ZoomInfo Technologies Inc. (GTM) Q3 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the ZoomInfo Third Quarter 2020 Financial Results Conference Call. At this time all participants lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jerry Sisitsky. Thank you. Please go ahead, sir.

Thanks, Gigi. Welcome to ZoomInfo's financial results conference call highlighting our results for the third quarter of 2020. With me on the call today are Henry Schuck, CEO and Founder of ZoomInfo; and Cameron Hyzer, our Chief Financial Officer. After their remarks, we will open the call to a question-and-answer session. I'd like to remind all participants that during this conference call, any forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Expressions of future goals, including business outlook, expectations for future financial performance and similar items including, without limitation, expressions using the terminology may, will 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 section of our filings with the SEC. 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 cautionary statement included in the slides that we have posted to our Investor Relations website at ir.zoominfo.com. All metrics discussed on this call are non-GAAP unless otherwise noted. A reconciliation can be found in the financial results press release or in the slides that we have posted to our Investor Relations website. With that, I'll turn the call over to our CEO, Henry Schuck.

Great, thank you, Jerry, and welcome everyone. This quarter more customers than ever stepped up to modernized their go-to-market motions by adopting ZoomInfo's data and insights platform. In Q3, our team has delivered 41% organic growth over the last year, up 40% from last quarter. Out of 47% adjusted operating margin, we achieved the most adjusted operating income ever in a quarter and year-to-date we have delivered $167 million in unlevered free cash flow. Because of the strength that we're seeing across all areas of the business, including record quarterly new sales, record engagement levels and a new high watermark for our customers spending over $100,000 a year with us, we are raising our financial guidance for the full year. As we've continued to enhance our offerings and capabilities, we saw customers of all types engage with our data and insights platform at record levels. In the quarter, we experienced record high engagement rates, including a 33% increase in adoption of our FormComplete product, a 67% increase in adoption of our intent product and a 40% increase in adoption of our InboxAI product. The move from analog single channel to digital multi-channel motion that started in the last few years continues to transform business to business selling. Our teams are focused on consistently executing on our vision where ZoomInfo powers a closed loop go-to-market cycle from data to decision and action. One that's less reliant on heroic unpredictable outlier performances and more dependent on a scalable predictable platform approach with data-driven orchestration. The ZoomInfo platform seamlessly delivers data and insights to drive the day-to-day go-to-market activities of thousands of leading organization. By using our platform, sellers and marketers are able to identify prospects, ranked their target – their best target companies, monitor end market buying signals in real-time, get direct contact information for their prospects and directly engage with them. We are in the very early innings of what we now see as more than a $30 billion total market opportunity with meaningful corporate initiatives in flight increased that total addressable market. And we continue to see a long-term opportunity to drive a rare combination of both durable growth and profitability. During the quarter, we signed deals with companies from a diverse set of industries. From the Horton Group, an insurance, employee benefits and risk advisory firm to Total Plastics, a plastics distributor to RoadRunner Recycling, a waste and recycling service, to Echo Global Logistics, a publicly traded provider of transportation management services, ServiceMaster Restore, who does commercial and residential restoration services and Be Green Packaging, the leader in molded fiber packaging solution. In the quarter, 40% of our new ACV was generated from industries outside of software and business services. B2B companies of any size and in any industry can and do use the ZoomInfo platform to grow their business. Q3 was also our best quarter on the land and expand side. Our team has added more customers than our greater than $100,000 ACV cohort than ever in our history with more than 720 customers now spending $100,000 or more in ACV with us. To attract new customers and expand within our existing customers, we continue to reinforce our competitive moat by investing in our platform, our robust core data assets and by executing on M&A that fortifies our strength and increases our reach within sales and marketing organization. I'll touch on all of those areas now. To capitalize on our momentum within the enterprise, we released a host of new features designed to provide greater speed, scalability, transparency, security, and administrative control to our enterprise customers. As part of those initiatives, we greatly enhance our analytics layer by embedding business intelligence dashboards directly into our platform. These allow users to track real-time changes. Our APIs and enrichment solutions are making in a customer's CRM or Marketing Automation platforms and to provide detailed usage analytics that give administrators clear views of platform engagement. This new analytics capability helps to clearly communicate the ongoing value and ROI provided by ZoomInfo. On the data side, last quarter, we talked about how we continue to invest in and differentiate our data products by using machine learning and AI to ensure our customers enjoy the industry's most accurate and comprehensive data. Those investments have grown our professional dataset over 30% since the beginning of the year from 100 million profiles at the end of 2019 to more than 132 million at the end of Q3. Over that period, we have also increased fill rates on direct phones by 29% and validated email addresses by 24%, all while simultaneously increasing data quality. From a platform perspective, we have been extremely busy. In Q3, we've launched Engage, a sales engagement offering designed to help sales teams maximize productivity through access to an automated sales dialer, built-in email automation and technologies to manage sales workflows. Engage users have a clear next step for activating their data and engaging with prospects and customers. Although we don't expect it to be a material portion of our revenue in 2020, the TAM associated with this market is estimated at around $9 billion by 2025 and we do believe it will help drive incremental growth in 2021 and beyond, leading to an increase in our total addressable market. In addition to launching Engage, we also released hundreds of new features and improvements in Q3 