Good morning. We'll go ahead and kick things off. My name is Brent Bracelin, Co-Head of Technology Research here at Piper Sandler. We have Graham, the CFO of ZoomInfo, ticker ZI, with a change there, and our discussion today is going to be really focused around go-to-market, that you guys are go-to-market specialists, but the world is changing as we think about go-to-market. One of the questions we're fielding from investors for a lot of product-led growth companies, for a lot of direct sales companies, is the change in search patterns. As we think about AI engine optimization, search engine optimization, we're seeing a big change in traffic patterns at these large companies. What do you see from your standpoint as you enable these companies' go-to-market engines that's changing because of a drop in SEO?
Sure. Yeah. I mean, we're seeing a version of what everyone else is seeing. And for us specifically, we're actually well-positioned. At least a year-plus ago , we started kind of right-sizing our down-market business where a lot of that would have an impact, inbound search-driven traffic. So with the changes we made a year ago, we're effectively well-positioned to continue to right-size our down-market business while we resource our up-market business, where that's kind of less of a dynamic. And then for our customers, I think the interesting dynamic here is if they're seeing declines in inbound traffic, what they're starting to do, what we're seeing, and we've talked to customers about this. I think some larger companies have talked about this publicly. They are starting to lean back into outbound to fill that gap.
Leaning back into outbound SDRs is a pretty big opportunity for us to go and equip those SDRs to use ZoomInfo to effectively go to market.
Just an early thing, but has activity begun to pick up on this whole relying more on outbound than inbound just because you have to offset that inbound traffic, for sure? And what are those signals? What are the signals that you see there? Is it your own top-of-funnel inbounds that are coming to help with outbound? Walk me through the signals you're seeing.
Yeah. It is early. I would say this is like a last few months thing where I think this kind of last earnings season, you had a lot of customers and companies come out and talk about AIO and search disruption. And then it's like, what are you going to do about it? And a lot of them either publicly or actually speaking to us as customers are saying, we're going to hire outbound SDRs. And that's, I think we're also able to see signals out there from job listings beyond just talking to customers. But we do view that we already have a pretty massive seat opportunity within our customer base from persona expansion.
So those are account managers, account executives, where with ZoomInfo Copilot, with our upgraded Copilot that we're rolling out in a few weeks, we have a really great product to go sell to those existing seats at existing customers. So if we actually see some level of net increase in outbound SDR hiring, we view that as kind of an incremental positive.
maybe compare and contrast that seat environment, particularly I think has been most acute in tech. What were the trends you're seeing three years ago? And maybe compare and contrast that with the trends you're seeing over the last few months. It sounds like there's been a slight change, but it's early.
Yeah. I'd probably do like three phases here. The first phase would be late 2022 into 2023, where we saw just net, pretty significant net decreases in seats in the greater space. There were just kind of peak tech layoffs in early 2023. A lot of that was front office sales and marketing focused. I think since then, starting in 2024 and in 2025 so far, it was kind of neutral. Some companies were adding seats. Some were keeping them flat. There were still some places where there were layoffs. I think those layoffs generally tended to weigh actually a little bit more back office into R&D and G&A. We did not see as much of an impact in sales and marketing. So coming into Q3, we felt pretty good about seat expansion opportunity. Our non-seat product, Operations, which is our fastest-growing product, is not seat-based.
So we had kind of this diverse vectors of growth available to us. Now this kind of third phase of potentially a step- up in outbound hiring again would just be another tailwind for us.
Interesting. We had a HubSpot Analyst Day last week, and one of the things that was interesting to think about was they're a kind of hybrid seat model. They have seat-based pricing. They have consumption, but they spent a lot of time talking about expanding the applicable seats. You guys were coming out with new products as well too. Maybe frame where has the product sold historically? Was it just sales reps, just SDRs? And then maybe how is that changing and what type of new seat opportunities can you look at with some of the new products?
Yeah. Historically, I think we were largely viewed as a contact and company lookup tool for top-of-funnel prospecting seats. So that's generally SDRs, inbound, outbound, potentially some full-cycle AEs. What's really been exciting over the last few years is we've effectively built and continue to build the full-spectrum AI for go-to-market solution. And really what we're, I think, able to sell to now is any go-to-market professional.
Define that though. To me, go-to-market means salespeople. But there's a much bigger kind of sea opportunity in the full go-to-market. So what are those?
