ZoomInfo Technologies Inc

NASDAQ:ZI

Good day, and thank you for standing by. Welcome to the ZoomInfo First Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to turn the conference over to Jerry Sisitsky, Vice President of Investor Relations. Please go ahead.

Great. Thanks, Lisa. Welcome to ZoomInfo's financial results conference call for the first quarter of 2025.

With me on the call today as we announce our financial results live from the NASDAQ market site in Times Square are Henry Schuck, Founder and CEO of ZoomInfo; and Graham O'Brien, our Interim CFO. Earlier today, we rang the closing bell of the NASDAQ and we announced that tomorrow morning, ZoomInfo will begin trading under the symbol GTM.

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 sections 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 forward-looking statements in the slides posted to the 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.

And with that, I'll turn the call over to Henry.

Thank you, Jerry, and welcome, everyone. We delivered another consecutive quarter of better-than-expected financial results, continued momentum of market and improved net retention. We dramatically expanded the capabilities of our go-to-market intelligence platform to empower our customers to accelerate revenue growth.

ZoomInfo now includes even more sophisticated AI-powered applications and agents with the technology integration and intelligence for go-to-market team. As we continue to drive innovation in the way businesses market and sell, today, we announced the NASDAQ that we are changing our trading symbol from ZI to GTM to reflect our commitment to building the core software platform for go to market. Much like Workday is synonymous with Enterprise HR and ServiceNow for Enterprise IT, ZoomInfo will be synonymous with enterprise go-to-market.

In Q1 2025, GAAP revenue was $306 million and adjusted operating income was $101 million, a margin of 33%, both above the high end of our guidance. Our shift up market continued on the right path during the quarter. We now have 1,868 customers with more than $100,000 in ACV, a sequential increase of 1 customer and a year-over-year increase of 108 customers. This is after a period of decline and marks our fourth straight quarter of sequential improvement.

In our $1 million cohort, we drove sequential and year-over-year growth in the total ACV as well as the average ACV per customer. This quarter, we again drove better-than-expected performance upmarket, which grew 3% year-over-year and now represents 71% of our business. With more than 70% of our business growing and accelerating growth we are increasingly confident in our longer-term growth aspiration.

Net revenue retention also improved in the quarter while rounding to 87% for the second consecutive quarter. During the quarter, we closed enterprise opportunities with Lionbridge, Wipro, Integrity Express Logistics, RSM, Sprinkler, Wizz and Dice Career solutions. Stripe is now deploying ZoomInfo copilot across more than 300 sellers to increase conversion, win rates and deal size by leveraging real-time insights. Copilot will deliver better account prioritization, create more opportunities for upsell and cross-sell and help to close more deals at higher price points.

One of the largest food delivery vendors is activating our full go-to-market intelligence platform to support their expansion efforts and extend their reach into international markets. They have deployed thousands of ZoomInfo seats to drive account prioritization and more efficient prospecting while our strategic account insights improve win rates. And we expanded our relationship with Intuit, to become a more strategic partner on their outbound sales motion.

We're helping them build durable and repeatable sales plays to mid-market accounts in helping them leverage intent data, implement advanced data tracking, integrate APIs for real-time data management and build sophisticated audience segments for programmatic advertising. Our traction is powered by the increasing pace of innovation across data, intelligence and go-to-market AI. Our Copilot product is successfully rolling out into our customer base and accelerating our expansion beyond SDR prospecting into AE and AM use cases. This persona represents a 3x opportunity in our customer base and Copilot has converted AM and AE users on the platform to be as active as our SDR prospecting users.

Earlier today, we launched go-to-market studio to enable revenue leaders and operators to architect their go-to-market with intelligence and AI. The single biggest ask from our customers is to unify all go-to-market data so teams can target, prioritize and execute in 1 place. Traditional CRM alone is no longer sufficient to run go-to-market. Critical signals like product usage, marketing engagement and voice of customer insights fragmented across enterprise system. Revenue teams need this data to effectively target prioritize and execute revenue campaigns. There are only 2 ways to solve this problem in modern GTM either by building a complete in-house solution with a massive engineering investment, which is inaccessible to nearly all organizations or by deploying ZoomInfo's best-in-class data platform which was trained on billions of messy data problems and applying it to solve a customer's internal go-to-market environment.

