Thanks for joining us. This is day two of the Wells Fargo TMT Summit here in sunny Southern California. I'm Michael Turrin, software analyst here. We have Cameron Hyzer, CFO of ZoomInfo- Yep With us for our next session. Cameron, thanks for joining, making some time. Thank you very much for having us. Excellent. We've been having a lot of conversations around ZoomInfo, and I wanted to start off by kind of just level-setting for those who are less familiar. It's been a number of years since the company went public, but maybe you can level-set what the company is, the products offered, the user personas that have been most prevalent, and then we'll get into some of the finer details. Yeah. So we provide a platform to sales teams and marketing teams, we think of that as go-to-market, that really helps them be more effective and efficient. We really do that through providing high-quality data and insights about the companies that they're selling to, and the people that work at those companies. Then, signals that can help them determine when is the right time, and how should they frame their outreach or conversations with those companies. On top of that dataset, we've then added on additional tools that, you know, can help them automate their processes. We have a conversation intelligence tool that helps them, you know, gather data from the conversations that they're having. As well as, you know, really kind of provide workflow and underlying capabilities to help automate more of that process, and in many cases, centralize some of their, their motions. And centralize that whether they want to, you know, create a better foundational data layer to drive an AI strategy, or to drive more automation around how they're running those motions. Yep. You were in a somewhat of an ideal environment when sales was forced to go remote because of how important the data you're enabling, and the ability to keep teams productive in a time where I think everyone was scrambling to figure out what to do there. And we get the question that I think is mischaracterized often around: did you capture more than your share of the market during that time? If I look at it, it looks like a very significant horizontal market opportunity. But maybe you can respond to the question on how much of the market did you capture, and when you look at the addressable market, how much greenfield there still is to be had for ZoomInfo? Yeah. So when I look at that, you know, we obviously track a number of companies that are B2B companies selling to other businesses. And, you know, in our system, we'll identify by name over 700,000 businesses that are selling to other businesses. And so, you know, I think there's still a huge opportunity out there to go out and help many of those businesses that, you know, even despite the pandemic and having to go remote, still have not really modernized their go-to-market infrastructure. You know, at this point, we have, you know, over 35,000, you know, customers, but that's still a fairly small sliver of all of the companies that, you know, are selling to businesses out there. And, you know, frankly, even with our largest customers, there's still a, you know, significant amount of opportunity to help them continue to sophisticate their data infrastructure, help them continue to, you know, drive a better go-to-market motion. So even within our larger customers, there continues to be a great opportunity to expand with them as they, you know, continue to find areas where they can drive incremental efficiency and effectiveness o f their sales teams. Okay. The past year, you've seen a number of, like, different headwinds or permutations play through within just the expansion rate and the growth rates of the company. Maybe you can just level-set what those are, and we can kind of spend some time unpacking what could happen, permutations that could drive improvement going forward. Yeah. When I think about the, you know, algorithm for growth within ZoomInfo, I really break it down into three components. One is, you know, churn that we see from customers and, you know, it's natural that customers will close down or, you know, for one reason or another, stop using ZoomInfo. Then there's the net upsell within those customers. Obviously, there's an upsell component to that. There's also, more recently, a more significant downsell component to that. And then there are new customers that we're bringing on. So historically, we've seen, you know, gross retention, you know, kind of the inverse of churn, in that, you know, 90% range. We've actually seen that continue to hold in reasonably well in, you know, the tougher macro environment. It'll be a little below 90% this year, but, you know, hold in reasonably well. What we've seen is that, you know, the Net Upsell has really contracted significantly, and I think a big part of that is in the period of time where we, and frankly, I'm not sure that it's so much COVID. I think it's more that there was a ton of free money in the economy whether that's venture funding or PE funding or government support from you know, from, call it, the end of 2020 to the beginning of 2022. That certainly provided a lot of people with the opportunity to lean into their, their sales motions. And, you know, frankly, there are a lot of companies that had expectations