Thanks everyone for joining. Pleased to have Graham O'Brien, Interim CFO. Do I still say interim? Yeah. Interim CFO of ZoomInfo with us this afternoon. This is day two of the Wells Fargo TMT Summit. I'm Michael Turrin with the software team here. Graham, just maybe we can just start with your background, just in the context of framing the overall ZoomInfo story, you know, how long you've been with the company, how the transition to the CFO role has been, and we can just use that as a starting point for more of the discussion on the business dynamics. Great. Yeah. Love you, Michael, so background is in corporate accounting and FP&A. I actually worked at a company called RainKing. That was a competitor of DiscoverOrg. It's like 2016, 2017. DiscoverOrg is the company that ultimately bought and rebranded as ZoomInfo. So I was working in corporate accounting there. The acquisition happened. I moved out to our headquarters in Vancouver, Washington, joined the FP&A team. We bought ZoomInfo, rebranded, did several other acquisitions, and then IPO'd in 2020. You know, since then I've been scaling up the FP&A team and working for our predecessor. Okay. So a lot of experience with Henry in the domain, the space. Yeah. Sounds like very much in your wheelhouse, so I think a lot of the conversation with investors around ZoomInfo is just trying to, really just spend time understanding a couple of factors. Like one, what is happening to the business? What are the kind of pressure points that are weighing on growth currently? And when could those start to subside, right, and so I wanna start with just the journey of what's gotten us to this point, right? Like we've seen macro pressures across software, we've maybe seen more pronounced macro factors hit the front office, some of the more sales marketing-focused, software businesses, so where does ZoomInfo fit within that conversation? What have been the sort of headwinds that growth has been running into as a starting point? And then we can start to talk about the factors of the timeline of when those could start to subside a bit. Yeah. Absolutely. So, I'd focus first on our mid-market segment, and our mid-market segment is, you know, very heavy to the software and tech vertical. And those, that segment in total and that specifically that vertical were, you know, significant drivers of our growth in 2019, 2020, 2021. And then as we got into late 2021, early into 2022, those software companies that had, you know, 150 sales reps expecting to have 250, pretty much overnight were asked to decrease those sales teams to deprioritize growth and get to profitability faster. So that kind of experience over the last two years has been the greatest contributor to our deceleration of growth. What we experienced there was mostly a downsell motion. So we kept many of these logos. We went through a cycle or two of right-sizing their spend so that we could grow with them when they get back to a point of growth. And we're starting to see that, you know, potentially we're close to that point again. We saw mid-market retention stabilize and actually improve sequentially in Q3. This is a mid-market retention was well above 100% at its high point. And, you know, we've gotten to a point now where we think we're beyond the trough and potentially on a path back to 90+% retention there. So that is a kind of a stabilization and potentially, back on a trajectory towards growth story. The enterprise was a little bit quicker to react in the beginning of this economic cycle, and we're back to 100% retention with our enterprise customers. We feel like we've kind of reorganized our go-to-market structure to be more focused up-market over the last few years. So we feel like we're well-suited and well-positioned to continue to drive the rebound there that we've seen in that segment, and that we can really control the renewal and a lot of the expansion opportunities there. And then late in 2023 and into 2024, we started to experience incremental weakness in our SMB, our small and medium-sized businesses. And that showed up kind of in two forms. In late 2023, it showed up in an increase in our write-off rate or the non-collection of cash. So that led to more bad debt expense. That led to us upping reserves at that time. And then in Q2 of this year, we saw an incremental increase there resulted us taking a charge on the P&L in Q2, which effectively increased our estimates behind those rates and accounted for any P&L activity that had occurred to date. So what that did is, you know, effectively remove the volatility from kind of change in rates heading into the future. We also saw SMB retention get worse this year than it was year to date last year. And, you know, we view that as just a tougher economic environment at the tail end of, you know, potentially this economic cycle we're in. So. This is gonna ask just on the small business side and why sort of the lagging timeline. What are your best guesses as to what drove the degradation relative to the stabilization in the other categories? I think the potentially