ZoomInfo reported strong Q4 2024 earnings with growth in key metrics and focus on upmarket.
From Nasdaq, Inc.: 2025-02-25 23:30:11
ZoomInfo Technologies (NASDAQ: ZI) held its Q4 2024 Earnings Call on Feb 25, 2025, reporting GAAP revenue of $309 million and adjusted operating income of $116 million, a margin of 37%, above guidance. They highlighted growth in key metrics and successful changes made over the past two years. The company sees potential in both upmarket and down-market sectors, with upmarket showing growth and higher margins. ZoomInfo is focused on providing data and AI solutions to enterprise customers, aiming to become a leading provider in the industry.
The company has seen success with Copilot, exceeding expectations with over $150 million in ACV, and ZoomInfo Operations, driving accelerating growth. ZoomInfo aims to continue shifting towards upmarket customers to drive profitability and growth. They are prioritizing customer success, innovation, and data solutions to ensure long-term success. ZoomInfo’s lower-end market is shrinking but healthier, with a focus on upmarket growth. The company saw increases in customers with over $100,000 in ACV and $1 million-plus customers. Net revenue retention rose to 87%, the first sequential increase since Q1 of 2022. A brand survey revealed a 99% improvement in customer perception. Partnerships with companies like CoStar and Lumen Technologies aim to drive sales growth. New data products and AI innovations have enhanced go-to-market strategies, with Copilot AI agents automating seller workflows. ZoomInfo is expanding into new use cases and automating more go-to-market workflows.
The company is confident in automating more go-to-market workflows and moving them onto the ZoomInfo platform. Ali Dasdan stepped down as CTO, with Philip Popovic taking over. Patrick McCarter is leaving the board after nearly eight years, while Katie Rooney and Rob Giulio have joined as new directors. Katie brings experience in finance, operations, strategy, and corporate development. Maven appoints new CFO, Rob O’Brien, with a background in marketing and customer relations. The company is focused on financial and operational execution, with a strong data moat and innovation engine driving growth. In Q4, revenue was $309 million with an adjusted operating income of $116 million. Maven’s new risk model is improving customer quality and net revenue retention. Copilot functionality is growing, with $150 million in ACV. The company retired 46.8 million shares and approved a $500 million share repurchase authorization. Guidance for Q1 includes revenue of $294-297 million and adjusted operating income of $96-99 million, with full-year revenue projected at $1.185-1.205 billion and adjusted operating income of $426-436 million. The company expects non-GAAP net income of $0.95 to $0.97 per share based on 362 million weighted average diluted shares outstanding, with unlevered free cash flow in the range of $420 million to $440 million. Capex for the year is expected to be around 5% of revenue, with a non-GAAP tax rate of approximately 13%. The upmarket segment is showing strength, particularly in operations and Copilot products, while the SMB segment is stabilizing. The company is focusing on resourcing and reallocating towards the upmarket for growth opportunities. Building AI for go-to-market teams requires accurate data on companies, contacts, and signal data, which the company’s data asset provides, leading to more success in the operations business. Migration of customers to Copilot is ongoing off-cycle and at renewal time, with strong double-digit growth in migration rates. Customer impact reports show that migrating to Copilot is providing tremendous ROI and value for customers, leading to a 1000-person deployment at a top job search engine. The company is focused on maintaining pricing discipline for the value delivered. NRR has improved to 87% from 85%, with growth retention holding steady. Factors contributing to retention improvement include shifting to upsell opportunities and stabilizing down-market retention.
The company has seen an uptick in customer count, driven by acquiring new customers above $100,000 and successful upselling. The focus is on customer acquisition, upsell opportunities, and less downsell exposure. The company is on a path to mid-single-digit growth, with mid-market segment showing positive growth after facing challenges in the software vertical. New customer ACV is mostly on Copilot, with approximately 90% of new customer ACV coming on board.
The company’s focus on maintaining pricing discipline and delivering value to customers is driving growth and improvements in retention. The shift to upsell opportunities and successful customer acquisitions are contributing to the company’s positive outlook and growth trajectory. The company’s Copilot platform is proving to be a significant driver of new customer ACV. ZoomInfo is excited about DeepSeek, testing its potential to drive down prices for LLM providers. The $100,000 cohort is upmarket, with opportunities for upselling into various use cases. NRR dynamics show seat expansion opportunities in the upmarket segment. The $100,000 cohort is primarily in the upmarket, ensuring customers get the right packages. Pricing strategies differ between down-market and upmarket segments, with aggressive pricing in the SMB market. The nature of pricing in the upmarket remains consistent. Exciting growth opportunities are seen, with a focus on expanding into new personas and use cases. The CEO of a company discusses their strong position in the upmarket segment compared to the mid-market, highlighting product-market fit, data accuracy, regulatory compliance, and innovation as competitive advantages driving growth.
Another analyst asks about the down-market disqualification of new business policies, leading to a $2 million monthly headwind, with no anticipated changes for 2025. The company remains optimistic about carrying momentum from a strong Q4 into 2025, focusing on steady execution and product innovation in the upmarket segment to drive growth. The potential for accelerated growth lies in Copilot and operations business within the enterprise. 1. The Motley Fool discloses that they have no position in any of the stocks mentioned in the news article.
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Read more at Nasdaq, Inc.: ZoomInfo Technologies (ZI) Q4 2024 Earnings Call Transcript