of growth that were bigger than what actually happened. And so, you know, that overbuying that we experienced in, you know, 2021 and the beginning of 2022, I think is something that we're working through right now. You know, certainly you have, A, there was overbuying, and then, B, you've seen, you know, probably a net decrease in overall sales headcount, particularly in our customer base that's more concentrated in kind of technology right now. You know, those being our early adopters versus, you know, more of the physical economy that, you know, we continue to expand with and so I think we really need to work through this cycle of renewals. I think of kind of peak negativity being, call it February or March of 2023. And so we need to get to where we've fully lapped that peak negativity level in order to, you know, really get to a better foundation on which we can then, you know, grow with more of our customers. And so, yeah, I think that'll provide the opportunity for that, you know, net upsell number to increase. This year, I think where we're expecting a, you know, net retention number to be, you know, below 90%, that net upsell is gonna be very close to zero. But as we're able to attenuate that anchor of downsell within the customer base, obviously, we can hopefully move that net upsell number back up to where we've seen. Yeah, historically, it's been in the 15%-25% range in terms of net upsell. Even if I go back kind of pre-2020, 2018 and 2019, we saw net retention that was, you know, net single digits above 100%. I think getting back to that level will obviously create a very good base where we can continue to then drive new sales as well. New sales in the most recent timeframe has also not been as significantly affected as the, you know, net upsell. So where, you know, gross retention has remained, you know, reasonably good, which I view as a, you know, definite positive. You know, customers are still using the system, they're just appetite or demand for that use is, you know, smaller than it used to be, given the environment. And there are still a number of new customers that, you know, haven't necessarily weaned into that digitization or, you know, sophistication of their go-to-market motion, and that market is, you know, really big, particularly outside of, you know, our core technology, verticals historically. You know, that creates an algorithm where 100%+ net retention, plus strong new sales gets us back into, you know, teens, maybe even low twenties, you know, growth rate in a more normalized environment. Okay, that's very helpful. So on the seats and the expansion in the renewal commentary, you mentioned February, March as kind of peak negativity that you're lapping. Are there things you're seeing in renewal conversations currently that suggest that things are mostly stabilizing from a seat perspective? Or is there anything you can say around how far you are into the renewal cycle, or how far you will be in that February-March timeframe, where you can start to think about returning the page on some of that and creating a good baseline at the very least? Yeah. So certainly, I think we've consistently talked about getting through that renewal cycle and, you know, even now, the people that are renewing, they're renewing against a, you know, contract level that is, you know, more optimistic than peak negativity. So, I don't think I'd say that, you know, we see stabilization in that yet. But as we get, you know, further into Q1, hopefully that'll, that'll be the case. You know, certainly, you know, when we look at our customer base, you know, based on revenue, we'll have transacted with 90% of our revenue between, you know, September of 2022 and March of 2024. So while we do have some, you know, longer term contracts, obviously, the vast majority of customers will have transacted in this timeframe where, you know, negativity has been, has been greater. Therefore, you know, ideally, we'll be able to, you know, build off that base with those customers going forward. The other thing you mentioned was new customer activity has been, I think, relatively healthy. In terms of the way you characterized it. I'm wondering if you still feel like, in some way, you've had to put more emphasis on the expansion piece of those renewal conversations to make sure those go right in, versus how you would typically invest or focus go-to-market, or can you do both? We very much do both. Our go-to-market teams are set up, that it's a completely separate team for new. Okay. So new customers, they go to a specific account executive. Obviously, there's a lot of real-time routing and enrichment that we're doing around the customers that are coming in to get them to the right account executive. But then once, you know, they become a customer, they get handed off to our customer success team and customer support, and then they also get an account management person that's wholly focused on making sure that they get value out of the platform, and then to help them with their journey of sophistication. 