Q4 2023 Earnings Summary
Reported on Feb 18, 2025 (After Market Close)
Pre-Earnings Price$16.02Last close (Feb 12, 2024)
Post-Earnings Price$17.78Open (Feb 13, 2024)
Price Change
$1.76(+10.99%)
- Strong growth in non-technology verticals: Financial services, manufacturing, transportation logistics, retail, and other traditional industries are experiencing growth in the teens or even 20+ percent, indicating robust performance outside of the challenged technology sector. This diversification contributes to overall growth and reduces reliance on software and IT services.
- Record new customer bookings and shortened sales cycles: The company added the most new logos on record in Q4, with new business demand and closes staying strong throughout the year. Median sales cycles have shortened significantly year-over-year, improving efficiency in customer acquisition. Additionally, investments in product-led growth (PLG) are expected to further enhance sales cycles and customer onboarding.
- Potential upside from AI initiatives not included in guidance: The company is introducing CoPilot, an AI functionality expected to launch in the middle of the year. Any success from CoPilot is not incorporated in the 2024 guidance, presenting potential upside if it gains traction, particularly in non-technology sectors where AI adoption is low.
- Continued Weakness in Key Verticals: ZoomInfo's software and technology verticals, which are significant contributors to revenue, continue to face challenges. The software vertical has contracted on an absolute basis year-over-year due to layoffs and budget constraints among customers. Customers are scrutinizing every dollar of spending, leading to downsell pressures and affecting net revenue retention. This weakness in key verticals could hamper overall growth.
- Limited Near-Term Impact from New Products: The company's new AI-driven product, CoPilot is not expected to contribute meaningful revenue in 2024, as it will only become generally available in the middle of the year. The guidance does not factor in significant upside from CoPilot, indicating that it may not drive substantial growth in the near term.
- Increased Investment Costs Impacting Margins and Cash Flow: ZoomInfo is investing heavily in AI functionalities, such as CoPilot, which is expected to impact margins by a few hundred basis points due to increased engineering and infrastructure expenses. Additionally, capital expenditures are projected to increase by $25 million to $35 million in 2024, driven by facilities build-outs, leading to headwinds in free cash flow margins. These increased costs could pressure profitability without immediate returns.