Sign in

    Zoominfo Technologies Inc (ZI)

    Q1 2024 Earnings Summary

    Reported on Jan 30, 2025 (After Market Close)
    Pre-Earnings Price$16.02Last close (May 7, 2024)
    Post-Earnings Price$12.11Open (May 8, 2024)
    Price Change
    $-3.91(-24.41%)
    • ZoomInfo's largest enterprise customers are growing strongly, with Annual Contract Value (ACV) from $1 million-plus customers increasing by 16% year-over-year, demonstrating significant traction in the enterprise segment.
    • ZoomInfo is introducing Copilot, an AI-powered go-to-market solution built on their unique and proprietary data asset, expected to improve utilization and engagement, especially among SMB customers, potentially leading to improved retention rates.
    • SMB weakness is primarily due to macroeconomic factors, not increased competition, indicating potential for recovery in this segment as conditions improve.
    • Weakness in the SMB sector has negatively impacted ZoomInfo's financial results, with new business below expectations due to a fair amount of SMB weakness, and increased downsell pressure among smaller customers. , ,
    • Mid-market and smaller customers are experiencing budget pressures and downsells, leading to a decline in the number of customers in the $100,000+ ACV cohort. The company continues to see customers falling out of that cohort, which could impact revenue growth.
    • The company's guidance relies on sequential acceleration in the second half of the year, based on reduced expirations and improved upsells, which may be uncertain given the continued weakness in the SMB market and potential macroeconomic challenges.
    1. SMB Weakness Impacting Guidance
      Q: What's causing the lowered guidance and impact from SMB weakness?
      A: The company lowered its guidance due to SMB weakness, particularly since a larger pool of SMB renewals in Q1 underperformed expectations. This weakness was more pronounced than historically seen, leading to an adjusted outlook assuming continued pressure throughout the year. The SMB segment, which accounts for about one-third of revenue, is more sensitive to the macro environment and higher rates.

    2. Copilot Monetization Strategy
      Q: How will you monetize the new Copilot product?
      A: Copilot will be monetized by upselling additional value per seat, targeting customers likely to see the highest value. This may lead to increases in certain renewals or prevent downsells where user counts have decreased. The biggest monetization opportunity is within the existing customer base, though significant revenue impact is expected over time rather than immediately.

    3. Enterprise Growth Drivers
      Q: What's sustaining growth in the enterprise segment?
      A: Enterprise growth is driven by traction in Data-as-a-Service (DaaS) offerings, which are largely enterprise products. Enterprises investing in AI and automation require high-quality data inputs, benefiting the company. Despite layoffs, enterprises seek to make teams more efficient, and the company remains underpenetrated in terms of total available seats.

    4. Net Revenue Retention Trends
      Q: How will Net Revenue Retention improve going forward?
      A: Improvement in Net Revenue Retention (NRR) is expected through stabilization in mid-market renewals, enhanced upselling with new products like Copilot, and the impact of multiyear contracts serving as a tailwind. Renewal rates are improving in the enterprise cohort, and trends are continuing into Q2.

    5. Impact of PLG Motion on Pricing
      Q: Are you facing pricing pressure due to PLG motion and competition?
      A: Competitors have not innovated on data or product but offer lower costs, primarily targeting low-end SMB buyers with PLG motions. The company's PLG approach involves selling at lower initial price points to smaller customers and growing them over time. This results in lower initial pricing in the PLG cohort, impacting overall pricing dynamics.

    6. Sequential Growth Expectations
      Q: What drives the expected sequential growth in the second half?
      A: Sequential growth in the second half is driven by smaller expirations in Q2 and Q3, reducing downsell opportunities. With fewer expirations, upsells and new business have a more significant impact on revenue. April trends align with these expectations.

    7. SMB Churn Mitigation Strategies
      Q: How are you addressing high churn in the SMB segment?
      A: The company is shifting from a pull to a push platform using AI with Copilot, which auto-configures and delivers value without requiring complex system learning. This increases utilization and engagement among SMB customers, directly improving renewal rates.

    8. Demand in Non-Software Verticals
      Q: How is demand in non-software verticals affecting growth?
      A: Non-software businesses are experiencing mid-teens growth, with segments like retail and transportation growing even more. Net retention in these sectors is well above the company average. This contrasts with software customers who have faced significant pressure and operational changes.

    9. Settlement of Class Action Lawsuits
      Q: Does the settlement of class actions affect your PLG plans?
      A: The settlements resolve claims in all states where there were issues, with minor changes to community pages. These changes are not expected to impact the PLG motion or pose issues from a community perspective.

    10. Minimal Change in Sales Cycle Length
      Q: Did sales cycles shorten in Q1 as in Q4?
      A: No change was observed in sales cycle length during Q1; it remained consistent.