'Cause certainly, most of our customers, they come in in a relatively basic package. They get basic functionality, and then as they start to get more comfortable with that, they're able to move on to, you know, more workflow-driven capabilities, more automation capabilities, and, you know, ultimately, get more value out of the platform as well. So those teams are, you know, separate. And as a result of that... Yeah, I don't. There's obviously an investment trade-off of where we're putting dollars. Sure. But there's not necessarily an attention trade-off on a person-by-person basis. Okay. You mentioned 700,000 potential customers. We've also spent time, and maybe as part of the response, you can provide any recent disclosure that you've given on just the vertical segmentation, the composition of your customers. I'm wondering how actively you're pursuing diversification, or thinking about the composition of that 700,000 relative to what your existing customer base looks like, in the hopes that maybe, you know, future cycles, you can hit a point where there's just more mix kind of playing against one another, assuming it's not a broad-based downturn. Yeah, totally. So, you know, currently, in terms of revenue or ACV, our, you know, software as an industry comprises, you know, less than 35% of our kinda total revenue, you know, 34 or so. Obviously, that's bigger than what you'd think of as the B2B economy or, you know, the overall potential addressable market. Yeah, I think that is somewhat based on history. You know, DiscoverOrg, before we acquired ZoomInfo, was really focused on profiling the IT organizations within kinda mid to large companies, and, you know, doing that with super high quality. We took all that technology that we had developed to kinda drive quality within the data and, you know, mixed that with the technology that ZoomInfo had developed to really drive quantity, you know, breadth of the different companies that they were focused on. And so by bringing those two together, we really exploded the addressable market that we're able to go after, and have seen an increase in the contribution from non-software, you know, companies over time. And so that is something that we continue to really focus on. You know, at this point, obviously, 66% of, you know, $1.2 billion means that the non-software part of our business is over $800 million of you know, revenue today. And, you know, when we look at our new business, so those companies that are coming on, it's more than 80% of the new business revenue that we bring on comes from non-software industries. You know, I think that there's... That opportunity with non-software industries, you know, is really great, but it's, it's not going to just explode all of a sudden, 'cause for a lot of those companies, there's a fair amount of inertia. You know, if you were a, I don't know, a company that frames art for offices, right? You're selling to businesses. You might have founded that company in, you know, 1953. Like, you know, that's a 70-year-old company, they had to be doing something right in terms of finding new customers and continuing to drive that, that business. So they aren't necessarily saying: "Oh, well, how do I use data to, like, drive a better go-to-market engine? Sure. But, you know, at some point, the founder of that company might turn the business over to his daughter, who's been working a lot, and she wants to, you know, think about how things could be run better. They bring in a new salesperson that maybe worked with ZoomInfo before, or has greater plans, or they wanna move into, I don't know, furniture sales instead of just art sales. Like, you know, those, those instances of change within those companies really help to help them think about overcoming that inertia of, "We've always done it this way," to, "There's a new and better and interesting way to do things." And those are the companies that we're finding all the time, and that's frankly why the new business motion continues to do pretty well. You know, while new business overall will be, you know, a little down this year versus where we were last year, like, software's come down significantly, and the rest of those industries have actually grown to largely offset that softness that we see in the software sector right now. That's great. Some of the common themes that we've heard throughout this conference have been things like value-based selling, consolidation, different shifts in terms of the way companies are selling or presenting the value of their software than might have been the case a few years ago. Are there elements of ZoomInfo's business model you would, you would bring into that? And then I'll ask a second part, just in case you say, not as much on the first part, is just AI is a major point of focus. We've seen another player in the front office space acquire a smaller company in, sort of a data-focused opportunity set, right? And I think the view is just fresh data is very important in a lot of different instances, and can turbocharge whatever companies intend to do with go-to-market. So I'll give you a couple of parts to potentially answer the question with, but in terms of sources of optimism and, you know, things that you're tweaking in the go-to-market, so if the macro shifts or just in general, you're in a sort of a better selling position, what would you highlight? Yeah, certainly for our go-to-market engine, we have been more focused on being more customer-centric. Part of this is more value-based selling versus transactional selling. That's a journey we've been on for, for a little