Welcome everybody. It's great to be here with Henry Schuck, Founder and CEO of ZoomInfo, and Graham O'Brien, Chief Financial Officer. Thank you for joining us here. For anybody that might not had the pleasure of knowing you guys, you guys wanna do a 30-second introduction?
Sure. I'm Henry Schuck. I'm the Founder and CEO of ZoomInfo, founded the company in 2007. I think that's it.
Graham O'Brien, CFO of ZoomInfo. I've been with the company for almost 10 years.
Great. Thank you. I think we can kind of hit the nail on the head. One of the dominant themes on the road right now is what we publicly call AI confusion. I think everybody's kind of gotten that phrase now. Customers know that AI is the future. You know, between now and then they feel, like, overwhelmed. You called that out directly on the Q1 call, noted that even through the early part of Q2, customers are still in that pause phase. Can you walk us through what the conversations actually sound like when you're sitting across the C-suite, you know, leadership team from a Fortune 500 company, and they talk about this pause?
Sure. Yeah, I think it's two things. One, obviously I'm having conversations around go-to-market and revenue as it relates to AI, and I think a lot of customers got a first sort of boost in AI productivity as they put AI solutions into their support organizations. Support is a really interesting channel for AI to be adopted because all you really need for support to be really successful from an AI perspective is all of your first party data, your knowledge base, your tickets, your past support conversations. You feed that into the AI, and it does a pretty good job of being able to handle the next support ticket.
They had a lot of success there, and then they're saying, "Okay, we wanna do this in revenue and go-to-market now." What they're realizing is that, number one, go-to-market, very unlike support or engineering, doesn't just sit on top of one data store.
The data is spread out across calls and conversations and tools like ZoomInfo and your CRM and your marketing automation tool and your forecasting tool. All of that data needs to be stitched and brought together before you have just your code base for engineering or just your knowledge base and support tickets for support. What they've brought in sort of like new leadership, or they've anointed someone inside of the organization to lead the AI efforts for go-to-market or revenue. They're trying to figure out how to get all of that data together, how to have reference data underneath it, and how to use that data to then build account plans, build prospecting, understand their total addressable market.
The jobs that happen in go-to-market, there are like 20 of them, none of those jobs have changed at all in the AI era. Where those jobs get done and how customers wanna do those jobs, that's changed. Where you might have done forecasting in one application and call coaching another and prospecting in another and territory management and segmentation design in another, customers are now building custom workflow and solutions for all of those different activities that really match how work gets done inside of their companies. The conversation we're having with those customers is to do that you need referential B2B data at its core, and then you need to unify all of that data that sits in silo, silos across the go-to-market and revenue organization.
Got it. The complexity is just kind of a magnitude order greater.
It's a very different complexity than the other areas that you've sort of implemented AI inside of an organization so far.
Is that the complexity that causes customers a little bit to kind of have that pause and try to figure out, you know, what the right path forward is?
Yeah, a lot of times what happens is they get focused on the sort of the AI layer of the work.
Not the data layer of the work, and so they've gotten some solutions out to their teams, and then their teams are coming back and saying, "Well, it missed this, and it missed that, and it didn't know this, and it didn't know that, the company just had a great earnings or hired a new CFO or is researching my competitor. It didn't know what my last conversation said, and so I'm not getting the context necessary.
Yeah
to actually get value out of the new AI tool." I think that what we expect to see is a shift back to the core foundational layer.
to get that going, we're seeing that happen across a number of our customers. As that happens, we're in a really good position to step in and say, "We're the B2B reference data that sits at the core, and then we're the unification platform to bring that all together.
I mean, even in our work we hear constantly that data and organizational sophistication is what's really needed more than the capabilities themselves. You know, if we think about, you know, to finish out the thought, we have this phenomenon happening. Customers are kind of trying to figure out the right path forward. What would have to happen for this pause to kind of lift off in the second half of 2026, or do you think it's just gonna take longer than that for sure?
I think that the thing that has to happen is people get deeper and deeper into these AI initiatives for go-to-market and realize that the actual missing piece is the data.
Yeah.
We're seeing that happen across our customer base. They're starting to talk about this now. I don't have the context. They don't have the data necessary to really automate processes end to end in go-to-market, and I think as that continues to happen, we're really well-positioned to step in and be a really great partner to those customers.