The launch GTM Studio, we expanded our data asset into core enterprise operations use cases running on our technology platform, built through the successful integration of our acquisitions of Ring lead for data management, Corus conversation intelligence for unstructured go-to-market data and set sale for CRM attribution. This positions us as the only vendor with natively integrated data orchestration, AI and frontline execution. GTM Studio is the revenue leader and operator solution to run go-to-market.

And then Copilot is the frontline activation that turns campaigns into revenue execution. Over the last 2 years, we have been fixated on making every sales rep more productive, every campaign more targeted and every workflow more intelligent. This has resulted in record levels of NPS scores these last 2 quarters with enterprise NPS up more than 6 points year-over-year in Q1. In our pursuit of this vision, ZoomInfo has become so much more to our customers than just a provider of company and contact lookup information.

Our go-to-market intelligence platform superchargers CRM and giving our customers a living, breathing view of who's in market and where sales resources should be allocated across the entire total addressable market. Beyond sales, we continue expanding across the entire revenue cycle, increasing the number of and types of go-to-market professionals that use our platform every day.

ZoomInfo marketing now generates 80% of its revenue up market and plays a key role in bringing sales and marketing into tighter, more strategic alignment on the go-to-market intelligence platform. With expanded workflow management, we're embedding our intelligence deeper into our customers' ecosystems, making their operations more connected, more creative and more powerful. Our innovation is giving revenue teams the advantage they need to move faster, sell smarter and win bigger. Our trading symbol change reflects our creation of a new category, go-to-market intelligence. This isn't just a name change. It's a commitment to building the best go-to-market engine for all companies.

We are very pleased with our execution and how that has translated in strong financial results. We continue to reallocate resources upmarket where we are accelerating the transition as we successfully drive better growth and profitability outcome. Today, 71% of our business is growing and accelerating growth with demonstrably better profitability than our downmarket business. We are being very intentional with the down market portion of our business as we continue to move our business upmarket and develop solutions that are defining the future of go-to-market.

ZoomInfo now does what no other software company does, we unify first- and third-party data insights and automation and execution to serve the entire go-to-market organization, not just sales, not just marketing, not just rev ops -- that's what GTM means. It's not a department. It's the entire revenue engine. And go-to-market intelligence aligns and activates the whole engine in real time. Over the last 2 years, this is the vision we've been relentlessly focused on and it's the future of go-to-market.

With that, I'll turn over the call to Graham.

Thanks, Henry. Q1 GAAP revenue was $306 million and adjusted operating income was $101 million, a margin of 33% above the guidance ranges we provided. Annualized sequential revenue growth for the quarter was 1.1%. And as Henry indicated, net revenue retention improved in the quarter while still rounding to 87%. We delivered strong results in the quarter, and while we remain as optimistic as ever about the trajectory of the business and have not seen any impact to customer behavior in the current environment, we are including an incremental layer of caution in our guidance raising the low end of our full year revenue guidance and reiterating our AOI and cash flow guidance.

Over the past year, we transformed the business from higher volumes of transactional new business to a place now where our growth foundation is rooted in a more durable upmarket customer relationships. This transition was notably evident in the first quarter as our upmarket growth of 3% year-over-year accelerated.

While we intentionally continued on the path towards a smaller and healthier version of our downmarket business with down market declining 10% year-over-year. In Q1, we lapped a significant volume of downmarket transactions from last year that predated the introduction of our new business risk model in Q2 2024. So as we progress further into 2025, a greater percentage of our first year aspiring population, will have experienced more rigorous qualification during their initial purchase in 2024, potentially leading to better renewal outcomes.

We see continued opportunities to drive upside in our upmarket business while continuing to aggressively manage the contribution from the down market. In Q1, we drove an acceleration in upmarket growth, leading to a 1 point shift of market mix from 70% to 71% of the business. We are seeing returns from shifting resources upmarket while qualifying risk out of our downmarket revenue, evident in decreasing write-off activity, efficient cash collections and more reasonable bad debt expenses. These are all signs that our strategy and execution are delivering the intended results.

It's also important to note that upmarket also has better economics than our downmarket business with a margin difference of several thousand basis points. As we expand more upmarket, that gives us more opportunities to expand margins while still resourcing for growth. ZoomInfo Copilot showed continued traction in the quarter asset operations. Copilot continues to attract new to the franchise customers while we continue to achieve uplift on a per-seat basis via our customer migration motion, and we have an exciting product road map to finish out the year.