while, but feel that there's, you know, a lot of, you know, opportunity for improvement there. And as we, you know, create a better partnership relationship with our customers, we feel that as we're move into a more stable or potentially growing macro environment in the future... that'll pay dividends in terms of being able to grow back with those customers, and frankly, just really making sure that they're getting the value that's really inherent within the platform overall. You know, certainly with our largest customers, I think we're seeing good traction around that, and we're seeing, you know, really strong demand for some of our more automation-focused features, as well as, you know, what we think of as Data as a Service or our Operations OS, that is really allowing those larger customers to centralize parts of their go-to-market motion, with a revenue operations team, pull in signals or data and kinda feed that out to their sales teams in a more structured way. And that more structured way ultimately makes sure that signals don't fall through the cracks, or that they're getting the most value out of the potential signals that they're, you know, in all cases, using the best motion against a particular signal. I think a lot of that then ends up playing into AI, where people are really thinking about their data strategy and how they are building that data foundation. Having the highest quality and broadest kinda data capabilities are helping those much larger companies really drive an AI strategy. So that is, you know, I think, where we do see some traction, and frankly, where we continue to lean into, you know, providing really high-quality data and insights to customers. You know, I think it, it's interesting that, you know, you really can't find the, the level of quality and breadth anywhere. So, you know, while there's a whole bunch of, call them very small, kind of other companies out there, they don't, they don't have the kind of tens of thousands of attributes about companies. They don't have the real quality, you know, that, we continue to test and drive around the people that work at those companies and the buying committees and, you know, org charts around those companies. And frankly, I think the signals is where we see more and more kind of value for customers, and, you know, those signals are things that you're only gonna find at ZoomInfo. Yeah. Before I flip over to some of the metrics and most recent earnings results and some other things, I wanna just go back to what you're touching on here, because this is a question I get often, and I think it's important. Like, I think a lot of this conversation, it's important to level set, not just what's happening in the macro, but where ZoomInfo's value resides, so investors can make their own calculations around a normalized environment and what, what the future might hold. So we get questions around the moats, the difficulties of replicating what ZoomInfo has built, I think inherently because, in many ways, it's a new market relative to other software companies, that software investors are used to evaluating. So when you think about the moats, the big points of differentiation that make what ZoomInfo's built hard for a competitor to replicate, what, what would you highlight? You know, I think first and foremost, you know, most of the data ingestion that we do is from proprietary sources. Those are our Community Edition, Contributory Network, as well as from our customers. And, you know, many of the different data points that we're able to derive from that, whether that's... You know, at some level, obviously, contact information is important, but it also drives, you know, our IP- to- Company Graph, which, you know, ends up giving us a lot of insight into different companies. So I think that, you know, the proprietary nature of a lot of the inputs of the data is, you know, a big part of it, and it's, you know, probably the majority of the evidence points that we're driving. But then you give long history of data that we've built, as well as the machine learning engine that we've put together to really drive quality around that. So we're bringing in, you know, millions, if not billions, of kinda evidence points into a data engine that's comparing those against each other. So we're triangulating to really understand, like, what are the things that should be published and should be acted on, versus what are the things that are noise in the multitude of data that's out there? And so, you know, obviously, we've had, you know, more than a decade of really driving and developing and continuing to enhance that machine learning engine to drive quality. And then on top of that, you know, frankly, we spend a lot of money, not just on machine learning and how that works, but also the research team that we've developed, bigger than most of our competitors, like whole companies. And that research team is constantly sampling the data and different data points to, to create ground truth for the machine learning engine, which, you know, frankly, is the most important thing to driving quality. So when you sample the data points, you figure out which ones are right and which ones are wrong. You feed that back to the data scientists and the machine learning engine, so that we can scale that investment across the entire