Zoominfo Technologies Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Elizabeth Elliot - Morgan Stanley - Analyst : After Q2, the EBITDA, we should largely be through the renewal risk, which has pressured the business for a while now. So I'm just hoping to get a better understanding of the decline for the back half of the year. Or are you assuming a second round of downsells or has new business outlook changed materially? So if we could just get some color on kind of where the incremental pressure is coming from and the assumption on NRR in the back half of the year, that would be great.

Question: Mark Murphy - JPMorgan Chase & Co. - Analyst : I'm curious if the volume of newly announced layoffs in the technology industry since June and July might have surprised you at all because Henry, I think you just said that you're not assuming that any of these improvements that you did see in Q2 are going to continue in the second half. So we had these announcements from UIPath and Intuit and OpenText Salesforce and Intel and others since then. And so I'm just curious if something is causing you to sense a second wave of layoffs that might be affecting go-to-market head count in the last say, five to eight weeks a little more than you might have expected? And I have a quick follow-up.

Question: Mark Murphy - JPMorgan Chase & Co. - Analyst : Okay. And then, Cameron, is it possible, can you remind us on the non-collectability receivables, how often is it stemming from business failures versus something like a contract dispute or customer claiming that services were not provided? And then you did allude to some incremental write-off potential, I think going forward, is it possible to put any balance on that? And just help us understand, have you factored something in there as an ongoing type of revenue offset in the second half, as you just saw in Q2?

Question: Brad Zelnick - Deutsche Bank AG - Analyst : Henry, it's no doubt a tough environment and ZoomInfo has outsized exposure to some of the tougher segments of the market. But as we think about an environment versus execution versus product market fit, how much of what we're seeing in the numbers, do you feel is within your control? And maybe just a quick one for Cameron. Cam, can you comment on the pricing trends that you saw in the quarter? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2024 / 8:30PM, GTM.OQ - Q2 2024 Zoominfo Technologies Inc Earnings Call

Question: Raimo Lenschow - Barclays PLC - Analyst : If you think about the ability to collect from clients, like how does this current environment kind of compare to what you've seen before? Because like we had in the COVID 2020, where it was half 2022, this seems to be either you changed how you kind of in 2023 or it's getting worse? Can you just compare and contrast like how this kind of feels compared to the time before, because it is somewhat surprising given that you've been in tough markets before.

Question: Parker Lane - Stifel Financial Corp. - Analyst : Just to stick on the idea of the new business risk model, Henry. Are the parameters there simply about the size of the customer that you're talking about? Or is it also based on a number of seats or products they're adopting from you guys at the onset?

Question: Alex Zukin - Wolfe Research, LLC - Analyst : Apologize for the background noise, maybe two quick ones. I'm trying to swear just, Henry, maybe your comments around improving retention rates in the quarter, particularly in the South parts and also increasing charge-off rates? And maybe just comment on the linearity that you saw of these increases, because I would say the kind of nonretaining customers, or customers are going to go out and do something different. Can you just help us understand like for my second question, mechanistically, if you look at your bookings, which I think on a reported basis, CRP bookings was down to it how much of this bad debt can we kind of take out of that bookings to inform or something that can square us to that comment that Cameron made about flat, secondly, low single (technical difficulty) kind of once you start getting back some--.

Question: Kelly - Goldman Sachs Group, Inc. - Analyst : This is [Kelly] on for Kash. Thanks for all the color provided on the call. I had two quick ones for you. How has your sales cycle duration really compare this quarter versus prior periods? And second, what lessons do you take away from the large customer win and mid-market improvement? And it seems also enterprise that you saw this quarter to close remaining deals in your pipeline?

Question: Brent Bracelin - Piper Sandler & Co. - Analyst : I wanted to go just back to kind of framing how much exposure you have to SMB. I think it looks like bad debt accruals were $33 million, $34 million last year. You're at that similar mark here at the first 6 months of this year. What portion of that SMB business would you frame as still kind of being at risk versus how much you're kind of pre baking in as additional weakness? Just trying to think through at what point could we make a mark that kind of worse is behind you? I think we thought that a year ago, clearly not happening now. But maybe just frame overall, that SMB exposure, I think, would be helpful.