Our operations business is growing double digits and continues to be one of the fastest areas of growth within ZoomInfo. We expect that the launch of go-to-market studio will further support that momentum in the back half of the year. Within operations, our Data as a Service solution is showing strong traction with new logos up 24% year-over-year and average ACV per customer up approximately 10% year-over-year. Performance was consistent across verticals. Retention in our software vertical improved sequentially for the fourth quarter in a row.

From a macro perspective, we continue to monitor verticals to better understand any potential impacts from tariffs and if there's any measurable impact from the evolving economic environment. And while we do think businesses are looking for more clarity on the economic environment, we have not seen meaningful changes to the way our customers operate. Turning to share repurchases.

In Q1, the company repurchased 8.6 million shares of common stock at an average price of $11.05 for an aggregate $95 million. With the Board of Directors approving an incremental $500 million share repurchase authorization in February -- as of the close of Q1, there was $543 million in remaining share repurchase authorizations. As you will see in our 10-Q filing, following the close of the quarter, we have already deployed another $50 million plus in cash towards repurchases in Q2 as we use the dislocation in share price created over the past month to retire nearly 7 million shares of stock at an average price of $8.27 per share.

To date, we have retired approximately 85 million shares of common stock through share repurchases, one of the factors contributing to our expected growth in adjusted net income per share.

Turning to cash flow. Operating cash flow was $119 million in Q1 and unlevered free cash flow for the quarter was $125 million, a margin of 41%. We expect to continue to primarily use the cash flow we generate to retire shares of ZoomInfo as we believe that will generate the best possible return for shareholders as we continue on our path to reaccelerating revenue growth.

We ended the quarter with $143 million in cash, cash equivalents and investments, and we carried $1.24 billion in gross debt. Our net leverage ratio is 2.5x trailing 12 months adjusted EBITDA and 2.3x trailing 12 months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements. With respect to liabilities and future performance obligations, unearned revenue at the end of the quarter was $484 million, and remaining performance obligations, or RPO, were $1.13 billion, of which $837 million are expected to be delivered in the next 12 months.

Before I move to guidance, while our strong operating performance continues to underpin our confidence in the promising trajectory of the business, given the unique current economic environment, we thought it prudent to add an incremental layer of caution into the guide.

With that, let me turn to guidance for Q2. We expect GAAP revenue in the range of $295 million to $298 million. We expect adjusted operating income in the range of $101 million to $104 million and non-GAAP net income in the range of $0.22 to $0.24 per share. For the full year 2025, we are raising the low end of our revenue guidance. And with share count reductions from repurchase activity year-to-date, we now expect higher adjusted net income per share.

For the full year 2025, we expect to deliver GAAP revenue in the range of $1.195 billion to $1.205 billion, representing negative 1.2% annual growth at the midpoint of guidance and adjusted operating income in the range of $426 million to $436 million, representing a 36% margin at the midpoint of guidance. We expect non-GAAP net income in the range of $0.96 to $0.98 per share based on 352 million weighted average diluted shares outstanding. And we expect unlevered free cash flow in the range of $420 million to $440 million.

Now I will turn it over to the operator to open the call for questions.

[Operator Instructions] The first question today will be coming from the line of Alex Zukin of Wolfe Research.

Congrats on navigating a volatile macro environment. So maybe, Henry, just the first question, why now the change around the name, the ticker the category, what's making right now at the moment to kind of go double down on this motion? And maybe what are you seeing from the changing conversations as you're having with customers that you're renewing, particularly upmarket that's driving the acceleration? And I've got a quick follow-up.

Sure. Thanks for the question, Alex. I think there's a couple of things. One, we've expanded the platform broadly to not only be a platform for prospecting sellers, but also for account executives, account managers, customer success managers. When we launched Copilot last year, we saw ourselves being pulled into a much broader set of conversations across go-to-market into marketing, into rev ops and then we released today our go-to-market studio product, which really allows any revenue operator, any revenue leader to bring their first and third-party data together to leverage AI across that data asset and then to orchestrate campaigns with sellers, account managers, SDRs and marketing teams.

So we're incredibly excited about the broad range of solutions that we're providing now beyond just sales and beyond just information but throughout go-to-market -- and so it felt fitting that our ticker symbol change to encompass the solutions that we're now offering.