universe of, companies and people at those companies that we're profiling, in order to, to really drive the highest quality that's out there. So I think for us, you know, none of this is static. We wanna continue to invest and drive, drive a bigger and bigger moat, you know of that data and the value that we're able to provide to customers with that. Yeah. That's great, and nice job, Cameron, in spending all this time without getting into metrics and staying higher level. It's, Yeah, lots of metrics, too. So we'll get to those. So, summing up the puts and takes of some of the various things that are happening in and around ZoomInfo, maybe you can also provide some context around Q3, the highlights, the positive points, the points of consideration that you're making in terms of guidance for Q4, and just help level set where we are currently. Yeah. So, you know, I think that we do continue to see positivity out there, particularly when you look at our largest clients, the traction that we see with Data as a Service and Operations OS. We also see traction in the Marketing OS. And so I think that those are the, you know, exciting parts of the business that we continue to lean into and continue to drive. You know, it's still a tough world out there, though, and I think particularly when we look at working through some of the overbuying that we talked about before, that we will see, you know, or we expect to see, Net Retention for the year below, you know, 90%. Obviously, we're not 100% there yet, but, you know, our expectation is that the net upsell for this year will be, you know, impacted by a significant amount of downsell and, you know, frankly, the environment has pushed a little less upsell than we've seen in the past. So, yeah, I think as we look through the year, you know, we've, you know, set our expectations appropriately when we're looking at where we expect to end the year. And, you know, ideally, as we get through Q1, we'll be able to build off of, you know, a more stable foundation with many of those customers that have laid people off or, you know, significantly look to change their margin structure. And, you know, ideally, we'll be looking to grow as we go forward. Okay. On margin, you're certainly not in that camp, right? You have an incredibly efficient core business, so you haven't had to make meaningful considerations around margin trade-offs to the degree that some others have. But- Yeah, certainly that is, I think the goal of most businesses should be to, you know, generate profits for their shareholders. And certainly something that we've focused on, and frankly, you know, we leverage everything that we can, including our own system, to drive, you know, really strong efficiency in the company. Obviously, the efficiency of the system largely translates into the, you know, sales and marketing leverage that we get out of our team. But frankly, we, you know, push that throughout the company in order to drive, you know, efficient business overall and, you know, translate that into, you know, strong cash flow as well, within the company. Any change that you've made in the considerations over the past year, as far as considering just leaning further into margin and kinda waiting this out versus continuing to add capacity? It sounds like because net new is healthy, that would be a willing trade-off you'd make. And just how do you make sure that you're carefully considering the right balance if the world starts to turn in a more favorable way, that you're not caught off guard by that? Yeah. So certainly we have continued to build capacity, and that is, you know, a core tenet, that we do believe that the environment will stabilize and, you know, eventually improve. That's kind of the nature of cycles. I just don't know when exactly it's going to happen. So, you know, we have focused on continuing to build capacity from a sales perspective. We also, you know, very much focused on, you know, R&D capabilities, whether that's, you know, implementing additional AI capabilities, you know, continuing to deepen the moat with respect to data, or leaning in with respect to some of the operations and kind of enterprise-level functionality that we offer. So those are key things that we're, you know, really focused on. You know, honestly, part of being efficient as a business is, you know, maintaining a certain level of nimbleness, where, you know, we are constantly having the discussion with our executive team about where things are going, how we see top line, and where are the places that are appropriate to lean into that can drive improvements, and making sure that we're prioritizing those in the right way. How does buyback fit in the discussion for you within terms of capital allocation? Your stock seems to be undervalued here currently. It seems like investors are, in some ways, waiting for a turn that inevitably seems like it will happen based on some of the characteristics that we've laid out. What is the discussion that you're having, and what would cause you to kind of tilt more towards buyback versus the more balanced approach that you've used? Yeah. So, you know, naturally, or obviously, we did approve a $500 million buyback in August. And, you know, we are very focused on being aggressive about that at the, you know, levels that we're trading at right