Yeah. I mean, still SDRs. And then we start talking about account executives, account managers. Our Copilot product, one of the exciting, really exciting things about that is when we had legacy ZoomInfo Sales, account managers internally and at our customers didn't use it at the rates that SDRs did. What we've seen with Copilot is now account managers and account executives, their usage levels have parity with SDR usage levels, which is a really great sign. And then beyond that, customer success, sales leadership, there's a lot of RevOps and data personas within go-to-market world now that we are building products for.
So if we think about that spectrum of our product suite, it starts with Operations, that third-party data asset, not a seat model that is our proprietary data asset that we can bring into customers, marry it, unify it with their first-party data asset to create this source of truth contextual data layer that they can go and actually execute against. At the very other end of that is our activation layer, Copilot, ZoomInfo Marketing, best for SDRs, account managers, marketing professionals. Now we're about to release this kind of middle layer or Go-to-Market Studio where we can take all of those data sources, unify them for one RevOps or data leader.
They can architect plays, campaigns, enrich by row to bring in kind of the first-party experience they've had or have not had with those customers, bring in our third-party signals, enrich it with AI and talking points, and then push it out to the front lines for activation.
A Go-to-Market Studio is a new product. Sounds exciting. But before we double-click into that, put a bow around the old way of three years ago of what you might sell to. So if I have a company that has 100 sales reps and you're selling 100 seats, what's the new model? Do I get a sell to 120 now, potential seats, a full go-to-market, or is it potentially 200? What is the ratio of the traditional SDR you sold to now the full spectrum of go-to-market seat opportunity that it's opened up now?
Yeah. I'd say kind of high level, we think that that seat opportunity that's unlocked with those, I guess, incremental expansions into account managers and account executives was like 3X.
3X.
What that SDR, more traditional opportunity was. One of the challenges two or three years ago is a lot of our customers, especially in the software, were growing 40%, 30%, 50%. They'd buy 500 seats. They'd use 500 seats, and then overnight they only needed 250. So we were able to keep most of those customers right-size those seat counts. And now we've got an opportunity at kind of these rationalized levels to go expand into those teams that were not using Copilot.
So walk me through the journey you're on going from the 100 to maybe 300 seat opportunity. Are we in the top of the first inning? This is just beginning to start. Are we two quarters in? Walk me through where we're at in that journey.
Yeah. I think it's early. Somewhere in second inning.
Second inning. Okay.
I think what's exciting about this is it's not just a, "Let's go expand seats and that will be the growth vector." We're pairing that seat expansion with Operations and Go-to-Market Studio and ZoomInfo Marketing where it's less seat-based. We also have this great notion where we can just get some of these larger customers under ELAs where seats become less of a limiter, and they can get effectively the right to use Copilot across most, if not all, of their teams. They buy Operations. They sign up for a multi-year contract. We provide kind of the right limiters around that, but it starts to remove some of the downsell or the kind of it brings the floor up on seats. We're able to simplify the pricing model for customers, removes artificial barriers to expansion, and it starts to blend our kind of revenue growth vectors.
Has there been a change in trajectory around ELAs? Again, how many ELA customers did you have maybe three years ago? What's it look like today? What's that pipeline opportunity around ELAs? Just color on framing that ELA opportunity.
Yeah. This is something that we're ramping up. We started kind of ramping up in Q2, so I'd say very early. We've always had some customers under that. But as we have kind of, like I said, kind of that more full-spectrum solution where there are individual pricing models across different products for different teams, we've started to move more towards a customer relationship-focused selling notion. So it used to be high velocity, get the transaction in in one month, one team, and then go try to sell another team. Now it's more, "Let's make sure we invest in the relationship with the larger customer, land the deal with the right kind of buy-in from the right stakeholders, and then have an opportunity to expand on that and grow with that customer." That lends itself well to kind of more of an ELA, more broader agreement with the customer.
I'd say we are starting to build this pipeline as we get into the back half of the year. We have some large customers where we have dozens of expiring events every year or multiple contracts across multiple teams. If you're able to unify that and do it over a two or three-year contract, that's also an unlock for us just from a productivity perspective from our account management and our customer success team.
The customer like it as well too.
Yeah. It simplifies it for the customer.