running out of money, you know, slower to react. I think it's, at times, tougher to, you know, some of these customers might sign up or counting on, you know, getting a deal or two deals done to be able to pay for a service, unable to do it. I think there's just a cyclical five-year, kind of nature there for SMBs or small customers. I think that as we got into, you know, the latter part of that cycle, the outcomes have been getting worse. Okay. So just back to the enterprise and mid-market pieces of that, it sounds like gross retention has remained fairly consistent and stable. Is that a fair characterization? Yeah. Yes. Gross retention has, you know, not degraded as certainly as much as net retention has, and part of that, specifically in the mid-market, was a somewhat intentional move, right, where in 2021, we're showing up to renewal conversations and we're, we already have the renewal secured. We're talking about cross-selling new functionality, seat expansion, other things like that. Once the environment changed where, you know, the renewal is a tougher conversation. Mm-hmm. It really didn't make much sense to go in and also try to push new features, present new kind of expanded opportunities. So that, the net upsell that we used to help drive retention really went closer to net downsell over that period. And now, specifically with Copilot, we're back to a place where we feel really confident. We're starting to see the return of a net upsell opportunity. Okay. So can we double-click on that for a minute and just maybe level set first for those who aren't as familiar what your Copilot offering is, how you communicate differentiation to the market, and early metrics or proof points that you're seeing that you can share? Great. Yeah. You know, if you think about our legacy ZoomInfo Sales offering, it was a, you know, best-in-class third-party data asset for contact company signal data that had a software application on top of it where you could customize lists and filters and use it as a, you know, your mechanism to go to market, but that experience with that ZoomInfo legacy offering was very similar for most customers, right? They were getting similar data. They could customize it. What Copilot really does is creates its own unique ZoomInfo experience for every ZoomInfo customer. So what that means is, well, Copilot is an AI-powered application that once you layer this or, you know, implement this for a customer, starts to understand what that customer's total addressable market is, what that customer's ICP is, and starts to customize the signals, the intents, the prioritization of those signals to a specific customer. So if you are a cybersecurity company or if you're selling cybersecurity, it's gonna surface a different set of, call it, buying intent signals than it would surface if you were an event planner. And that starts to create a very bespoke experience with Copilot. On the SMB side and the sort of lagging nature and just the sort of shape of retention there, do you think about, are you starting to mix away from that business? Do you think about focusing more on the mid-market and enterprise and de-emphasizing that side of the business? Or how are you looking at that opportunity versus the core enterprise mid-market piece, which seems like it's showing more early shades of optimism? Yeah. We're absolutely focused on shifting our focus up-market. You know, what the way we think about that, and I can just level set for a second here on the current mix. Our enterprise ACV is 41% of our total business and increasing. Mid-market is 28% and has been decreasing, but, you know, we think we see a path to start to increase that again, and SMB is 31% and decreasing. Okay. With the positive trends we see in enterprise with the stabilization and potential inflection in mid-market, we're focused on getting enterprise on a path to 45%, mid-market back to 30%, and SMB below 30%. What we get then is that SMB is a smaller part of the business but also a healthier version of SMB as we start to qualify the businesses getting in there, and we get to a point where, you know, much more up-market weight and each individual segment performing better. Is industry mix different in those categories? Meaning, is industry mix more heavily weighted towards certain sectors in enterprise and mid-market than small business? Yeah. You know, I think certainly mid-market is the one that is heaviest to software. And then when you get into enterprise, certainly at the high end of enterprise, you have large companies of all types, but they all kind of behave more like enterprise customers and less vertical-specific. And then SMB can be really a very diverse mix of customers. We have, you know, in the past year, we've segmented our sales teams to make sure that we are specializing from a company size. We've also, to some extent, started to specialize from a vertical perspective so that if we're selling to a financial services company, manufacturing company, or a software company, we're able to speak, you know, the correct language in those