designed to make our platform easier to use, more scalable and able to process more data to meet the needs of the largest enterprises. This started with, but it's not limited to a significantly design of our mobile experience improvements to our Quick Search, redesigns of our company and contact profile alerts and the homepage. We also added a real-time intelligence feed to give our users a place to consume proprietary and actionable content on their target prospects and customers. We believe these types of investments in our core offerings pay dividends by providing a better customer experience that delivers greater value, making the product stickier and leading to higher retention rates and upsells from our customers. We also tackle the big common challenge for all go-to-market teams, the need to unify first and third-party data sources. To help solve that, we released a new bi-directional sales force integration capability, allowing users to unify data from their sales force CRM systems with ZoomInfo's platform search. Today more than 65% of our customers have activated some form of ZoomInfo integration with their go-to-market systems. All of that platform work has knocked on unnoticed. In Q3, G2 Crowd released its fall grids where ZoomInfo was listed for the first time in the account data management, AI sales assistance, email verification, lead mining and visitor identification grids. In the last three years, we have gone from appearing on five G2 grids to appearing on 32 grids and placing number one on 19 of them. This is a testament to our ability to innovate, release products to the market that are rapidly consumed and best-in-class and expand the platform to drive more value for our customers. These platform enhancements have helped support our legacy platform migration efforts, where today we have over 60% of our ACV on our new platform. We have consistently seen a modest uplift when migrating customers to the new platform on a like for like functionality basis. But once on the new platform, our customers embrace the new depth of coverage and improved features and functionality with more than half of migrating customers adding additional users. And while very early in the renewal cycles, initial indications are that expansion activity from the first cohort of customers on the new platform are even better than what we've seen historically. Within our accounts, we still see a tremendous white space. Our data indicates that our existing enterprise customers represented an opportunity to grow by more than $1 billion in incremental annual spend, even taking into account that we have almost doubled our upsell into that cohort so far this year. In terms of data privacy, we continue to make progress on notifying every mailable professional on our database by the end of the year, and recently eclipsed the 88% mark. We also recently announced that we have received the TRUSTe Enterprise Privacy Certification Seal demonstrating our commitment to data privacy and to the security needs and growing expectations of our customers. Finally, from a product perspective, in Q3, we continue to execute on our acquisition strategy, enabling us to close the acquisitions of Clickagy and EverString in early Q4. Given our successful M&A track record and our plan to continue to pursue acquisition, I'll briefly discuss our philosophy and approach to M&A before speaking to each of these acquisitions. First, we target high value adjacencies where we can leverage our leading go-to-market organization to drive significant growth. With an LTV-to-CAC well above 10x across a scaled go-to-market team touching tens of thousands of customers and prospects, we have a proven, highly efficient go-to-market engine with a track record of bringing solutions to market. Second, the sale and marketing ecosystem has a flurry of solutions that drive go-to-market effectiveness. Nearly all of these solutions much like their CRM and marketing automation predecessors are empty boxes without the data and insights that ZoomInfo filled them with. So we look for products that integrate with our data and insights to create a differentiated value proposition to customers that competition cannot match with narrow automation alone. Third, we look for technologies that are near to what we do and adjacent to our current offering. We stay close to home, but look for assets that provide immediate and long-term value to our customers, while expanding our total addressable market. We believe that there's a real opportunity to become the de facto operating system for all go-to-market teams. And finally, from a financial perspective, we look for transactions that are accretive to our adjusted operating income within the near term. With the Clickagy acquisition, we improve our intent offerings by providing the first streaming intent offering for B2B sellers. The core of what ZoomInfo does is help companies know that companies they should be engaging with and the professionals that those companies who make buying decisions for their products and services. What streaming intent data unlocks is the when around target buyers being in market, doing research and poised to make a purchasing decision. This allows sales and marketing teams to tailor messages, offers, and resources to increase win rates. We are confident that over the next three to five years, B2B intent data will become a central ingredient to how companies target and segment potential customers and drive their go-to-market motion. And just the last year we have seen the number of forward-leaning customers that subscribed to our intent offerings more than triple. And announced last week, EverString provides a count and firmographic data of the service for the enterprise market. EverString's proprietary AI and machine learning has mastered sourcing and tracking of information on the long tail of SMB companies that are notoriously hard to detect and maintain. And they do it at scale with an incredibly high degree of accuracy, allowing them to take share from much larger legacy data providers. EverString's 100 million company records and 70 million professional profiles will be integrated into ZoomInfo's data engine, a 15 million company records and 132 million professional profiles. I continue to be impressed and thankful for the great team that we've put together to go after the opportunity in our market. We continue to virtually onboard hundreds of new employees each quarter, and we're doing it in a way that truly connects them to our culture. Our commitment to providing a great place to work was recently recognized with comparable naming us one of the top 25 workplaces in the country for happiest employees. We have also made a company commitment to diversity and inclusion, sharing our progress across the company and regularly discussing it at the Board level. We're proud that we have meaningfully increased the percentage of diverse employee that ZoomInfo over the last 12 months and expect to continue our progress here. With that, I'll hand it over to our Chief Financial Officer, Cameron Hyzer.