Do you have a sense of how long that process might take, or does it just vary a lot across customers, industries?
Varies a lot across customers and industries.
Yeah.
If I was to guess, I would say somewhere towards the end of Q4, you'd probably see a large majority of the customers making that realization.
Got it. Got it. If we switch gears a little bit, you guys, you know, restructured a little bit, approximately 20% of the workforce. I think that's one of the largest restructuring actions you guys have taken in your history. Help us understand the strategic nature of this decision. I don't think it was just about cost-cutting, right? How does that reorient the company towards what you expect the future to be, and where do you expect to deploy the incremental investments now?
Yeah. I would really think about this across two vectors. One, we closed our Israel operations, which was primarily R&D in Israel, and that was more of a decision to consolidate our operations. Over the last number of years, more and more of our R&D efforts, our CTO, that leadership team has moved to the United States. Even with some reinvestment, we of the heads in Israel, we still think we'll come out, you know, a leaner, faster, more agile R&D organization. That's one side. The other component was our down-market sales and marketing spend and organization.
You know, one of the things that happened in Q1 is our path to mid-single-digit growth got disrupted, and we've always talked about how the down-market part of our business is an anchor to the up-market part of the business. We wanted to be more aggressive in our transition out of a sales-led motion down market and into a PLG-led motion down market.
Yeah. A lot of good threads to pull on there. You know, we'll just kind of hit the reset in the guidance up front. Graham, you know, you guys came into the quarter, got it to $1.185 billion-$1.205 billion, a little bit below where you had it before, excuse me. Can you just walk us through a decomposition? How does that map to some of the challenges you're seeing and, you know, why should investors have that confidence in the new current framework?
Sure. I'll actually add on to Henry's answer from before. You know, we also continue to get more efficient in our G&A operations too, and that was part of this action. We have a solid track record of, you know, effectively cost discipline, and every quarter or so, we update a long-range plan. We look at what growth we want to target two quarters, six quarters, eight quarters, five years out, and what the margin profile of the business would be when we get to those growth milestones. When we looked at, you know, kind of this transition opportunity from our top line from shifting more towards or away from seats, right-sizing the down-market business, we were well-positioned to go and understand what kind of that restructuring plan would look like and move fast when we got into April.
When I think about the guidance revision that we announced last week, there's really kind of three core tenets. The first is the rightsizing of down market. The second is some of the softness we saw in software at the end of the quarter and taking a cautious approach to that moving forward. Then, the third is our opportunity to more rapidly transition the top line of the business away from more, you know, dependency on seats to a non-seats model.
We're really excited about accelerating that path. Right now, about 1/3 of our total ACV is attributable to non-seats. All of our operations business, which is almost 20% of our business, which is growing 20%+ year-over-year, is in that 1/3. That 1/3 of the business has better gross retention outcomes, better net retention outcomes, and we're excited about trying to get that closer to 50/50 over the next year and a half or so. When I decompose the revenue adjustment and the guidance, the $62 million change from the initial guidance. About 1/4 of that is from the down-market restructuring, we're taking out some of the more inefficient resources that we had down market. We're gonna shift more of that to PLG.
About 1/5 of that $62 million comes from lower entry points for down-market customers. Sorry, 1/4 . A fifth of that would be the softness in software, taking a more prudent view of some of that AI confusion that we saw at the end of Q1 and extrapolating that over the rest of the year. Another 1/5 or so is the migration that we're going to do, taking customers, existing customers who are on a seat-based model today, shifting them over to a consumption or non-seats model, and then leading with that consumption or that hybrid pricing model for new business beginning near the end of Q3. That gets you know, about $40 some million of the $62 million revision.
The rest of that revision is kind of accounting for the fact that we have multiple variables at play here and applying an incremental level of conservatism to the full year.
Yeah. If we fast-forward to next year, and you've outperformed your guidance, where do you think the upside most likely comes from? Where do you see the kind of the most pain action across those different variables?
I would bet on the things that we control. You know, there's some macro things here that we've talked about. I would say better product adoption, faster progress moving towards a consumption model, and really expanding the surface area exponentially where we plug into the GTM work.
Yeah.