sales cycles and get better outcomes. What are the other offsets beyond Copilot that you're thinking about in building back the revenue, the expansion potential within the enterprise and mid-market? Are there other kind of data-related products? Is it just a view that seats eventually come back? Like what would cause the retention rates to continue to improve over whatever period of time that take? Yeah. A couple of things that I would prioritize here. One is our operations offering. So that's largely a DaaS or a data as a service product. And that is not a seat-based offering. That operations product is up 22% year- over- year. It's largely an up-market enterprise buyer. And the buyer on that is usually a, you know, a data leader, an IT leader, a RevOps admin, someone like that. And what we're able to do there is go in to these enterprises, be their data partner, sell them these data cubes, enrich them, cleanse them, integrate them for whatever their data or AI initiatives are. So that is a different growth vector for us, the one that we're seeing a lot of success on. The other is, you know, while Copilot is seat-based, we also have a lot of white space from a seat perspective outside of, you know, I think what people typically look at us as is a AE or SDR top of funnel solution. With Copilot internally, when we, you know, use Copilot, the power users, the ones who have used Copilot more than any other team, have been our account managers. It's got this great account AI, account plan functionality that has been really compelling, and the adoption has been great. So when we look at our customer base and we see that we sell to an AE team or an SDR territory, we see a massive opportunity to go and sell to an account management team, a CSM team, a sales leadership team. We also just talk a little bit about just the renewal characteristics because I think we've talked with ZoomInfo in the past just about with the certain segmentation, with the focus on tech and certain other industries. There's a renewal cohort that's heavier around this time of year. You know, I think there have been challenges in just kind of calling where that renewal will come in because they're maybe not as transparent with what they're doing with sales seats at certain points in time. But do you have any kind of early signals around how this year is shaping out that give you a sense that maybe that renewal dynamic is also stabilizing, that we're not likely to see? You know, most of the conversations here have been more characterized with cautious optimism around how companies are thinking about 2025. I'm not sure if you have at this point any read or anything that you can share just on what's happening with seats within the two up-market segments. Yeah. Absolutely. So Q4 is our, you know, generally our biggest activity quarter from a renewal perspective. It also tends to lean a little bit heavier up-market, which, you know, is a good opportunity for us. The way I'd characterize kind of the selling or buying environment is that it's not getting worse, but it's not necessarily getting better yet, so we are cautiously optimistic about the trends we see there. We've talked a lot about discounting those trends when we talk about expectations going forward. We're not relying on an improvement in the macro, but we feel like with what we built with Copilot, with what we've done internal, internally from a go-to-market structure perspective, and with our kind of focus on optimizing the mix of segments so we can control and improve outcomes without macro improvement. So stacking that all up, and then I wanna move over to margin because that's also a very important piece of the financial profile here. How should we think about, like, the drivers of sequential growth, the drivers of growth in the business, and just the timeline that you're thinking about in terms of kind of weighing when macro pressures are easing and you could start to add more capacity and think more about the potential for acceleration of growth at a certain point in the future? Yeah. I'll touch on the margins first. You know, I think we made the Copilot investments and some of the data investments back in 2023, and we view those investments as, like, effectively in our run rate. There's still some, you know, some work to do down on the product roadmap, but we don't view that there's another, like, step-up in investment needed to get back to sequential growth. You know, we had 37% adjusted operating income margins in Q3, guided to 35% in Q4. It's mostly a timing thing. You know, I think it's fair to think about our run rate annualized AOI margins in the 36%-37% range. So that is a place where, as we get into 2025, we expect to maintain that level and even expand that level if, one, you know, we get back to sequential growth and we have some level of operating leverage, or two, we're delayed in getting back to that growth and we're able to just expand margins by removing some costs. Can you talk about just free cash flow in the context of all the conversation and the focus there, the