Q4 2024 Earnings Summary
- ZoomInfo is experiencing strong growth in its upmarket segment, particularly with increased demand for their Copilot and operations products. They are reallocating resources to capitalize on this opportunity and expect to become the de facto partner for enterprise data and AI in the upmarket.
- The company has a durable competitive advantage in the upmarket due to its strong product-market fit, breadth and depth of data, rapid data updates, valuable data types like intent data, industry-leading regulatory and compliance posture, and pace of innovation around AI, which drives wins in the upmarket segment.
- ZoomInfo saw the first sequential improvement in net revenue retention since Q1 2022, increasing from 85% to 87%, driven by a significant improvement in shifting to an upsell opportunity in the upmarket, indicating better customer retention and potential for growth.
- Declining Downmarket Segment Expected to Worsen in 2025: The company's downmarket business (customers with fewer than 100 employees) declined by 9% in 2024 and is expected to decline even more in 2025. Management stated, "We're expecting that 9% to be a little bit worse in 2025". This continued decline could negatively impact overall revenue growth.
- Persistent Revenue Headwinds from Downmarket Disqualification Policies: Policies disqualifying certain downmarket new business have led to a revenue headwind of $2 million per month, with no anticipated changes in 2025. When asked if the amount had changed, the executive responded, "That hasn't changed. We don't anticipate any changes to that". This ongoing headwind may continue to pressure revenue growth.
- Net Revenue Retention Remains Below 100%, Indicating Limited Growth from Existing Customers: Although Net Revenue Retention (NRR) improved to 87% in Q4 2024, it remains below 100%, suggesting the company is not achieving net expansion within its existing customer base. Management noted, "We saw the 2-point sequential improvement in Q4... Our growth retention has held in pretty well over that period". The continued sub-100% NRR may limit overall growth prospects.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Decline of ~2.3%: from $316.4M to $309.1M | Q4 2024 revenue declined modestly compared to Q4 2023. This follows earlier challenges such as elevated write-offs and changes in risk models that were introduced in prior periods and continued to affect revenue as smaller high-risk transactions were disqualified, echoing trends seen in Q3 2024. |
Operating Income (EBIT) | Drop of ~82%: from $70.5M to $12.9M | Operating income collapsed dramatically as lower revenue combined with significantly higher operating expenses – including surging general & administrative costs, increased restructuring and lease-related expenses – compounded challenges seen in earlier periods (e.g. Q3 2024). |
Net Income | Rebound from a loss of $5.5M to $14.6M | Net income reversed course in Q4 2024 despite the revenue and operating headwinds. The turnaround likely reflects improved non-operating outcomes such as reduced one-off expenses or favorable tax adjustments compared to the prior quarter, contrasting with the negative net income observed earlier (e.g. Q3 2024). |
Depreciation and Amortization | Increase of ~172%: from $15.0M to $40.8M | Depreciation and amortization expenses surged due to accelerated depreciation linked to lease restructuring and an increased amortization of internally developed software. These factors intensified the expense base compared to Q4 2023 and build upon similar cost drivers noted in Q3 2024. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
GAAP Revenue | Q1 2025 | no prior guidance | $294 million to $297 million | no prior guidance |
Adjusted Operating Income | Q1 2025 | no prior guidance | $96 million to $99 million | no prior guidance |
Non-GAAP Net Income per Share | Q1 2025 | no prior guidance | $0.22 to $0.23 | no prior guidance |
GAAP Revenue | FY 2025 | no prior guidance | $1.185 billion to $1.205 billion | no prior guidance |
Adjusted Operating Income | FY 2025 | no prior guidance | $426 million to $436 million | no prior guidance |
Non-GAAP Net Income per Share | FY 2025 | no prior guidance | $0.95 to $0.97 | no prior guidance |
Unlevered Free Cash Flow | FY 2025 | no prior guidance | $420 million to $440 million | no prior guidance |
Capital Expenditures (CapEx) | FY 2025 | no prior guidance | Approximately 5% of revenue | no prior guidance |
Non-GAAP Tax Rate | FY 2025 | no prior guidance | Approximately 13% | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
GAAP Revenue | Q4 2024 | "$296 million to $299 million" | 309.1 million | Beat |