In the upmarket, I think what we're hearing from our customers is two things. One, they are thirsty for data to leverage inside of their go-to-market organizations, particularly as they look to leverage AI to drive efficiency and effectiveness of their sales teams. And then when they see the power of that data they want to leverage a front-end application to help their frontline teams execute. And so when we're having conversations, whether it be with Stripe or Intuit or [indiscernible] when we're talking with them, they're telling us, yes, we need this data because we know we can drive efficiency if we leverage this data with AI.

But we also need the platform where our frontline team can actually execute on the insights that are coming from that data. And so they're investing in our data asset and then our Copilot platform to execute against that data asset.

Makes total sense. And then, Graham, maybe just 1 for you on NRR. Could you maybe just bifurcate that by what you're seeing both upmarket versus down market? And then is there any sign of of improvements in IRR from here either in the guidance and kind of what you're thinking and seeing in the pipeline and renewal activity for the year.

Sure. Retention upmarket continues to improve. That's something really focused on down market continues to be impaired, but not getting significantly worse. When we think about improvement going forward, we really think about it from a growth perspective, up market versus down market. The last time we talked about the upmarket business growing mid-single digits in 2025 in the guidance. I think we're definitely on that path.

And then down market, we were down 9% last year. We're down 10% year-over-year in Q1, and we had an expectation that, that would get worse in 2025, and we still feel really comfortable managing the downmarket business within those original parameters.

The next question will be coming from the line of Mark Murphy of JPMorgan.

I'll have my congrats as well. I'm curious where the Copilot ACV might have reached in Q1. Was that something that you mentioned and/or any thought on kind of overall glide path of that ACV stream for this year?

Yes, I can take that one. Copilot continued to grow kind of a rate that we expect. I think we're going to disclose milestones as we get to those milestones in the future. But we're really happy with not only the migration pattern, but also just the upsell opportunity that we continue to see there in Q1.

Okay. And how do you feel about this earlier-stage Copilot rollouts? Because I think commonly, we've seen with other Copilots and agents out there that companies will run into some hurdles. You're trying to understand the security policies, looking at the governance and the data retention and sometimes they're encountering some buggies. Are you seeing any of those typical kind of speed bumps or does it feel like it's full steam ahead?

We feel really good about the trajectory of Copilot, particularly in the upmarket. This was Q1 was a quarter where we saw the most upmarket deals for Copilot that we've seen. And so we're getting much better at the motion of navigating data privacy, data security and AI governance boards within our clients. And that's not creating a real speed bump for us today. .

The next question will be coming from the line of Elizabeth Porter of Morgan Stanley.

I first wanted just to ask a little bit on the expense side, just given the better top line, but operating income and free cash flow guidance looked like it was pretty unchanged for the year. So just given the continued shift up market with better profitability and better top line in the full year target, is there anything to consider as it relates to investment priorities that may be limiting some of the flow-through -- and then as a follow-up, just as you leverage your own tools, could you speak to the internal efficiencies that you're seeing and how that may be reinvested or pass through over time?

Yes. I can cover the guidance upfront. So I want to reiterate that we saw no impact to the overall business in Q1 from the economic environment. And in a more normal economic environment, we probably would have felt comfortable flowing through more of the beat into the full year guide. So for the avoidance of doubt, we're not seeing anything material in how our customers behave this approach to guidance is 100% driven by caution as it relates to the uncertain environment.

Is it -- when you think about revenue versus adjusted operating income versus cash flow, we looked at revenue and the low end of the range was derisked by the magnitude of the beat in Q1. We're still expecting to deliver 36% margins in 2025. And then on margins specifically, the seasonality of our business has evolved. I think we've talked about this some over the past few quarters. We expected margins to be several points lower below full year margins in Q1 and several points above the full year margin in the back half of the year, so in line with our expectations.

We've deployed Copilot across all of our go-to-market teams I think what that's really allowed us to do is take the efficiencies gained by that deployment and their use of the platform and allowed us to invest more in our upmarket growth. Our upmarket sales resource allocation. And so we feel really good about our continued opportunity to shift more and more resources upmarket as we get efficiencies across the sales team.

The next question will be coming from the line of Raimo Lenschow of Barclays.

Perfect. Could I stay on that topic, please? You talked about the extra buffer where you kind of put it in. If you think about a downturn or like kind of tougher times in selling. Where did you think the issue is going to be more on downmarket that there you had already like quite a few years of issues or more on upmarket? How do you brace for that?

