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01/11 11:28
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A reflect strong financial performance, with upmarket retention above 100%, growth in operations, and successful AI integration. Despite weaker billings due to high comparison base, optimistic guidance and strong cRPO growth suggest positive momentum. The focus on AI-driven strategies and customer engagement, alongside a commitment to revenue growth and margin expansion, indicates a positive outlook. However, management's lack of specific details in certain areas tempers enthusiasm. Overall, the sentiment is positive, suggesting a likely stock price increase in the short term.
GAAP Revenue $318 million, up 5% year-over-year. The increase was attributed to the company's focus on upmarket growth and improved net revenue retention.
Adjusted Operating Income $118 million, a margin of 37%, which is the highest level since Q4 2024. This improvement was due to disciplined investments and operational efficiency.
Net Revenue Retention 90%, up 5 percentage points year-over-year. This improvement reflects the company's success in entrenching itself as a mission-critical solution for scaled businesses.
Customers with more than $100,000 in ACV 1,887 customers, a 4% year-over-year increase. Growth in this cohort was driven by strong ACV growth and upmarket strategy.
ACV for $1 million cohort Accelerated in the quarter, up more than 30% year-over-year. This growth was attributed to the company's focus on upmarket opportunities.
Operating Cash Flow $94 million in Q3. This reflects consistent seasonality and operational efficiency.
Unlevered Free Cash Flow $95 million, an 81% conversion from adjusted operating income, representing a margin of 30%. This was consistent with prior seasonal trends.
Unearned Revenue $432 million at the end of the quarter. This reflects the company's ongoing contractual obligations.
Remaining Performance Obligations (RPO) $1.17 billion, with $824 million expected to be recognized in the next 12 months. This indicates strong future revenue visibility.
AI and workflow products: Aggressively expanding the product portfolio with innovative go-to-market AI and workflow products, including Copilot, GTM Workspace, and GTM Studio.
Operations suite: Grew more than 20% year-over-year, driven by proprietary data assets critical to AI-driven initiatives.
Account-based marketing platform: Recognized as the only vendor in the Customers' Choice quadrant in the 2025 Gartner Voice of the Customer Report for ABM platforms, adding millions of ACV.
Salesforce partnership: ZoomInfo Revenue Agent integrates B2B data and agents into Salesforce workflows, enabling natural language queries for sales teams.
Upmarket growth: Accelerated upmarket growth with 73% of total ACV from upmarket business, up 10 percentage points in 2 years.
Customer wins: Closed deals with major companies like Ryder System, BrightView, Circle K, and a global professional services firm, highlighting a move upmarket.
Data advantage: Demonstrated superior data coverage, leading to upmarket displacement opportunities from legacy vendors.
Net revenue retention: Improved for the fifth straight quarter, reaching 90%, the highest since Q2 2023.
Operational efficiencies: Reduced invoice write-offs by 45% since 2024 using proprietary data for risk prediction and collection models.
Cash flow and share repurchases: Generated $94 million in operating cash flow and repurchased 8.3 million shares, reducing outstanding shares by 80 million over 2 years.
AI-driven initiatives: Positioning ZoomInfo as synonymous with AI and go-to-market through proprietary data assets and innovative platforms.
Shift upmarket: Focused on larger customers with longer-term contracts, improving renewal outcomes and driving efficiency.
Financial discipline: Maintained low stock compensation relative to revenue and focused on performance-based equity.
Market Conditions: The company is facing increasingly competitive markets, which require unique and proprietary data assets to stand out. This highlights the challenge of maintaining differentiation and relevance in a crowded market.
Regulatory and Compliance Risks: Forward-looking statements involve risks and uncertainties, including those discussed in the Risk Factors section of SEC filings. This indicates potential regulatory hurdles or compliance challenges.
Economic Uncertainties: The company has highlighted the importance of stabilizing and improving its downmarket business, which has been declining year-over-year. This reflects potential economic pressures impacting smaller customers.
Strategic Execution Risks: The company is undergoing a strategic shift upmarket, which involves risks such as maintaining customer retention, ensuring smooth transitions, and achieving expected growth in the upmarket segment.
Supply Chain and Operational Risks: The company has implemented models to identify payment risks among smaller customers, indicating challenges in managing collections and reducing invoice write-offs.
Customer Retention and Revenue Risks: Net revenue retention improved to 90%, but the company still faces challenges in retaining customers, particularly in the downmarket segment, which has declined 10% year-over-year.
Seasonality and Revenue Fluctuations: The business is becoming more seasonal, with sequential revenue growth expected to fluctuate. This could lead to periods of inconsistent financial performance.
Revenue Expectations: For Q4 2025, GAAP revenue is expected to be in the range of $307 million to $310 million. For the full year 2025, GAAP revenue is projected to be in the range of $1.237 billion to $1.240 billion, representing 2% annual revenue growth at the midpoint of guidance.
Margin Projections: Adjusted operating income margin for Q4 2025 is expected to be in the range of $117 million to $120 million. For the full year 2025, the adjusted operating income margin is projected to be 36% at the midpoint of guidance.
Capital Expenditures and Cash Flow: Unlevered free cash flow for 2025 is expected to be in the range of $424 million to $444 million. The company plans to continue using the majority of its free cash flow for share repurchases.
Market Trends and Business Segment Performance: The company is focusing on upmarket growth, which now represents 73% of total ACV, with a 6% upmarket ACV growth in Q3 2025. Operations growth accelerated, continuing to grow greater than 20% year-over-year. Copilot renewals showed a mid- to high single-digit improvement on initial renewal compared to Sales OS renewals.
Strategic Plans and Future Implications: ZoomInfo is expanding its product portfolio with AI-driven solutions like Copilot, GTM Workspace, and GTM Studio. The company is focusing on integrating proprietary data assets into AI-ready systems to enhance customer engagement and operational efficiency. The company is also shifting customers to longer-term contracts, with over 50% of the book of business on contracts longer than one year.
Share Repurchase Program: The company is committed to using the majority of its free cash flow to repurchase shares of ZoomInfo stock. During Q3, the company repurchased 8.3 million shares at an average price of $10.46, totaling $87 million. Since the start of 2024, 116% of the unlevered free cash flow generated has been used for share repurchases, reducing the weighted average shares outstanding by approximately 80 million shares over the last two years. The company plans to continue this strategy, emphasizing that share repurchases at a deep discount to intrinsic value will generate the best possible long-term return for shareholders.
The earnings call summary and Q&A reflect strong financial performance, with upmarket retention above 100%, growth in operations, and successful AI integration. Despite weaker billings due to high comparison base, optimistic guidance and strong cRPO growth suggest positive momentum. The focus on AI-driven strategies and customer engagement, alongside a commitment to revenue growth and margin expansion, indicates a positive outlook. However, management's lack of specific details in certain areas tempers enthusiasm. Overall, the sentiment is positive, suggesting a likely stock price increase in the short term.
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