now. We feel that that is, you know, the, the best place where we can use that cash to return money to shareholders and ultimately drive shareholder value, given that we are trading below what we would view the intrinsic value of the, of the stock to be. You know, certainly, our goal over time is to drive free cash flow per share. That's where, you know, kind of the primary metric for our, you know, performance-based shares and so forth is. And so, you know, at these levels, that is something that we think we can, you know, really impact. Yeah, at this point, we are using more cash to buy back shares than we're generating in a particular quarter, so I view that as being, you know, appropriately aggressive, given where the stock is. And, you know, naturally, being opportunistic about that means that if the stock starts to get, you know, closer to what we view as intrinsic value, then we'd think about what are the other opportunities for that. Realistically, in my mind, the, you know, primary opportunities for capital allocation are, you know, returning money to shareholders, which is what we're doing in an aggressive way. Yeah. You know, potentially, you know, thinking about our debt structure in some way, although frankly, I would say that we're probably under-leveraged where we are, so there's not a lot of need there, or potentially M&A. Yeah, I think when we look at the opportunity set and what we're delivering to customers, we don't feel that there are big holes that we need to fill through M&A. And, you know, frankly, the opportunities that are out there aren't that attractive, particularly relative to being able to buy the, you know, industry leader at whatever, 11x or 12x cash flow. Like, it's hard to find other things that are more attractive than that. Yeah. From an M&A perspective, the bar is, you know, really, really high. That was a good endorsement. I hope, I hope that one was picked up. Sure. We just have a couple of minutes left, so I'm gonna ask a couple of forward-thinking questions. The first is just around where we are currently and things you're thinking about in terms of 2024 strategic priorities for the company. I think it's been fairly consistent in management teams characterizing the macro as what you've said, like, it's similar. It's not creating reasons for rose-colored glasses, but companies are accepting and, and making some tweaks. Is there anything there in the sort of 2024? I think for 2024, we're gonna continue to really focus on delivering value to the enterprise. Part of that is continuing to, you know, invest into and shift the sales motion around the enterprise. So we've already started verticalizing some of the sales teams on the account management side, you know, focus even more on that as we move forward. Certainly one of the things that we haven't discussed yet, but, part of focusing on the enterprise is freeing up resources to move folks to, you know, really focus more on the enterprise, and that's focusing on our self-service or PLG motion. So we'll roll out. We've already started testing some of the ZI Lite capabilities and self-service capabilities, and we'll roll those out more aggressively in 2024 as well. You know, I think the third leg of that is really from a product perspective, continuing to develop more of that functionality that's focused on the enterprise, whether that's within the Operations OS to support, you know, automation and AI capabilities or, you know, within the Admin capabilities or Marketing OS to really drive, you know, more value for those, you know, larger enterprise customers. Okay. Good answer. The last one, and then you're off the hook, is taking longer term. Like, step away from the macro a little bit and just think about the normalized opportunity, sort of the long-term view on why investors should prove interest in ZoomInfo and look beyond some of these things towards the bigger picture. Probably a similar thing to what you're articulating to employees and what keeps motivation internally. So I'd, I'd love to kinda close on that note. Yeah. You know, I think we are and always will continue to be really focused on delivering significant value to our customers. I think that that is, you know, the underpinning for, you know, building a, a great company. By delivering value to our customers, you know, we expect to keep, you know, the kind of gross retention in a, in a very solid range, given our mix of customers. That'll enable us to kinda get past this kind of time frame when the net upsell is, you know, not as strong as as we'd like it to be. If you think about getting that net upsell back into, you know, teensish range, that gets you into a net retention level that's, you know, single digits above 100%. There's just such a massive opportunity out there in terms of, you know, new potential customers that, you know, driving a company that has, you know, great cash flow and margins that can continue to drive growth at scale in the, you know, teens range or maybe even low twenties. That's a great business overall, and that's what we're really focused on, you know, executing against in an efficient and in a really strong way. That's a fantastic note to close on, Cameron. Thank you. Thanks for joining us. Absolutely. We'll let you- Thank you very much. ... back out in the sunlight. Thanks.