prioritization ways that you can drive free cash flow for free cash flow per share improvement, even if we are in still a constrained environment? How are you thinking about, you know, that metric and ways to present that to investors as kind of the North Star, at least for now with ZoomInfo? Yeah. Absolutely. So, you know, this year we've gone out and talked about delivering $1 of adjusted levered free cash flow per share and then growing that meaningfully in 2025. So when we think about the levers to growth there, the first is grow the top line. And that is what we are prioritizing. That's, w e feel like we are resourced to do that. We don't feel like there's another investment needed to do that. If we're delayed or we're not getting back to growth, on our timeline, then, you know, as I mentioned before, we'd start to think about expanding margin, and I think we have options there. And then the third is to continue buying back shares, where we've been, you know, very aggressive in doing that, over the last six quarters. We'll continue to be opportunistic as we, you know, as long as we see a difference between share value on, on the open market and what we see is what we view as the intrinsic value. Can you just level set the buyback program, sort of, just the way you think about the timeline, what's approved, and then your decision criteria with just a little bit more context around what informs that? Yeah. So since we initiated this last year, we bought back 17% of shares. And as of coming out of Q3, we had $150 million left in our authorization. We've bought back more, or we've used more cash than we've generated this year to buy back shares. We've actually taken cash off the balance sheet. We'll continue to kind of weigh how much cash we feel we wanna keep on the balance sheet at any given point. Leverage ratios, you know, certainly we always keep an eye on the M&A landscape. If, you know, we continue to see that the best use of our or one of the best uses of our capital is buying back shares of ZoomInfo. I don't know that you can directly speak to this, but we've also observed that Henry has been active in open market activity and purchasing shares. He's the Founder of the company. I'm more curious from a cultural perspective, like, how that carries through if employees kind of see that as a signal of confidence and, you know, what would you say to investors just on that decision point and, you know, your Founder kind of choosing to double down at this point? Yeah. It's exciting. You know, I think it shows that we continue to feel really good about the long-term value of ZoomInfo. Great. I wanna just spend some time on the competitive landscape. And, you know, this is an area that I think has gotten increasingly noisy. There were a lot of front-office software vendors. There were a lot of, I think, solutions that were implemented that have been consolidated. But ZoomInfo has been more data-focused. Like, I don't, we don't see as many vendors doing specifically what ZoomInfo does. How would you characterize competitive differentiation in the space? And is the competitive environment at all different if we're thinking about ZoomInfo and enterprise versus ZoomInfo and SMB or mid-market? Yeah. It certainly varies by the segment. Really, when you think about up-market, if we think combined mid-market and enterprise, there's very little competition. You know, in enterprise, occasionally from a company data or firmographic sales cycle, we'll see a Dun & Bradstreet or, you know, but that's not super common. Same thing in mid-market for our Copilot. There's really no competition out there that we see. There's occasionally competition for an account-based marketing solution. So we have our own MarketingOS solution. So we'll see a 6sense or a Demandbase. But when we're talking about anything that's, you know, that has that data layer of our third-party data asset, we believe our moat there certainly up-market is huge. And then as we think about SMB, historically, it's certainly at the lower end of SMB. There's just been a history of competitors, and while, you know, we continue to be kind of focused on prescriptively acquiring business and retaining business at that low end of the market. How does ZoomInfo think about the data that you've accumulated in a world where data is being talked about a lot as tied to generative applications? Does it help your Copilot offering first and foremost? Is it kind of a wedge in the conversations for those that have a CRM solution but are looking to kind of augment all the data that supports? Or what's the data-related conversation like around ZoomInfo, given it seems like there's just greater focus around the category everywhere? Yeah. I would tie it back to kind of the AI initiatives that most companies are either planning or adopting right now and that it's really highlighted the need for best-in-class data and specifically marrying third-party data with your first-party data if you wanna do any kind of go-to-market AI initiative. So we view that as, you know, a tailwind and