GAAP Revenue | FY 2024 | "$1.201 billion to $1.204 billion" | 1,214.3 million(sum of Q1–Q4) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Enterprise and Upmarket Growth | Mentioned consistently across Q1 , Q2 and Q3 as a core focus with steady growth in enterprise and mid-market segments. | Q4 emphasizes an even stronger focus on enterprise with mid‐single-digit upmarket growth, reallocation of resources, and enhanced differentiation. | Consistent focus with increased emphasis. This continued commitment to upmarket growth is both a bullish strategic anchor and a driver for future profitability. |
Copilot Product Performance and AI Integration | Repeatedly highlighted across periods – Q1 showcased early positive user feedback , Q2 reported solid upsell performance and integration , while Q3 detailed expanded usage and strong customer engagement. | Q4 reports record ACV achievement, expanded use cases across multiple personas, and new AI-driven enhancements that boost overall productivity. | Growing adoption, extended use cases, and positive sentiment. The evolution of Copilot remains a major engine for upsell and operational efficiency with increasingly bullish sentiment. |
Downmarket/SMB Segment Decline and Credit Risk | Consistently noted as a challenge – Q1 attributed weaknesses mainly to macro factors , Q2 focused on elevated write-offs and credit risk with operational changes , and Q3 detailed higher disqualification rates and headwinds. | Q4 reports a 9% decline in the downmarket segment with continued disqualification of risky SMBs and associated headwinds. | Steady challenge with improved risk models. Although the segment remains a drag, improved credit controls and risk models moderate the bearish sentiment. |
Net Revenue Retention and Upsell Trends | Every period underscored the importance – Q1 noted stabilization and upsell successes , Q2 reported an 85% NRR and healthy upsell trends , and Q3 maintained steady NRR with strong Copilot‐driven uplifts. | Q4 shows an improved NRR of 87% and continued strong upsell activities – particularly via Copilot expansion and growth in high ACV cohorts. | Gradual improvement and stabilization. Enhanced upsell efforts and retention, especially among enterprise customers, point to positive momentum for future revenue growth. |
Data Moat Expansion and Data-as-a-Service (DaaS) Initiatives | Q1 mentioned DaaS as vital for enterprise efficiency. Q2 provided detailed insights on DaaS growth, integration into AI initiatives, and strong retention metrics. Q3 clearly emphasized expanding the data moat with new signal integrations and partnerships. | In Q4, while “data moat expansion” is not explicitly reiterated, the emphasis remains on a robust data foundation that drives competitive advantages, especially in enhancing AI and enterprise offerings. | Stable emphasis on leveraging data. The focus on high-quality data remains central, though explicit discussion of “data moat expansion” declined, suggesting consolidation of earlier efforts rather than a policy shift. |
Operational Improvements vs Margin and Profitability Pressures | Q1 reported strong margins with operational efficiency. Q2 and Q3 highlighted progress through new risk models, despite temporary margin pressures from write-offs and restructuring. | Q4 reflects continued operational improvements resulting in higher adjusted operating income and margins (37% in Q4), though mindful of seasonality and restructuring effects. | Consistent operational gains with a cautious outlook. Improvements are evident, driving margins upward even as the company navigates short-term profitability pressures. |
Financial Guidance Revisions and Write-off Concerns | Guidance revisions appeared in Q1 and Q2 with notable $33 million write-off charges impacting guidance. Q3 maintained a conservative outlook with ongoing monitoring of write-off impacts. | Q4 provides clear guidance for 2025 with less explicit focus on recent write-offs; prior concerns appear to be moderating through improved risk controls. | Diminishing emphasis on write-offs. While caution remains, reduced focus in Q4 suggests improved stabilization of write-off impacts, allowing for more confident future guidance. |
Regulatory and Compliance Posture | Q1 mentioned settlement-related expenses tied to regulatory compliance issues. Q2 highlighted strong data compliance as a selling point for DaaS and partnerships. Q3 had no specific mention. | Q4 reintroduces regulatory and compliance as a key competitive differentiator, reinforcing its role in securing upmarket customers and boosting overall market position. | Shift from concern to competitive asset. Earlier regulatory challenges have given way to leveraging robust compliance as a clear, differentiating strength for future growth. |
-
Upmarket and SMB Growth
Q: How are trends in SMB and enterprise, and growth rates?