Yeah. 100%. So let's talk a little bit about competition in the broader context of the space. If I go back 10, 15 years, lots of customers, highly fragmented industry. ZoomInfo helped consolidate it. Then really became kind of the platform leader by consolidating this fragmented market. We've kind of seen new entrants. I'd say as you consolidated the market, became the market leader, new entrants popped up. What's changed as you think about the new entrants that you were seeing a year ago versus today? Obviously, there are a lot of challenges. There are new options, some of them being lower cost. Walk through what you've seen, biggest changes to competition last year versus this year.
Yeah. I think as a statement, I don't think a lot's changed since last year. I think that there's always been kind of a cycle of new entrants down market at the lower end that are lower price, lower quality. I think what's changed for us is we more fully realize that we have this upmarket opportunity where there are not new entrants. And honestly, there aren't that many competitors. We do not see competition often upmarket. We'll see like a legacy provider in the company data sales cycle. We'll see some ABM competition in the mid-market. But generally, we said, this is where the real growth, durable, long-term opportunity is. That business has higher margins than our downmarket business.
We have this great opportunity to shift our resources upmarket, invest in those customer relationships, build products that are aimed at durable value for the customer. We can do that while we improve margins. Downmarket, what we want to do is make sure we're competitive at the lower end. We still value those customers. We want them in our product. A lot of those customers will graduate up into being upmarket customers. We want to grow with them. We want them as contributors into our data network.
The size of enterprise, the growth characteristics of enterprise, maybe frame where that is today.
Yeah. Our upmarket business is 72% of our total ACV. That's up from the high 60s% a year ago. It's growing 4% year-over-year. It was growing 3% year-over-year a quarter ago and 2% year-over-year two quarters ago. So we're accelerating growth there. I think we are on a path there to get the mix to being 75% of the total business near term, and then we have a goal of getting it to 80% over the next several years. So if we can take that business, which again has higher margins, accelerate growth, mid-single digits right now, get down to high single digits, and shift the mix at the same time, which is partly accelerating growth of that segment, partly the downmarket business is still declining.
We have this great opportunity to get a four-fifths of the business growing high single, if not double digits long term, and then a fifth of the business downmarket, get into a smaller and healthier version of itself where it's not declining at the rates that it currently is and is kind of more low negative single digit, low positive single digit, 0% grower, and it really serves as a logo acquisition engine and a data contribution engine.
As you think about the growth algorithm here, let's put SMB aside and just focus on enterprise, that 72% mix of the business. What's possible there? As you think about, yes, growth improved 3%-4%. That's great. Median cloud software company is growing about 13%. That wasn't too long ago, four years ago, where the whole SaaS group was growing 20%. So I understand growth has slowed. The market's matured. Walk through just the governors on growth. Is this high penetration rate that you have in enterprise? And so it's going to really be new products that drive growth. Walk me through that growth algorithm. How does growth go from 4% to, I'm going to dream, double digits?
Sure. I think that's possible. I think that's reasonable. The most important assumption there is net revenue retention in the upmarket business. We've built products. We've restructured our go-to-market teams upmarket to be optimizing for dollar retention while still focusing on logo acquisition. But the growth is going to, the durable growth is going to come from improving that net revenue retention number. That number was in the mid-90s year-over-year, two quarters ago. It was in the high 90s last quarter. If you just look at the in-period activity in Q2, it was above the high 90s. So getting that above 100% on a durable basis, even up just to 105%, if you do that, you've got a high single-digit grower upmarket right away, very close to a low double-digit grower. So I do think that low double-digit growth upmarket is a pretty reasonable goal for us.
And again, if we do that with better economics in that segment, the LTV to CAC there, that kind of renewal efficiency we get in year two and year three and year four really starts to become more margin accretive. And I think that that's kind of the really promising opportunity we have to return to meaningful growth here.
As you think about the headwinds to retention, how much of it is logo churn? So folks churning off the platform versus seat churn, downgrades. You still retain the customers, the logo, but you're seeing just seat contraction. That's been the biggest issue I know for three years. But walk me through where we're at now.
Yeah. And I think the, I don't think logo churn really even got much worse. Historically, it's been very consistent upmarket. There's customers generally don't leave ZoomInfo. What we went through is a lot of seat pressure, a lot of spend pressure starting in late 2022. I think that was very, very specific to the software vertical. That software vertical was our fastest growing business in 2021. It's almost 40% of our total business as a percentage of mix. It was down to the low 30s now. So we cycled through a lot of downfill there. Generally, we were able to keep those logos and get them to a point where we can grow with them again.