Thanks Henry. We are driving a high-growth subscription business at scale, and we operate profitably, which allows us to reinvest operating leverage to drive durable long-term growth. In Q3, we posted organic growth of 41%, acceleration relative to what we achieved in Q2. And we did so with an adjusted operating margin of 47%. GAAP revenue in Q3 was $123 million, up 56% year-over-year. Organic growth based on allocated combined receipts was 41% compared to Q3 2019, driven by strength in new customer additions and expansions of existing customers. While GAAP revenue and allocated combined receipts have converged in 2020, the difference in growth rates is due to the fair value adjustments of acquired unearned revenue; the impact of the comparative figure in 2019. Both new sales activity and existing client net expansion improved relative to Q2 and last year. We continued to build momentum and increased win rates throughout the quarter, and this combination of strength in new sales and expansion activity helped drive sequential revenue growth of 10% adjusted for the relative days in each quarter. Our land and expand motion continues to underpin our success, particularly in the enterprise. Customers spending $100,000 or greater in ACV increased by about 70 to more than 720, which is our strongest quarterly increase ever. As we move to expenses, adjusted gross profit in the quarter was $109 million yielding an adjusted gross margin of 88% in line with the margin we delivered in Q3 2019. Adjusted sales and marketing expense was $30 million or 24% of revenue, up from 22% a year-ago. We continue to drive an LTV-to-CAC that is well above 10x, reflecting our go-to-market efficiency and success this quarter. And we will continue to invest in expanding capacity to drive sustainable growth. Adjusted R&D expense was $8 million or 7% of revenue in Q3, up from 6% a year ago. We continue to invest in R&D as well as innovation and data accuracy and coverage to further deliver value to our customers and extend our competitive advantage as well as expand our addressable market and create a pipeline for new revenue sources in the future. Adjusted G&A expense was $13 million or 10% of revenue as compared to 7% a year ago. As we have added capacity to operate as a public company and incurred public company costs, including increased corporate insurance and professional services. Adjusted operating income in Q3 was $59 million yielding a 47% margin, which compares to $47 million in a 54% margin in Q3 2019. Operating margins were consistent with our guidance, which called for higher public company costs as Q3 was our first full quarter of being a publicly traded company. Adjusted net income for the quarter was $43 million or $0.11 per share based on $403 million weighted average to wooded shares outstanding. Turning to the balance sheet and cash flow; we ended the quarter with $306 million in cash and restricted cash and used approximately $70 million of that to fund the acquisitions of Clickagy and EverString after the close of the quarter. In the third quarter, we generated operating cash flows of $49 million, which included $10 million of interest payments. Unlevered free cash flow with $60 million for the quarter and $167 million year-to-date. With respect to liabilities and future performance obligations, unearned revenue at the end of the quarter was $176 million, and remaining performance obligations were $458 million of which $349 million are expected to be delivered in the next 12 months. In Q3, we did experience an improvement in the mix of annually paid contracts relative to Q2, but we were still below what we experienced in 2019. I know that some analysts look at calculated billing to approximate in quarter activity, but I would caution you from placing too much weight on this calculation. Our dynamic mix of billing terms and lack of consistent seasonality of contract expirations caused a significant level of variability with respect to unearned revenue, calculated billings and RPO as evidenced by comparing the last two quarters. As such given the fully subscription nature of our business, we focus on sequential growth and revenue, adjusted for the days in the quarter to more accurately assess the signal through the noise. As of September 30th, we continued to carry $756 million in gross debt, and our Q3 net leverage ratio on an LTM basis is down to 2.1 times. I also want to speak to the disclosure we made this afternoon with regard to our plan to restate our Q2 financial statements. This is a restatement of tax benefits that we recorded in Q2 related to upstate structure and the IPO transactions. Our internal team identified it as part of our preparation and review of Q3 financials and determined that it should not have been recorded. This difference is driven by certain calculations and estimates regarding the impact of the IPO on long-dated deferred tax assets derived from the difference between the GAAP basis and tax basis of partnership interest held by corporations within our structure, which were impacted by the restructuring of sponsor owned entities, stock compensation expense, and carryover tax basis from prior transactions. We'll be filing an amended 10-Q for our previously reported Q2 results. Year-to-date figures in our Q3 financial results, press release and presentation materials properly reflect this change, which is detailed in our press release, increases GAAP net loss in Q2 by $22 million, and principally impacts the balance sheet by reducing non-current deferred tax assets of $62 million. The adjustment did not impact any of our key performance metrics including; revenue, adjusted operating income, cash flow or adjusted net income. The Up-C structure delivers significant value to our shareholders, but requires extremely technical and specialized accounting knowledge. We have expanded our team over the last three months and are confident in our ability to effectively manage these complexities moving forward. Before we turned to guidance, we have noted that GAAP revenue and allocated combined receipts have converged in 2020, and to simplify comparisons and avoid confusion we have consistently guided the GAAP revenue. As such, this will be the last quarter where we provide allocated combined receipts as a supplemental metric. As a helpful addition, please note that we have included historical RPO balances for Q2 2019 forward in the financial sides to provide incremental transparency for investors as it pertains to trends in remaining performance obligations. As we move to guidance, please note that reflected in our guidance is the expectation that Clickagy and EverString will contribute a couple million dollars in revenue and will be mildly, modestly dilutive to adjusted operating income in Q4. We expect them to be accretive to AOI in the first half of 2021. With that, I will provide our outlook for the fourth quarter and our revised guidance for the full year of 2020. We expect to generate GAAP revenue in Q4 between $129 million and $131 million and adjusted operating income between $58 million and $60 million. This guidance implies 43% annual revenue growth or 35% growth relative to the previously reported allocated combined receipts figure for Q4 2019; and a 45% adjusted operating margin at the midpoint of the range. Non-GAAP net income is expected to be $0.09 to $0.10 per share based on 404 million diluted shares outstanding. For the full year, we now expect GAAP revenue to be between $465 million and $467 million, up $13 million at the midpoint, relative to our prior guidance, and adjusted operating income of $220 million to $222 million, up $6 million at the midpoint. Our upwardly revised guidance for the full year implies 39% organic revenue growth and 47% margin at the midpoint of the range that. Non-GAAP net income for the year is expected to be $0.31 to $0.32 per share, up $0.02 per share at the midpoint. And we now anticipate unlevered free cash flow to be $213 million to $215 million, up $6 million at the midpoint. To summarize, Q3 was another quarter where we delivered strong revenue growth, profitability, and free cash flow. We continue building our teams, developing and acquiring technology. Increasing the value we provide to customers further differentiating ourselves from competitors and expanding our sales and marketing capacity to drive future growth. All of this enables us to confidently execute against our plan. Now let me turn it over to the operator for questions.