A: We're seeing strength in the upmarket, especially with our operations and Copilot products. SMB is stabilizing but becoming a healthier, smaller portion of our business. We're discounting its contribution to growth and expect upside from execution in the upmarket. For 2025 guidance, we're modeling mid-single-digit growth in the upmarket, while downmarket was down 9% in 2024 and we expect it to be a little worse in 2025. -
AI Agents and Go-to-Market
Q: How do AI agents impact your role in go-to-market?
A: Building AI agents for go-to-market relies on third-party data, which is constantly changing and requires signal data. Our data asset is necessary for successful go-to-market AI agents, making us a key input in their development. We're seeing increased uptake in our operations business as customers recognize the need for our data to build effective AI agents. -
Copilot Migration Path
Q: How will customers migrate to Copilot?
A: We are migrating customers to Copilot both off-cycle and at renewal, seeing strong double-digit growth on migration. We're maintaining pricing discipline, demonstrating the value and ROI of Copilot through pilots before monetizing during renewals or off-cycle upsells. -
NRR Improvement Drivers
Q: What drove NRR improvement from 85% to 87%?
A: The 2-point sequential improvement in NRR is due to improved upsell opportunities upmarket and mitigated downsell. Upmarket churn remained stable, but we shifted from defensive downsells to upsells. Downmarket retention stabilized in Q3 and Q4. -
$100K Customer Growth
Q: What drove the uptick in $100K customers?
A: We're successfully upselling existing customers above $100K, acquiring new upmarket customers, and experiencing less downsell below $100K. This is due to improved upsell opportunities, cross-selling additional functionality like operations and Copilot, and reduced downsell exposure. We believe this pace can be sustained. -
Seat Dynamics and NRR
Q: How are seat dynamics affecting NRR?
A: In the downmarket, we're typically fully penetrated in seat counts. Upmarket, there's significant seat expansion opportunity as we're rarely fully penetrated. Copilot expands our addressable personas to include account managers and customer success managers, increasing seat expansion opportunities. -
DeepSeek Impact
Q: How might DeepSeek affect your business?
A: We've tested DeepSeek internally and are excited about its potential to drive down prices among LLM providers. We always use the model with the highest efficacy and lowest price. DeepSeek isn't a production LLM we're using, but we expect it to contribute to cost reductions across the models we use for Copilot. -
$100K Customer Characteristics
Q: What are characteristics of $100K customers?
A: The $100K+ cohort is heavily upmarket. We have opportunities to upsell with seat expansion into AE, AM, CSM, RevOps use cases with Copilot, and cross-sell additional functionality like operations OS. We're focused on larger customers where these upsell and cross-sell opportunities exist. -
Upmarket Competition
Q: What are you seeing in competition upmarket with Copilot deals?
A: Our product-market fit and differentiation are stronger upmarket. We have a durable competitive advantage due to our data's breadth and accuracy, regulatory compliance, and pace of AI innovation. This drives our wins upmarket, especially in Copilot-first deals. -
Downmarket Disqualification Impact
Q: Has the $2M monthly headwind from downmarket disqualification changed?
A: No, the amount hasn't changed from Q3, and we aren't expecting changes to that level in 2025. -
Upmarket Growth Durability
Q: How durable is your upmarket growth path?
A: Our upmarket growth reflects slow and steady execution, with resourcing, product innovation, and service focus contributing to improvements across all metrics. We expect this momentum to continue into 2025, with Copilot and our operations business accelerating growth further.