Yes. I think the down market will be more reactive to macro slowdown than our upmarket business. So I think we're -- we feel like we're in probably the best shape we've really ever been in from an upmarket, downmarket mix perspective to weather something. So worth reminding our initial guidance provided an opportunity for down market to decline and be managed down at an acceleration relative to where we were in 2024. And our guidance today continues to allow for that. So we continue to feel comfortable managing the downmarket business to a place where I'd say smaller and a healthier version of itself.

And then one follow-up for Henry. Like obviously, in the front office space, there's a lot of talk on agents, Copilot, et cetera. Like what do you see in terms of customer understanding of where the different vendors with the different offerings fit in? And what can you do to kind of improve your spending gap.

I think, look, I think of all the departments and corporate America go-to-market is the -- has been the slowest to leverage AI and agents in their motions. And I think the big reason for that is that you need it is necessary for you to leverage third-party data and third-party insights in order for you to build an AI agent that's relevant to go-to-market professionals.

You can't just rely on your first-party data the same way that you could rely on first-party data to build a support ticket agent or a customer service agent the data that go-to-market professionals need exists outside of their first-party data. Now that first-party data is incredibly important, and it needs to be married to third-party data to actually execute an AI-driven motion, which is why we built GTM Studio is to allow our customers to bring what was historically very siloed go-to-market data together with third-party data and then build those AI motions and AI agents off of perfected, enriched and a broad data asset that includes both first and third-party data. We think this is the unlock for go-to-market team to actually go to market with AI.

And our next question will be coming from the line of Kash Rangan of Goldman Sachs.

My question would be with respect to the new emphasis of the company, go-to-market Henry, which I can certainly appreciate -- what the new budgets can you go after with this new positioning? And what are the new terms you can go after as a result of that. Now so moving upmarket is laudable, but it's also higher cost of acquiring business.

So as you move upmarket, what is the trade-off with respect to profitability that you might be making investing in new markets, new enterprise customers, new distribution can be a bit of a trade-off in the near term. How do you weigh the near term versus a longer-term payoff.

Yes. A lot in there. I think the first thing is in the down market. We've been moving more and more of our business to digital self-service. And so in the micro SMB today, we are pushing micro SMB to digital self-service where they're transacting without the aid or help of a seller. That's new in our go-to-market motion. We feel good about the trajectory that's happening there. That has already allowed us to move and reallocate resources from the downmarket and move those resources up market.

I should remind everybody that our upmarket business is meaningfully more profitable than our downmarket business -- and so as we move more and more of the business upmarket, we have the opportunity to increase margins as that business is far more profitable than our downmarket business. And then on the question of expanding within the enterprise and other budgets that we would unlock. I think our big opportunity that we have a number of opportunities there.

First, with our go-to-market studio product that we launched this week. We have the opportunity to bring rev ops professionals, sales ops professionals and sales leadership into the ZoomInfo platform to help them to build the go-to-market motion and go-to-market campaigns that they've always had trapped in their heads, but would have to sit in a long to with IT and data science to actually bring to life. And so we're really excited about bringing a much broader spectrum of go-to-market leadership into the ZoomInfo platform.

And then also, I mentioned this -- I mentioned this, but usage of our platform by account executives and account managers who are on copilot now matches the utilization of our platform by our heaviest SDR prospecting use case. And so that gives us real expansion to bring in a much broader spectrum of the go-to-market teams into ZoomInfo and to get more than just top-of-the-funnel prospecting use cases and broaden that to account executive and account manager and CSM use cases.

Super all the best for the journey, Henry.

And our next question will be coming from the line of Brad Zelnick of Deutsche Bank.

It's so great that you guys already here in New York. Nice to see the upmarket momentum here in Q1. I've got 2 questions. Maybe first for Henry. I was really intrigued by the intuit relationship that you talked about. I want to understand, is that specific to Intuit Enterprise suite, their upmarket product? And can you maybe talk more about the economic relationship what this can develop into? And how many more such relationships are out there that you can go after?

Thanks, Brad. We are really excited about our partnership with Intuit. It's a partnership that has grown with Merit over time, and we continue to find new and broadening use cases there. It's not just limited to the enterprise suite at Intuit, it's much broader than that. Particularly, we've been helping them with their mid-market focused business and their outbound outreach and think that we can expand much further to more data management, data cleanliness opportunities within the company.