So I think that we have gotten through the trough there, and we've got a much more solid renewal base where we're showing up to renewal conversations and it's less a, "I have all these seats. I don't have people to fill them anymore." And much more of a, "we're getting value out of this. We have the right seat count. We'd love to see this new product or understand this new functionality that you're selling." So we're moving from a very reactive, defensive posture that was somewhat deliberate over a few years to a customer relationship, but potentially more offensive. "Let's show you what we have here. We can grow with you." I think that the net expansion is the next step of the story.
So it sounds like there's some good signs, encouraging signs of stabilization in that software vertical for a couple of years, painful years. That's good to hear. What about AI natives? Explosive growth now in software again. Is it different? Are their go-to-market models different in AI natives where maybe you're not seeing some of those companies lean in on outbound as much? Or is there an opportunity you're starting to see some hope that you could actually land some net new customers in that software vertical?
I think it's a great opportunity. I think it depends whether they are going to market yet. I think a lot of them are well-funded and still in R&D phase. I do actually think it's a great opportunity. Most of those AI natives, call them startups or companies, they're going to know who ZoomInfo is, and I think we continue to position ourselves as AI for GTM.
And when they do go to market, whether they're just relying on us for that data asset and they want to build agents on top of their first-party data, marry it with our third-party data so they can actually do something with an agent on top of that layer, or want to leverage Copilot, the upgraded version of Copilot coming in Go-to-Market Studio, we've got a really compelling suite to go and take what are smaller customers that are growing very fast and have an opportunity to grow with them again.
Front office has been somewhat of a challenge space as we think about a lot of VC dollars going into some of these sales enablement tools. You've seen Salesloft and Clari emerge. You've seen a lot of turnover and Outreach. Walk me through the disruption in those go-to-market software application vendors. Do you think the worst is behind us? Is there still more digestion that we're going to have to see and consolidation we have to see in this space? Walk us through where we're at and what was a pretty heavily invested kind of VC area.
Yeah. I'm not. I'd say mixed bags. I don't want to call the bottom or an uptick there. I can talk about our experience. In 2021, we were very acquisitive. We were building and acquiring a lot of application-heavy front office technologies with kind of this goal to consolidate it all together. I think there were a lot of similar ambitions across the space. And then when we went through kind of the disruption of 2022 and 2023, we turned our focus back to we have this data asset. AI has changed kind of the value of this. We basically turned over our R&D team and said, "Let's go build AI-informed products and make sure that we're not losing focus on investing in the data asset. And let's go essentially build this solution that is built for agentic outcomes."
That's pretty different from what we were focused on in 2021.
Sure. And you have been acquisitive. And now you're buying back and investing in your own stock. Well, walk me through that balance as you think about opportunities to both invest in the business and do some more small tech tuck-ins.
Yeah. We've got our capital allocation strategy. We revisit it every day. We're actively monitoring the M&A landscape, looking at opportunities out there. It's a high bar from a capital allocation perspective where the share price is relative to what we view the intrinsic value of ZoomInfo is. It makes a lot of sense, in our opinion, to continue to be aggressive buying back shares. What we have done is we've been doing some tuck-ins, some acqui-hires where maybe one of those kind of AI-native companies builds a great technology that fits well into our roadmap. We can go out and either just hire the founders or do a small acquisition to accelerate our roadmap in a pretty economic way. And that's been the focus. But we'll continue to monitor it and weigh it against the buyback opportunity.
Absolutely. As we wrap up here, wanted to press you a little bit on future facts. Jamie Dimon talks about leaders oftentimes focus too much on the past than not on the future. And so as you think about your business, as we think about Nashville 2026, what's your best guess on what people are going to be talking about in a year from now that they're not talking about today relative to ZoomInfo?
Yeah, I think there's going to be a broader realization that we are providing AI for GTM, and I think there's been a lot of noise around that, but I think we will be well-positioned to be the clear leader and provider of that, and we can get there while also returning to growth top line, expanding margins, buying back shares, and having this compounding growth effect on free cash flow for sure.
Certainly, no one's expecting that, so if you can do that, we will be celebrating in Nashville in 2026. Graham, thank you so much for joining us. Great discussion.
Yeah. Thank you.
Thank you.