist in their CRM systems, their marketing automation systems, or their data lakes and data warehouses like Databricks.
The partnership with Databricks puts our data, and our Data Cubes right where customers are doing that type of analysis or building those types of models, and they can easily bring ZoomInfo data in, enrich their existing data, and set it up so that they always have the most accurate, most enriched data inside the places that they're leveraging to, to build these models, to build territories and segments and propensity to buy models. We wanna live natively where that's happening, and for a lot of our customers, that's happening inside of Databricks.