[Operator Instructions] Our first question comes from the line of Brad Zelnick from Credit Suisse. Your line is now open.

Excellent. Thank you so much and congrats on a great quarter. Henry, I listened very carefully to some of what you said today. You talked about becoming the de facto operating system for go-to-market teams, and as I contemplate what you said around ZoomInfo Engage and totally appreciate that this expands your market opportunity. I'm just trying to understand was this something that customers were asking for versus your vision of where this market is heading. And how should we think about the lines blurring between ZoomInfo and core CRM platforms?

Yes. Hi, Brad. Thanks for the question. I think first with Engaged, well, we saw as an opportunity to have a closed loop system where customers can live inside of ZoomInfo. They have an opportunity to find the data on their customers and prospects, and then actually have a method to engage with those prospects. So we've heard from a lot of customers that having the data and insights was incredibly powerful, but activating it was a struggle for them. And so building Engage into the core part of our platform allows our customers not only to have access to our best-in-class data and insights, but also to be able to engage and activate that insight – that data and that insight against their customers and prospects. And I actually think that theme, the idea of having access to data and actually activating it and having access to insights and actually activating it is the same theme we see with the Clickagy acquisition, where TOPO, who is the sales and marketing arm of Gardner talks about how companies are continuing to invest in intent data, but they don't have a way to activate it. And so bringing that underneath the umbrella of ZoomInfo and then creating automated ways for customers to activate against that data, I think is going to be a core focus of ours going forward.

Excellent, thanks. And if I could just ask one follow-up, clearly there is tremendous opportunity for you here right here at home in the U.S., but any update on international investments that you're making. Thanks.

Yes, absolutely, Brad. So international was – this quarter we spent a lot of time on international. It was – actually Q3 was very strong internationally. We grew revenue 60% year-over-year against that segment of customers. The pandemic did make us rework our strategy to open local offices in the short-term. And we adjusted by aligning a segment of our East coast sales account management and customer support team to European hours that shift in alignment is working very well for us. And then we spent some time on the current data set internationally. We focused on increasing our coverage on companies and contacts in the UK and Ireland where we're beginning our international focus. And in the quarter, we increased contact coverage over 50% in those countries. We increased contact coverage across Europe 168% year-to-date, direct dial numbers across Europe 35% in the quarter. And then our acquisition of EverString also significantly expands our company coverage internationally that data asset includes over 5 million companies in the UK and Ireland and 13 million companies across Europe. So we feel like we're in a stronger position than ever to be the single source of truth for company and contact information for any multinational enterprise.

That's awesome. Thanks, Henry, and congrats to the entire team.

Thanks, Brad.

Thank you. Our next question comes from the line of Raimo Lenschow from Barclays. Your line is now open

Hi, congrats from me as well. Henry on EverString, just kind of because you're not public that long, just how difficult is it to bring these two datasets together and just kind of get like one coherent AI on it and just kind of combine like how you clean it, how they clean it and just have like one integrated set and then kind of what does it mean like from a customer – actually you've touched already on it, but it seems like it's changing your B2B quite a lot in theory.

Yes. Hi, Raimo. Thanks for the question. The good news is we have a lot of experience with this, starting with our acquisition of iProfile in 2015, where we went through that same motion; the acquisition of Ranking, where we combined datasets, and then the acquisition of ZoomInfo, where we combined our datasets and processes and systems together. So we've seen the movie a few times. We have learnings from those experiences that we're bringing to bear. And in the run up to – and during diligence in the run-up to announcing the acquisition, our teams go through a pretty rigorous planning and integration process where we're identifying exactly where the merging of those datasets is going to happen, how it's going to happen in the short-term, how that evolves to the medium and long-term. And so we're already integrating that data today. We're already in a place where we can deliver to customers a superset of that data that we'll continue to refine over time.

Okay, perfect. Thank you. Congrats.

Thanks very much.

Thank you. Our next question comes from the line of Jennifer Lowe from UBS. Your line is now open.

Great. Thank you. And maybe just following up on Brad's question a bit. You've mentioned some of the challenges that that your customers have had kind of figuring out how to take action on things like intent data. And maybe just even asking a level higher, how many of your customers are really of the level that they understand the intent data and the AI insights and are taking advantage of those at this point versus customers who maybe are still a bit earlier in the adoption curve and really more focused on contact data at this point.

Yes. Thanks, Jen. This is super interesting question. Our customers come from a variety of different places when it comes to sophistication and using our data sophistication and going to market. There are some customers large and small today who just – who use our platform as a prospecting tool. And as you move up the sophistication curve, we find clients who use our data and insights to drive complicated propensity to buy models to drive territory mapping for thousands of sellers. I think the thing that we realize is regardless of where our customer is on that maturity curve, our solutions can drive quick value in their customer acquisition efforts. And then an interesting thing that we're seeing – that I've seen in every customer call that I've had this quarter, we found companies asking us how they turn their CRM system from a system of record to a system of insights. Literally every single customer is having this conversation with us today. And they're getting value from CRM as a hub. They're just not seeing their users adopt it, or get real value out of those systems because on their own, they just provide no insights. And so, they're looking to us to help them make that transformation. And so again, those are companies really early in their go-to-market maturity to companies that are really sophisticated about the way they go-to-market.