Question: Koji Ikeda - BofA Global Research - Analyst : A couple from me here. Maybe the first one for Cam. Just wanted to understand a little bit more on the write-downs headwind to the guidance for the full year. And I know you guys aren't guiding 2025, but just thinking about the write-downs and potential impacts heading into 2025. Is it a full year of impact? Does it affect 1Q '25? And does it potentially lead into the second quarter of 2025 too?

Question: Koji Ikeda - BofA Global Research - Analyst : Got it Henry. And just one follow-up, if I may here, Henry, for you. In prior quarters, you have talked about customers, I'll call them boomerang customers that left ZoomInfo that have come back to you. I don't think you really talked about it much in your prepared commentary. So any sort of color on maybe some bigger customers that have returned to the Zomato platform? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2024 / 8:30PM, GTM.OQ - Q2 2024 Zoominfo Technologies Inc Earnings Call

Question: David Hynes - Canaccord Genuity Group, Inc. - Analyst : Henry, one for you. So a lot of your data today is being piped into CRM systems. The CRM vendors are also trying to build Copilots that help with activating intelligence, prompting next best action. What gives you confidence that the AI-driven functionality will live with ZoomInfo versus the system of record or the CRM vendors that you partner with?

Question: Taylor McGinnis - UBS Group AG - Analyst : So if I look at the 3Q rev guide, it assumes a sequential increase, which is a reversal from some of the recent trends we've seen. Now I would imagine some of that might be due to the write-downs in softer new business changes that might be having an impact there. But Cameron, can you help us bridge that gap? I think you mentioned adjusted revenue of $307 million in the quarter. Can you quantify the pieces that make up the difference between that and what was reported? And as we look into 3Q and 4Q, are you able to quantify the write-down and new business impact that's embedded?

Question: Jackson Ader - KeyBanc Capital Markets - Analyst : Really, the one for me is, Henry, on the trends or the positive trends in the business that are not expected to continue, or are being kind of removed from guidance going forward. I'm just curious, are you already seeing some of the enterprise momentum slow here as we are here in early August? Or is this just true conservatism? Or is it actually happening and that's why you're taking it out of guidance?

Question: Michael Berg - Wells Fargo & Company - Analyst : Michael Berg on for Michael Turrin. When I think about the margin impact of the write-offs, how can you think about how that flows through the rest of fiscal '24 on a margin percentage impact? And then how can I think about that rolling through into fiscal '25. Then I have a quick follow-up.

Question: Michael Berg - Wells Fargo & Company - Analyst : Helpful. And a quick follow-up for Henry here. You made a point on the call to mention that you plan to be aggressively buying shares here. What would be your key things to point to as driving your confidence in scooping up more shares moving forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2024 / 8:30PM, GTM.OQ - Q2 2024 Zoominfo Technologies Inc Earnings Call

Question: Surinder Thind - Jefferies Financial Group, Inc. - Analyst : Just, Henry, any color on breaking down the NRR between SMBs and mid-market? And then maybe when you look at the new business that you're winning. So what is that mix between the SMBs and mid and enterprise? And maybe how does that compare to your current ARR mix?

Question: Surinder Thind - Jefferies Financial Group, Inc. - Analyst : Got it. And just one quick clarification question on Copilot. The ARR figure you provided, I think it was $18 million. Was that as of quarter end or is that as of a different period of time?

Question: Brian Peterson - Raymond James Financial, Inc. - Analyst : So Cameron, just on the $33 million in charges you mentioned this quarter, just to clarify, how much of that is embedded in the 2Q NRR figure? Or is some of that would have been impacted prior periods or future periods? I just want to make sure I understand how the charges are impacting the NRR?

Question: Sitikantha Panigrahi - Mizuho Financial Group, Inc. - Analyst : I just want to clarify, you talked about if you look at your guidance second half, you're taking down $50 million in revenues, if I exclude that $15 million write-off. So how much of that the $50 million that you're taking out, how much of is a write-off versus any kind of softer new sales or downsells or any cannibalation you're going to see given that Q4 another strong renewal quarter?

Question: Austin Cole - Citizens JMP Securities, LLC - Analyst : This is Austin Cole on for Pat. I just wanted to ask about the DaaS business, 13% of ACV. Can you just talk about what you're doing to drive success there? And how big do you think it can get?