I mean, one of the things that we've noticed is where historically a customer would buy a seat to ZoomInfo. They would access ZoomInfo data through our SaaS application. They'd give those seats out to sellers, there'd be one application to consume data. What we're seeing now is, particularly across tech and our more sophisticated customers, is that they're building their own applications internally, with using LLMs to build a custom application for sales prospecting or TAM prioritization or territory segmentation. They're plugging our APIs into all of these internally built applications. They're using our MCP in Claude or ChatGPT or inside of Gemini. What was one surface area where ZoomInfo was plugged into has now become multiple surface areas across the enterprise where go-to-market work happens.
I think another way that we drive growth, not just in the back half of this year, but in the future, is that everywhere go-to-market work is happening, our APIs, our MCP, our data gets plugged into those places. You actually see that same construct in our operations business. Our operations business is primarily up-market, and those customers have taken our data, our APIs, our data files, whether in Snowflake or Databricks or BigQuery, and they've built a number of critical revenue workflows around it.
That business, like Graham said, is growing 20%. It's almost 20% of our of our total ACV, and it's sticky. It's our highest net retention business in the company. I think what that informs for us is that when our data is plugged into critical revenue workflow, it's very sticky.
When it's used primarily in the SaaS application to look up contact information or companies, it's more under attack as these new surface areas get built. What we wanna do is instead of forcing our customers into just using the one SaaS application that's been there, is if they wanna build their own applications, to ship them to a consumption model and then get plugged in across a number of different go-to-market surface areas.
Got it. A lot of threads I wanna pull on, but before we get to those, just on the consumption point, we hear a lot of kind of mixed feedback in through how customers receive those, right? It does introduce a little bit uncertainty. As a CFO, I'm sure you appreciate that. It seems like your customer's more comfortable with it, or if they're not, you know, it'd be great to just kind of hear what your all's take on that topic is.
I can kick off. I think that generally customers are pulling us in this direction.
Yeah.
You know, we're able to effectively tie price closer to value in these scenarios, but there are going to be existing customers for sure who are on a seat-based model who don't want to move to consumption, who want kind of the known budget of seats, and we're not gonna force them off.
If we go back to the move to the PLG for the downmarket, can you help us understand, you know, I think the phrase is almost exclusively, excuse me, almost exclusively product-led. What does that mean? What does that look like for the customer, and how does that kind of change how you guys structure the business?
Yeah. I think first, when we think about the downmarket business, what it's historically been, you know, what it is today is a customer fills out a form on the website, they talk to a seller, a seller walks them through the platform, they get pricing, they decide to transact with us or not transact with us. What we're moving that downmarket segment to be is self-service, product-led, so a customer can come in where they won't have a difficult or a long term that they have to sign up for. They can get started at a much lower price point, and as they sort of go through consumption effectively of what they buy, they can buy more from us.
That can also be a lead generation engine when those customers are upmarket for our upmarket sellers to engage with them. Starting off, we're gonna take away the higher platform fees and the longer term and let customers come in and simply transact and onboard in a self-service way. That's how we're thinking about that change.
You know, a lot of our partner work across our coverage has kind of shown a little bit of weakness in that, you know, very low end of the market. I think some of the companies have spoken to it, you know, some of it related to the AIO, SEO shifts, all these sorts of dynamics. Do you think you're kind of a part of that broader trend, or you think it's somewhat idiosyncratic to ZoomInfo?
No, for sure, I think we've talked a number of times about the sort of disruption in the top of the funnel that happened as AIO sort of went out through Google and as questions started getting answered more in ChatGPT. I think we're very similar to, you know, any other company that has a downmarket business where it's gotten disrupted that way. We've made a big shift in the way that we generate content that drives traffic to our website. We're starting to see early indications of that being really successful. For sure from a top of the funnel perspective, we're very much the same as anybody who's trying to attract a downmarket customer.
Yeah.
I think part of that is now that when we're attracting them, we wanna transact with them in the most efficient way possible, and the sales-led motion downmarket was a, not a very efficient way to transact with them.
Yeah. You guys still think you're on that customer journey of figuring out, excuse me, the journey of figuring out the AIO and the search process?
I think we've made a lot of progress. We've made a lot of progress there and made a lot of changes to the way that we generate content that drives traffic to our website. You know, we're gonna keep on investing in those areas where we're seeing good return. There are areas that, like programmatic SEO, that were really healthy for us pre these changes that are less healthy for us today. We're just shifting investment from a traffic perspective.