Okay, great. Thank you.

Thank you. Our next question comes from the line of David Hynes from Canaccord. Your line is now open.

Hi, thanks very much guys. Henry, you made an interesting comment in your prepared remarks that expansion dynamics are even better on the new platform and I realized it's early cohort data, but maybe you could talk about why you think that's the case and if there's any way to quantify it.

Yes, I think it's a couple of things, DJ. First, the coverage is broader. So our customers who are migrating from legacy DiscoverOrg to ZoomInfo find somewhere in the neighborhood of 10x the amount of data in our new platform than what they were accustomed to. And so, they're coming into our platform. They're seeing significantly more coverage. And so, they're adding additional seats with their sellers, who couldn't get the value out of our legacy platform because they didn't have enough coverage. And then in the last year, year and a half, we spent all of our R&D efforts on the new platform. So we built new functionality, new features from things like FormComplete to InboxAI to advanced intent products. And so you see customers stepping up and adding new features and functionality that they didn't have before inside of the new platform as well.

And DJ, it's worth noting it is still early days on those core cohorts. But based on our analysis, we are really excited about the fact that not only our new customers that signed up with the new platform expanding at a higher rate than kind of new customers have historically, but also customers that migrated over to the new platform are expanding at a higher rate than when they migrated.

Yes, okay. And then one very quick follow-up for you, Cameron, while I have you. So current RPO is up 60%, thanks for the year-over-year disclosure there in the slides. Is there anything in there that muddies that year-over-year comp? Or is that a pretty good leading indicator of growth?

Thanks for including me on the questions. I appreciate that. I do think that those are our metrics that we need to be careful with. And I would advise the investors to be careful with. It does depend on a number of factors and we do have less consistency in the seasonality of when contracts expire. A big part of that is, you know, as part of our land and expand motion, a lot of our upsells are done off cycle, which creates a little bit of noise with respect to that RPO metric. So, I very much focused on the sequential revenue growth, which obviously you could annualize out and does show that we're continuing to do very well and be somewhat careful with those bookings and billings.

Yes, okay, very good. Thanks guys.

Thank you. Our next question comes from the line of Mark Murphy from J.P. Morgan. Your line is now open.

Yes, thank you. Congrats on a very strong performance. So Cameron, I also had a question for you. As we kind of think through the 40%-ish trajectory for ZoomInfo right now, and if we tried to overlay the effects of the pandemic and the recession for Q3, would you say that that's a net headwind now, would you say it's neutral, would you say it's become a net tailwind? And just given you're reporting on the day coincidentally that the Pfizer vaccine news came out, how do you see the imprint of the pandemic going forward in terms of ZoomInfo's ability to kind of benefit from reopenings next year and the year after?

Yes, so, I think we've always said that the pandemic and the resulting economic uncertainty present both headwinds and tailwinds for us. I think from a headwind perspective, we continue to have customers that are at least partially impacted by the pandemic and also just buying patterns obviously change. I think over the course of the year as customers and – particularly larger customers became more acclimated to the environment. I think we have seen kind of benefits as people are looking to improve their sales and marketing activities. Overall, with respect to where we are, the trend of people looking to improve their go-to-market activities achieve better efficiency and effectiveness started well before the pandemic and we have seen this, it's become more important, but post-pandemic we expect that that trend will continue for a very long period of time. And that secular trend will actually help us as economic uncertainty continues to win.

I would add some, Mark. There is a study by McKinsey that came out in the quarter that found that only 20% of B2B buyers say they hope to return to in-person sales and they're getting that even in sectors where field sales models have traditionally dominated like pharma and medical products. And once you make a shift from analog to digital, I can't think of an example where you go back.

Yes, that's a very good point I think we can all relate to. And so Henry, one other question I had for you. If you think through your typical customer, that's maybe been with you for a couple of years, and if you go back and try to look at their own headcount trend for their sales teams and for their marketing teams, I think that's a lever that can drive some dollar retention for you through seat expansion. Do you have any feel for how that's trending in recent weeks? Or have you seen any indication that your customer base is kind of beginning to re-engage and it starts to just kind of expand their sales teams more rapidly?

Yes. Mark, maybe I'll jump in and then Henry can add color, but we certainly see within our enterprise cohort that has improved in terms of our net expansion and upsell capabilities. While there has been some volatility in terms of overall headcount, we are still so materially underpenetrated that there's a lot of opportunity for us to continue to grow. And as we've looked through our customer base while we do have some customers where we operate wall to wall or provide real benefits to them wall to wall, the vast majority of our customers were very underpenetrated and within the – in the enterprise cohort, we believe we have at least $1 billion of incremental revenue just from the customers we have today.

Excellent. Thank you very much.

Thank you, Mark.

Thank you. Our next question comes from the line of Michael Turrin from Wells Fargo Securities. Your line is now open.

Hi, there. Thanks and good afternoon. Cameron, maybe going back to those points on the macro you just laid out and the mix of potential impacts, can you just spend some time following up there on some of the assumptions that went into Q4 guidance? And is there anything else given this is your – just your second quarter as a public company for us to be aware of from a seasonal perspective as we head towards the end of the year?

Sure. That's a great question. We look at our business and we're still very positive on the secular trends that are impacting us and continue to see great execution. That being said, this has been a year where a lot of things have happened whether it's economic uncertainty, there's potential for election fallout. At the end of the day, we really don't know what we don't know. So we've taken a prudent approach to how we've set our guidance to make sure that we're providing guidance that's achievable and realistic. From a seasonal perspective, I think we've – as a kind of completely subscription-based company, obviously the revenue and expenses, the only seasonality that you really get is based on a revenue recognition where you get days in the quarter and obviously Q4 has a similar number as Q3. We will see as you move into Q1, which has fewer days that could have an impact and we adjust for that in our sequential growth thought process, but also have a small impact on margins as well. And so, overall, I think those are the kind of seasonal aspects that we tend to focus on when looking at our reported results.