something that has really highlighted how valuable we view our data asset and the fact that we've been able to maintain that at scale. I don't know how directly in your purview this is, but we cover the software industry. We've seen HubSpot acquire Clearbit. And, you know, it's a smaller player. It's a smaller market focus. So I guess the question is twofold. The first is, does that create competitive noise down-market at all? And the second question is, does that validate the market in any way from your perspective if they're saying, "We have a CRM solution, but without data, the CRM solution is not particularly powerful"? So we view this as a way to kind of augment and improve the sort of immediate impacts that a customer would have in implementing a CRM. Yeah. The first part is, you know, we haven't really seen this pop up in sales cycles. Certainly, we were, you know, aware of Clearbit before the acquisition, but since then, it hasn't really changed. I do think that a, you know, a CRM that is integrated to this kind of AI application that we built with Copilot that is layered on top of this data asset is the right vision. It's just really hard to do, and we feel like we've done it with this virtual data layer or virtual CRM that we've effectively built, so it's the right vision. I think taking all of that data, understanding the regulatory environment with that data, building, you know, an enterprise-ready go-to-market structure that can go and sell that data, get, you know, large companies comfortable with the origination of that data is where we have competitive differentiation. I just ask on the visibility and if there are ways that you've been able to, like, lessons learned where you've been able to implement procedures that give you better visibility into the future. And can you just kind of speak to the duration of most customer contracts that you have? And then are there fixes or things that you've put in place to improve visibility across the business? And I ask because you, we ran into periods where it was just hard, to your point, to predict renewal behavior. And for gross retention rates as high as they've been for your business, I'd imagine there's a sort of a willingness to meet in the middle in some ways and have those more strategic conversations around just removing some of the variability. I'm curious if you've been able to work to bridge that gap in any way, shape, or form in the go-to-market or within the finance org. Yeah. I think yes to all of that. I do think our visibility into customer behavior, retention, new business demand got worse in the last few years. That was a lot of just kind of a macro development. The things we've done to, you know, address that and make it better, one is just, like, moving up-market helps with that, right? Like, when we have stickier relationships with larger customers, it becomes our visibility improves. Developing customer health scores and really tracking utilization, usage, engagement, conversion of the signals that we're serving. Like, if we can tie all of those to outcome data and understand, you know, what, how our customers are getting value out of our solution early in that contract, then the renewal outcomes become a lot easier to predict. Most of our customers are on somewhere between a one and three-year contract, and it's, you know, almost all subscription-based. So that, that's kind of the model we view it from, and then, you know, just really the seasonality of our business, from a buying and segment perspective has changed some over the past few years and really kind of isolating that, understanding that, doing a better job of communicating it out, so another, you know, we'll have seasonality in 2025, even from just a day's perspective. It's different than 2024. So revenue two fewer days in Q1 of 2025. We should make sure, you know, we recognize revenue ratably by day. We will have to adjust for that. Margins usually decrease in Q1 due to benefits resets. So, really going out there and articulating kind of the seasonality we see so that everyone's well aware of the timing there is, you know, something we wanna be able to do externally. Is there anything else you would bring into that conversation as investors are starting to think about 2025, the shape of 2025, just the ways that you're thinking about the business? Yeah. You know, I think, again, just the making sure we have the calendarization right of everything and some of the, you know, usually our margins in Q3 and Q4 due to days and the timing of benefits tend to be several points higher than they are in Q1. And then from an actual, like, lapping perspective, we feel cautiously optimistic about the trajectory of mid-market and enterprise, which we've covered. In this year, in Q2, we started disqualifying a $1 million and then a $2+ million per month of high-risk new business ACV as part of our, you know, preventative measures against write-offs. So as we start to lap that in Q2 of next year, Q3 of next year, we should see year-over-year improvements in things like bookings and