Look, I think the Intuit is a good example of what we see across all of our enterprise customers. We are lightly penetrated into our enterprise customers, our upmarket customers. and we see no demand ceiling today in our ability to continue to grow within the enterprise. And so our job now is to execute on that opportunity to learn from the way that we're deploying solutions and enabling our enterprise customers and then bring that across the enterprise base. But we don't see any demand demand difficulties and continuing to grow that upmarket business because we're still lightly penetrated across the enterprise.

Huge opportunity. If I can follow up for you, Graham. As we think about your comments and the forecast that you put together in the conservatism, the embedded caution given the backdrop. I just want to be clear that in terms of close rates, pipeline build or anything, average discount trends, is there anything in the last 6 weeks here into Q2 that you're seeing that is informing the way that you think about the forecast? And if we think upmarket versus down market, is there 1 versus the other that you're perhaps more concerned about?

I don't think we've -- we haven't seen anything in the past 6 weeks with our customers that is different. I think that our caution is informed by the broader uncertainty. And I think that's really what's informing this reiteration and slight raise on revenue. What was the last part of the question, Brad?

Just thinking upmarket versus downmarket, if there's one or the other you're more concerned about as you -- to the remainder of the year?

Yes. We feel -- we continue to feel really bullish around the market opportunity. We got to 3% growth in Q1, and we're really excited about the path we're on to mid-single digits in 2025. Downmarket would probably be earlier to react to some macro worsening. So I think that we are -- we recognize that our initial guidance accounted or gave us a lot of room to manage that part of the business. And we're just not going to really rely on down market to contribute to our revenue guidance in any significant way.

And our next question will be coming from the line of Jackson Ader of KeyBanc Capital Markets.

Henry, on the upmarket growth, how much of that growth is coming from some of those customers that are actually hiring sales reps like adding new seats to the platform.

I can take that. It's a mix. So we have -- some of our customers are hiring sales reps. A lot of our upmarket growth comes from our operations product, which is up double digits year-over-year. That's not really a seat-based model. That's usually a data delivery model on a subscription basis. So we definitely have a mix of customers and prospects that are growing seats. We have a mix of customers that are signing up for our operations business.

And then also, I mentioned this, we are expanding our use cases across account executive, account manager and CSM seats as well, where historically, we may have been limited just to the top-of-the-funnel SDR use case. Today, with Copilot, we're able to expand beyond just that top of the funnel use case. And so those seats existed within our customer base. They don't need to be hired for us to sell into. But now we have a product that delivers a use case and value proposition for them. And then the product itself is bringing them in and having them engage with the product at levels that are the same as our SDR prospecting use case.

Okay. So I mean, would it be fair to characterize it as like sales hiring is not yet a tailwind for you guys at the moment? Like it could be kind of upside as if things improve through the year?

Yes, definitely.

Okay. Okay. Cool. And then my follow-up, on remaining performance obligation, when should we expect the growth in those, whether it's total or current, when should we expect those to kind of more reflect what you're seeing in the upmarket motion.

Yes. I think when I look at the current bookings growth, we've been negative and then I think we were at 0% in Q1. So the trajectory there is improving. I would expect to get back to positive there, it's mostly a matter of time. Q1 was the last quarter where we were lapping a compare last year where we had a high volume of downmarket new business transactions that didn't go through our more rigorous qualification process. So we didn't really fill the bucket up again with the same or similar transactions in Q1.

Once we get into Q2 of this year, where we start lapping the introduction of the new business risk model last year, then we start to get into heavier upmarket market quarters, we should have an opportunity to start to get back to positive current bookings growth.

And our next question will be coming from the line of Brent Bracelin of Piper Sandler.

Graham, I wanted to double-click into the down market business. I get that you're seeing a good healthy acceleration upmarket. But the downmarket business still looks like it's a $350 million ARR business. How much do you think that business could contract? Do you see that contracting for the next year, for the next couple of years? I think it makes sense to focus that market, but any color on the duration of that business and how it contracts over time? And 1 quick follow-up for Henry.

Sure. We expected it to contract in 2025 and contracted a faster pace than the year in 2024 and 2024, it was down 9%. Our guidance in 2025 implied that it would be down the high negative teens. I think the way we would think about this is getting to an optimal mix upmarket versus down market of the business, we're at 71%, 29% right now.

That first milestone is let's get to 75%. And I think once we get to 80%, that would be my assumption around where down market would probably stabilize as the healthier and smaller version that we have been talking about.