Got it. Thanks for taking the question. Nice job on the results.

Thanks.

Thank you. Our next question comes from the line of Alex Zukin from RBC Capital Markets. Your line is now open.

Hi, guys. Thanks for taking the question, so maybe Henry first for you. When you look at your early stage pipelines, your late stage pipelines, the sales cycles at close rates, how do they look and compared to maybe earlier this year to your expectations during the pandemic to Mark's question around the pandemic serving as this forcing function or a change agent for you? Where are we today and kind of how does that look on a go-forward basis? And I got a quick follow-up for Cameron.

Yes. I think, if you look at this kind of every month coming out of March all of those metrics conversion rates demos, opportunities, close rates, sales cycles, everything has improved coming out of March. And it's come – and every month we've seen improvement against the month before. And so, we're getting very close to our pre-COVID time period.

Got it. And then, I guess, Cameron, if I look at some of the metrics pretty much across the board whether it's in revenue growth, whether it's in billings growth, whether it's in current RPO or even current RPO bookings on a year-over-year basis sequentially you're seeing acceleration. Are there any adjustments that you would – particularly on the billings number, on the one hand your billings number is also very different and you talked about why it's not a good number to look at, but across all three of those numbers, is there any adjustment that kind of sticks out that that we should keep in mind or pay attention to, to take us away from that acceleration narrative?

And, once again I think that particularly those bookings and billings numbers do tend to have a lot of variability in them. So, you look at billings in Q2 that was a 17% growth, so you look at billings in Q3 that's a 55% growth. It's going to go back and forth. I think when you look forward it will likely be in the middle of those numbers. I wouldn't expect it to kind of continue to grow because there is variability. And, realistically when you look back at Q3 of last year, there's always adjustments that you could consider. Overall, it's just – there are so many adjustments in terms of whether it's payment terms or the seasonality of when we've sold by our periods that are – that pause that variability and what reasons why it'd be careful of.

Got it. Okay, perfect. Thank you guys.

Thank you. Our next question comes from the line of Terry Tillman from Truist Securities. Your line is now open.

Hi, guys. This is Nick on for Terry. Thanks for taking my question. So I just wanted to talk about intent data a little bit. So, it certainly seems like your intent data solutions are seeing a nice uptick in terms of adoption. And again, that's a 67% increase in adoption of the intent product. Just wanted to know if you guys could talk about the importance of intend data when selling the overall platform. And this has led to an increasing number of enterprise customer wins are potentially larger lands. And just as a follow, how's the recently introduced streaming intent solution resonated with customers for so far? Thanks.

I didn't catch the last part, Nick. What did you say at the end?

Just as a follow-up I wanted to know how the streaming intent solution has resonated with customers so far. Sorry about that.

Got it. No, no problem. Yes, so, look we think customers – well, I think two things. One companies want to engage with their potential buyers at the time that they're interested in their products and services. And the B2C world has done an incredible job from a digital advertising and marketing perspective of being in front of their buyers when they're thinking about the products and services that they provide and sell. And the B2B world has been far, far behind B2B sophistication around that. And we believe the biggest reason for that is the fact that these – that the B2B companies have not had a way to take offline intent data and then activate it through their go-to-market system. And so there were two things – there are two kind of important things when we think about intent. One, we want to have the best intent solution on the market. We want to be able to predict when customers and prospects are in market to buy any number of different products or services. We want to deliver that in real-time to our customers, so they can take advantage of that data immediately, moments after their customers are crossing thresholds for engagement on certain topics or products. And then we want to make it seamless for them to activate that data across their go-to-market system. And so that the activation of that buying intent happens simultaneously without giving them the signal, and I think bringing that together gives B2B companies the opportunity to be truly as sophisticated as B2C companies are in their go-to-market efforts.

Got it. That's helpful. Thanks guys.

Thank you. Our next question comes from the line of Brent Bracelin from Piper Sandler. Your line is now open.

Thank you, and good afternoon. I had one for Cameron, a quick follow-up for Henry. Cameron. I wanted to drill down to the growth metrics. I appreciate the caution reading in RPO and billing metrics here given the volatility. But if I look at just like sequential growth, 11% was the highest in three years, year-over-year growth accelerated. As you think about just the quarter in what drove the momentum. Was it broad base? Was it all enterprise? Just help us give us a little more color on why you reported the highest sequential revenue growth rate in three years. And was there kind of a one-time benefit in there as well?

Yes. Thanks. That's a great question, Brent. It was broad-based across the Board. We saw really strong new business sales and that's with enterprises and mid-market and SMB customers. I think one thing to make sure to think about is that, all of our customers are selling to other businesses. So, at the end of the day they were probably less impacted by some of the COVID headwinds that you might see then say restaurant or other folks. And many of them are pivoting and finding ways to succeed, which happen to be many of the more agile and forward leaning go-to-market teams in the world. So I think our system really helped people to continue to perform. And, I think one of the things that that we continued to see throughout was that the tension or expansion among our customers continue to accelerate month-over-month, throughout the year. So you know, again, broad-based on both new sales and retention and across all of the different segments of customers.