RPO. We should have a higher quality of revenue because we're pushing more quality business into the SMB segment specifically. And I think that when we think of lapping that end of Q2, Q3 time next year, the year-over-year comps become a lot more normalized and potentially a lot better. Okay. That's all super helpful. Just a little bit of time left. I wanna open it up to the audience. If someone has a question for you to raise a hand, I may or may not be able to see it because the lights are exceptionally bright, but I'll pause for just a moment. Seeing no takers, so just I, I guess I wanna spend a little bit of time on how you think about the growth margin trade-off. And I can appreciate, like, it's not a, there's not a natural toggle. Like, some of it ties back to growth, right? If you're outpacing targets and some of that falls to the bottom line. And. Yep. But as you're, maybe you can talk first about sales capacity. If you've been adding sales capacity, where you've been adding sales capacity, and how you're thinking about sales capacity in the context of what you just said, which is there are several quarters we need to work through, but we may hit this more normalized period at some point in 2025. And I suspect you'd like to be ready with productive sales activity when that happens. It's a refocus of resources up-market. So when we look at sales resources that were focused on SMB and kind of higher volume, higher velocity, lower dollar SMB, we wanna be able to service that through a you know prescriptive PLG motion and then take, reallocate some of those resources up to account management and mid-market and enterprise, reduce account loads, make sure that we're really investing behind those longer-term relationships with customers. It's not an incremental thing. I don't think we believe we need that much incremental capacity at this point. Certainly, if we get back to accelerating growth at scale, then we can add capacity behind it. Sure. Okay. So the enterprise, that type of rep is something that you feel you have adequate capacity for now? We went and built out that team, you know, two to three years ago, and we knew that there was, like, you know, call it year, year-and-a-half ramp to go get that where we wanted to do it, so we've been doing that a little bit behind the scenes, and we feel like we've built that to a place where we are already scaling. Okay. And appreciating, I mean, you're saying growth is still a significant priority area as it feels like it should. But when we think about margin and drivers of margin longer- term, we get that question often just because ZoomInfo's margins have been outsized at the smaller scale than what many software companies need to get to the levels that ZoomInfo has been in the 35%-40% range. What would allow margins to continue to scale? I guess I'll stop with that. And I mean, I guess I'm also curious about it just in the context of how you weigh those trade-offs and, you know, still the focus on growth. Yeah. Well, prioritizing growth. We feel like we've made the investments. I feel like we have the product, and we think some of it is just getting there. From a margin perspective, I think, you know, we still have really good margins, but we're gonna weigh what that growth trajectory is, right? So if we're getting back to a place where growth is really starting to accelerate into the high single digits and approaching double digits, we might not be as quick to really drive margins up behind that. Sure. We might, like, get it just from operating leverage, at least nearer term. If we get to a point where we're delayed in getting back to growth or we think that, you know, growth we get back to it, but it, it starts to plateau some, then I, I think we start to really look at it from a Rule of 40 perspective and start to balance a, you know, let's get back into the low 40s, mid-40s longer- term from a margin perspective. Okay. That was super helpful. I guess the last one we're coming up on time is just given various scenarios at play coming into 2025, how do you approach planning activity? It sounds like you have a good handle on capacity and have that in place. You have the sort of the product focus to some degree as well. But what are the priorities you're thinking about in terms of 2025? And then what are the signals you'll continue to watch that will inform if that sort of growth improvement is starting to take shape under the covers there? Yeah. I think it's cautious planning. So we don't think that there's, you know, really fundamental changes we need to make to get to the place we wanna be at. The things that we'll be super focused on, as I'm sure many of you will, will be the trajectory of retention in aggregate. And then, you know, certainly, I think a focus on what the mid-market trajectory is because of how steep that decline was. If we can get that beyond stabilization to growing again, I think that that's a bellwether for 2025. Okay. That's great. It's a good note to close on, Graham. Appreciate you making the time. Yeah. Thank you. Thanks for coming.