Totally makes sense, kind of more of an 80/20 model. And then Henry, for you, companies generating over $100 million a quarter in cash on average here. You've done a dozen acquisitions over the last 10 years. really helping kind of reposition the company. What's your appetite to do both buyback and tuck-in M&A? I love to get your thoughts there.

Look, I think that we're going to be opportunistic with M&A, particularly tuck-in M&A. But look, right now, we're going to continue to aggressively reduce the share count at these levels, given how much greater our intrinsic value is than the market value today. We have great confidence. I have tremendous confidence in the future of ZoomInfo.

And I really believe that the best company to do M&A against today is ZoomInfo, and we're going to use our cash to buy back shares of what we believe is the lowest priced, most opportunistic company to buy shares.

And our next question will be coming from the line of Taylor McGinnis of UBS.

Graham, one for you. So when we think about the evolution of NRR this year, -- how much of it is an improvement that you're seeing in the different customer segments starting to emerge to those specific NRRs versus mix. So maybe you could talk a little bit about that. And part of the reason I ask is, as you start to lap the SMB go-to-market changes that you made, I guess, how much of a tailwind could that be to SMB NRR and therefore, the total to -- and then to the extent you can share what NRR is being baked into the guide. I think that would be helpful as well.

Yes. When I think about the the proportion of just better upmarket mix versus improvements within those segments. Right now, it's really being driven by better upmarket retention. If you look back to when we were at 85% for several quarters there. The sequential uptick is coming from better retention up market. We are not getting a large tailwind yet from the better mix. I think over time, as we continue to improve our market retention, as we take the upmarket mix from the low 70s to the mid-70s, that it starts to become more 50-50.

But right now, the biggest driver of our retention improvement is upmarket retention improvement. And then I don't think we're going to talk or disclose explicitly the retention in the guide. I think if you just think about it as mid-single digit upmarket growth that is being driven by improving retention in up markets and then down market 8 to 9 points degradation in year-over-year growth where we see lower retention and the potential for that to remain lower than it's been.

And the next question will be coming from the line of Michael Turrin of Wells Fargo Securities.

Appreciate you taking the question. It's the second straight quarter we've seen a pretty good consistent top line upside. So just I wanted to spend some time just on the commentary you're making around incremental conservatism in the rest of your forecast. Is there any more color you can add on which inputs are changing relative to what you're assuming at the start of the year? And maybe any added commentary you have just around the visibility into rest of your targets, at least on the upmarket side, it's just helpful context as we roll it all together.

I think that the methodology on how we develop the guidance hasn't really changed. We basically went through the same process for revenue, profitability, cash flow, adjusted earnings per share -- and then considering kind of the unique environment that we're in right now, we just -- essentially, the last step was layer on an incremental amount of caution around the guidance.

So I don't think there's 1 or 2 things I would point to. I think you should still expect in the guide mid-single-digit upmarket growth, a decline in the downmarket growth trajectory and consistent margins.

Our next question will be coming from the line of Brian Peterson of Raymond James.

Congrats on the quarter. Henry, you've mentioned a few times that you're extending the roles that you're addressing. I'm curious if there's 1 role in particular what you're most excited about in terms of incremental adoption in 2025. And maybe just remind us, any sense of what your seat penetration is with your enterprise customers?

Key penetration in enterprise customers is very low. I would tell you like maybe high single digits, low double digits. And then on roles that we're most excited about, I think -- I don't think there is one. Let me give you a couple. I think first, expanding into the account executive and account manager workforce we think, is a huge opportunity.

It represents 3x the seat opportunity as SDRs and top of the funnel sellers represent. And we have a great solution for them that they are leveraging and using with Copilot, so we're excited about continuing our journey to expand into that area. Then I would tell you that RevOps sales ops -- and then by extension sales leadership with GTM Studio will be a target audience of ours -- these are people in the company who have the most creative ideas about how to go to market, but they get stuck in a long line with IT and data science and engineering just to see those ideas come to life, and that's a pretty painful experience that we've been really focused on building around and giving them a solution to to be able to get those creative ideas in the market and execute it on as fast as possible.

And when we're showing GTM Studio to those leaders, they're incredibly excited about getting their hands on the platform, and we think we're going to continue to have moments where we get to delight our customers like that and are excited to be -- to have that opportunity.

And the next question will be coming from the line of Patrick Walraven of Citizens.