Great. Good to hear. And then Henry, just a quick follow-up with the recovery you're seeing in and mid-market and SMB; how should we think about the EverString acquisition? I know it adds a broad swath of SNB contact data. Does this strengthen your cheer game capability in the mid-market and SMB, or is this more of a product play? Just trying to understand the logic of EverString. Is it really storing up a SMB mid-market and opportunity for you there to gain, share, or is it more of a product extension?

Yes. So first EverString expands the firmographic information we provide on small businesses that ends up being a key need for our enterprise customers. Our sophisticated mid-market clients and our SMB clients who sell to other SMBs. And we talked about every client that somewhere on the go-to-market market maturity curve and this type of data and insights that are delivered – and this type of data and the insights that are delivered from it, is used for everything from simple prospecting activities to complex lead in predictive analytics scoring. But one of the places we're especially excited that EverString helps us accelerate the success we're seeing in the enterprise. It allows us to provide a data and insights to solve, go-to-market challenges that exist across an organization and some largely focused on that enterprise space with customers like FedEx and iHeartMedia and Snowflake that they call their own. And so we're excited about infesting enterprise it, because we think it helps us solve complex problems across the enterprise, but also has value to our sophisticated mid-market clients and our SMB clients to stop the other SMB.

Helpful color, thanks.

Thanks, Brent.

Thank you. Our next question comes from the line of Stan Zlotsky from Morgan Stanley. Your line is now open.

Perfect. Thank you so much, guys. And thank you. Congratulations on a good quarter. Thank you for taking my questions. From my end, Henry maybe one for you. Obviously very strong quarter of what it seems like new customer acquisition, maybe just qualitatively, right? Who are these customers who are coming on board now and adopting ZoomInfo to really help their go-to-market activities? And how did they frankly survive through the first seven months of the pandemic? And then a quick follow-up for Cameron on, the on the, on the metrics, thank you for giving us our current RPO. And as much as current RPO, obviously, you know, controls for some of the billing term issues that also inflected very, very strongly versus the momentum that we were seeing in Q2? Was CRPO simply a function of very, very strong customer acquisition that you guys saw in Q3. That's it for me? Thank you guys.

Well, thanks, Stan. I'll start. Look, I think what we're seeing on the new business side is really strength across industries and across customer cohorts and everything from a plastics distributor to commercial and residential restoration Services Company came on in the quarter. And so we see continued strength across industries. Think what, what, where you really see is companies are looking for digital ways to go-to-market. Some of them, because they're just coming up to sort of making the transition and some of them, because they've been forced to make necessary changes because of the pandemic. What you see often is companies that have that have historically had a field salesforce and have gone to market through expensive sort of field sales sellers coming to us and saying, walking and sales team productive from home? How do I give them the insights that they would otherwise be getting by walking the floors inside of companies and shaking hands with their decision makers and warning that way, how do I provide them a set of insights and data that they can use to continue to be productive when they're not in a customer's office? And so we hear that often, we hear companies accelerating their motion to digitally transform. And then again, we see a lot of companies who are making transitions from salesforce instances are doing deployments of salesforce. And as they're making those deployments, they're coming to us and saying, look our sellers don't adopt them. They don't love salesforce. It tends to be – it tends to be a tool that they feel like they're obligated to go into, to enter data into. And we want to transform that into a system of insights for them; a tool that they're excited to go into because they know they're going to get a unique piece of insight from logging in and going into the tool. Can you help us drive that insights driven motion? And so that's what we're saying. I'll pass the Cameron.

Yes. And then in terms of the RPO question, current RPO question, certainly as Brent pointed out, we did have probably the best quarter that we've seen in years in terms of sequential revenue growth. And that certainly was driven by both angles. One, new sales that we were able to execute against in the quarter; and also the net expansion that we drove with existing customers as well. And certainly that plays into an inflection point around fillings and calculated bookings as well. But again, I would caution people from putting too much weight on the bookings and calculated billings metrics, just because those do have other variables that will drive different answers at different times than just looking at sequential growth.

Got it. Thank you.

Thank you. Our next question comes from the line of Tom Roderick from Stifel. Your line is now open.

Yes. Hi, everybody. Thank you for taking my questions. Great to hear from you. So Henry, you noted in one of your remarks that there's potentially $1 billion opportunity or just full opportunity. I think just in the customers that you have and the ability to expand their footprint. I look at that number of customers over 100,000 that spend over 100,000 with and that jumped up pretty meaningfully this quarter, but still against the overall install base. So pretty low percentage. So I guess it's kind of a two-part question, and Cameron, perhaps you could jump in with some of the financial metrics behind it. The first part of this is, how are you getting these customers to make that jump? In other words of that 720, when you landed another 70 this quarter, was that predominantly back to the installed base, are you seeing that new customers come in at that level? And then the second more functional part of that is, what are you doing with the go-to-market motion either hiring new sales reps or changing the way that your go-to-market to attract more enterprise customers? That's it for me? Thank you. Nice job.

Yes. Got it. So first, we run a pretty sophisticated land and expand motion. And so we are driving existing customers from sort of bloke sort of low entry points in the enterprise to much larger subscriptions with us. And I think you're seeing sort of most of the growth in the customer cohort and the 100,000 customer cohort coming from that expansion motion. And again, really, because the way we sell is we can go into a large enterprise. So sell up $50,000 contract to small division there to, or a small set of sellers there and then grow from there by showing value against that, that group of sellers by expanding to other divisions at the company. And that is a motion that we're running and investing into. We do continue to invest in and refine the go-to-market approach in the enterprise as well. One of the things that we released in the quarter is auto-provisioning of free trials that allows us to target specific users within our enterprise customer base, give them free access to ZoomInfo for a period of time. Gather in product feedback. And then take that feedback up to Senior Executives at those companies to increase seats and that capability we've deployed now across more than 2300 of our accounts. We expect that to continue to, to drive incremental growth within the enterprise. And we've continued to hire Rex and the enterprise space as well. One of our key hires in the quarter as the Vice President of Enterprise sales that we hired from salesforce. Who's running that enterprise sales team? And so we continue to put make investments behind that team.

Excellent. Thank you so much for the detail. Appreciate it.

And I guess, Tom, just to follow-up on the numbers super fast. Henry is right that most of the customers are expansions, but Q3 was one of our best quarters ever in terms of landing new customers over 100,000. So we are starting to see some good traction in customers coming in at slightly higher levels to begin with.

Excellent. Thanks for the follow-up. Appreciate it, Cameron. Thanks Henry.

Thanks, Tom.

Thank you. Our next question comes from the line of Siti Panigrahi from Mizuho. Your line is now open.

Hey, this is a Michael Berg for Siti Panigrahi. Congrats on a great quarter. I wanted to quickly follow-up on Clickagy and EverString. And I guess where are you in terms of integration? And how much longer do you have to go? And have you had any early customer feedback, whether it's from their existing customers using your platform or from existing domain customers using some of the new feature sets and any commentary and color around that? Thank you.

EverString, we closed on third-day, so we've had 72-ish hour – work hours of customer conversations. Now I will tell you what EverString has done for us in a big way as we were involved in enterprise conversation where enterprises are looking to what, to solve their go-to-market data needs across the organization. And a lot of that comes down to our ability to enhance and enrich the data that already exists across their enterprise and our ability to match and fill and enrich a broad set of that data. The broadest set of that data with a go-to-market focus data asset, we're already having those conversations. We're already seeing traction from the enterprise and excitement around our ability to do more with them. We really are in a position from an EverString perspective where we don't need to create demand within the customer environment for these data enrichment solutions, thousands of our customers today use our data enrichment solution and the integration of the asset is going to instantly provide them value as we'll be able to enrich more records and monetize for those records across what they're already enriching from us. And then on the Clickagy side, which there's been a little bit more room between the acquisition and now. We're releasing our Streaming Intent data, our Streaming Intent product this month, we've already had customers signed up and ready to go on that. Lots of excited customers who want to get access to that as soon as it comes out. And we continue to build an enterprise grade product that will allow us to pipe intent level data directly into the enterprise into data science and machine learning organizations in the enterprise as well. And so we're working for those outcomes right now.

Perfect. Thank you. And a quick follow-up. As you notice that about $2 million of impact to Q4, is that correct?

Yes. That's our expected revenue from the two acquisitions combined.

So it's about, if my math is correct about $10 million run rate yourself, if you include write-offs.

Yes. Certainly it's not going to be material to our financials next year as well, and that will be the math.

Okay. Thank you.

Thank you. Our next question comes from the line of Brian Peterson for Raymond James. Your line is now open.

Okay. Thanks guys. Kevin [ph] here on for Brian. You've mentioned before seeing an uptick in leads and brand awareness surrounding the IPO. And I'm curious if there's anything specific you'd point to indicating that that is sustained. And how do you think that may be impacting pipeline generation or that 40% new ACV mix across some of your verticals with lower penetration rates?

Yes. I mean, I think the best thing to look at there is what our marketing teams look at and, and the staff that they track most closely as marketing qualified leads. And those are leads that marketing generates primarily from the website. Those leads reach an all time record, both in number of MQL, as well as ACV over MQL. Q3 was 65% higher than Q3 of 2019; and so that's a metric we tracked very closely and it is really what drives the overall conversion rate to close one opportunities. And so we continue to see really great momentum across that metric from a website and marketing perspective.

That's a good color. Thank you.

Thank you. Our next question comes from the line of Pat Walravens from JMP. Your line is now open.

Great. Thank you. And let me add my congratulations. So Henry, if I'm, dividing this up wrong, let me know, but, but it seems to me, we kind of have firmographic technographic and intent data is your big areas. And I'm just wondering, where do you see the most white space for you guys in terms of more organic product development or more acquisitions?

Yes. That's a great question. I think Pat, it's more like firmographic and you could put technographic as an element of firmographic. And from a graphic is like account data than professional data or contact data and then intent data. I think those are all in like unique places from an adoption perspective, from a graphic data is the type of data that every enterprise knows that they need. And we often find them kind of using a BPO solution to fill in some blanks. And it's a pretty broken process inside of the enterprise to gather and maintain and keep that data up to date. But it has been around the longest dead professional data. I think we're actually still in a really early stage of companies leveraging professional data for ideal buyer profile to engage the right buyers at the right time. I think we're pretty early there. And then on the intent data side, that's still like a, a pretty, like a largely evangelistic sale. And you're seeing customers totally understand the value of it because they seen it's used in the B2C world. And so they're familiar with why this would work for them in a B2B context as well. But we're probably in the earliest stages of that from a data perspective into go -to-market. Okay, great. That's really helpful. Thank you. Thank you.

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Henry Schuck for closing remarks.

Great. Thank you. Look, we continue to be extremely excited about the near and long-term growth prospects for the company. We're focused on delivering value to our customers, increasing engagement with our platform, investing in technology to further expand our competitive moat, building out a world-class team and executing against value, creating M and a opportunities. As I said last quarter, this is the starting line for us. We have a very active calendar for the fourth quarter, and I invite you to join us at one of the many conferences or events that we'll be participating in for more information on where we'll be in when please reach out or visit our investor relations website. I appreciate you all joining us today. Thank you. Good afternoon, or good evening,

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.