Great. This is Austin Cole on for Pat Walravens. Henry, I'm wondering about the kind of genesis for this new chapter, the ZoomInfo story, if you will. When did you start coming up with this larger go-to-market vision? It seems in some sense, like a kind of natural evolution of the platform. But wondering if there were some maybe potential buyers out there that were inquiring about these kind of capabilities that go-to-market studio can now provide.

I think probably the big thing that we realized was no matter how great of an e-mail you put together, no matter how personalized it is, no matter if it brings in insights from the most rare bespoke sources and is perfectly crafted that unless a front-line seller or a marketer takes action against that perfect audience, no revenue is generated.

And so we were hearing from our customers, "Hey, I'm pulling in intent and website visitors in all of these different unique data points -- but I'm not seeing it turn into revenue the way that I anticipated it would. Yes, it performs better than our last campaigns that were less personalized, but we want to see this move exponentially.

And so when we were able to bring go-to-market studio together and marry that to Copilot in a way that gives Copilot the ability to be in front of a frontline seller connected to their slack, connected to their teams, connected to their e-mail, connected to their text messages, designed so that they could take action quickly with those audiences that their sales leaders and their rev ops and sales ops professionals are putting together for them.

We recognize that once you marry frontline execution with that perfect personalized insight created e-mail an insight created talk track that that's where you can really move the needle and go to market. And so that was sort of the learning that we had that drove us down this road to put those together.

Our next question will come from the line of Surinder Thind of Jefferies.

When you guys are thinking about kind of the pipeline and the idea that you're excited about what you see in the upmarket. Can you maybe talk about the mix itself, Copal adoption early on was primarily newer customers? But it sounds like the increase in NRR at existing clients has been a more recent driver.

Just how are you thinking about the different -- those 2 cohorts and kind of what's ahead?

Yes. I think we view the net revenue retention as the primary driver of stabilization and return to reacceleration of revenue -- our new business pipeline is more segmented than it's ever been. We introduced this in 2024, but for the downmarket customers, we're able to score them, qualify them, figure out whether it should be going to a PLG digital motion or if it's more of the higher end of down market, whether we should keep a sales rep in that sales cycle.

And then upmarket, we've really specialized and segmented our account executive base so that we are investing behind some of these longer sales cycles for these larger customers. So we're much more prescriptive and scientific with our customer acquisition engine. And that will eventually -- that's starting to show up in improving retention outcomes. But improvement in retention is the key driver in getting back to our growth goals.

And our next question will come from the line of Rishi Jaluria of RBC.

Henry, Graham, just one for me. I want to go back to the Q2 revenue guidance and maybe unpack some of the set of assumptions behind it. You saw in this quarter above 1%, days adjusted sequential growth your guide calls for negative 4% base asset growth on my math.

At the same time, you are seeing improving momentum up market. Your comps don't get -- aren't super difficult and you're seeing success with copilot as well. Maybe just walk us through kind of the set of assumptions you have behind it, how much of it is conservatism because you're saying the guidance philosophy is pretty similar as before.

Sure. The incremental cost on I talked about was baked into both the full year and the quarterly guides. Of course, the magnitude is bigger by nature with the full year than the quarter. But yes, Q1 was another great revenue quarter that was driven by great Q4 sales performance and continuing better cash collection and write-off outcomes. So there is a little bit of seasonality in there relative to our market opportunity, which we usually are starting to see more and more at the end of Q2 and Q4.

But you could think about this incremental caution that we've layered in as applicable to the full year as well as to Q2.

And our next question will be coming from the line of Alan Bruce Husky of Scotiabank.

Great to hear retention in the software vertical improved sequentially for the fourth quarter in a row. Can you just go a layer deeper on what trends you saw in this segment in the past few months? And can you update us on how this vertical is impacting ZoomInfo's total revenue growth? .

Yes. So we saw retention in the software vertical improved sequentially for the fourth quarter in a row. Software vertical is one of the largest contributors to the deceleration and decline in growth that we saw starting in 2022. We experienced a lot of downsell pressure there. So in general, we were able to keep most of those logos but at lower annual spend. As we got into the middle of 2024 and more so now we're not -- we don't have that level of downsell pressure.

And in fact, we're starting to get to more of an upsell opportunity place again with the software vertical. So as a the retention improvement is really positive for 4 quarters in a row. We think we're almost at that place now where software is actually contributing back or back contributing to our aggregate growth as opposed to impairment.

Great. Thank you, everybody, for joining us tonight. We appreciate it.

Thank you for participating in today's conference call. You may all now disconnect.