Yeah. You've emphasized it a lot, I think it's critical to the story, that is, you know, the fact that you're going towards this non-seat-based, you know, consumption, data utilization. It's under 20% of the business, It's grown over 20% year-over-year. Talked about, I think, a third of ACV. You've called it out repeatedly. Help us understand API, MCP integrations, you know, all these kind of concepts. How are customers using it? How does it fit in with, you know, Claude, Cursor, custom agents? Help paint the picture of what's really happening out there for the customer.
Sure. I think first, we're seeing thousands of our customers who now have plugged our MCPs into Claude, who have plugged our MCP connections into ChatGPT. Within those, within those chat interfaces, they're able to build lists, enrich lists, prioritize their total addressable market. Effectively anything that you could have done with clicks inside of ZoomInfo, you can now do in natural language inside of Claude or ChatGPT or using our MCP in Gemini or Copilot or Perplexity. The prospecting motion, the enrichment motion, that can largely be done through natural language inside of those chat interfaces, and that's exciting. We see a lot of customers doing that.
Internally with our APIs, or if you're in Cursor or Claude Code, you could use our MCPs, but most of those customers are using our APIs. You can use our APIs to build dashboards internally to enrich an internal application that you're building. Any of our customers who want to build something custom, their custom interface where they bring their first party data together with our data, build a custom interface for their sellers or their marketers or their account managers to take advantage of, our APIs can sit underneath that. You could build those applications in Claude or Replit or Lovable or anywhere. The APIs are really flexible to plug into any of those interfaces.
Every time you make a, in the MCPs, in the APIs, anytime you call ZoomInfo and ZoomInfo returns information, that's a consumption credit that you've paid for and then gets drawn down.
Yeah.
The more of those surface areas you plug us into, the more consumption we're able to drive.
Got it. When we're thinking about, you know, these different Claude, ChatGPT, Gemini, Groq even out there, do you expect that over time that's gonna become a layer that becomes a little bit more commoditized and what's important is just the data underneath? Or do you see customers having a lot of preference for, you know, which one of those, you know, intelligence tools they're using?
It depends on if they're building their own internal applications or they're leveraging the chat interface. I think if you're building your own internal applications, you're selecting the model that you're going to use for different tasks.
Yeah.
You're probably doing that on its ability to solve the task at hand and the cost per call. If you're using the chat, I think that becomes a preference thing. We're seeing a lot of our customers on Claude. We see still a lot, but a lesser portion in ChatGPT. Then we're getting in the enterprise, we get a lot of pull for Gemini, for plugging into Gemini as well.
Interesting. Graham, if we're kind of on the same subject here, at what point mechanically does this, you know, non-seat-based mix get large enough to where it starts to change how you think about the business, you know, long-term even guide, but how does it impact that side of it?
I think it's once we get closer to that 50/50 mark is when I think you'd start to see like how the growth advantages of the non-seed model really start to take over in the business. We're thinking about this, call it 18 months out, to potentially get back to a place, call it end of Q2, where we're starting to get kind of the tailwind of ARR growth from this migration. We'll be about six-nine months into it by that point. The unknown here really is kind of the ins and outs up front as we sell or lead new business with this, different entry points, and as we migrate customers over, you know, how much upside, and in some cases downside or downsell we have at migration.
What we're really confident is after we get them onto the seed or the non-seat-based model, that we have much better or I guess lower, downsell pressure and actually significantly more upsell opportunity. Really that window of kind of middle of next year is where I think we have an opportunity for this to kind of, support a return to growth for us.
Yeah.
I think, you know, I believe that that return to growth would come with, significantly higher margins, up, you know, potentially 40%.
The other thing that I would add from a consumption perspective is you also saw last quarter Salesforce released their prospecting agent on Agentforce. We were the native data and intent plug-in to prospecting agent. As Salesforce customers start building on top of prospecting agent, every time they build a prospecting workflow, that calls ZoomInfo and it triggers consumption. HubSpot also released their own Breeze prospecting agents as well, and we were a native plugin inside of HubSpot's prospecting agent as well. You know, my sense is you're gonna see more and more companies build unique offerings that need data as the underlying foundation and B2B data as the underlying foundation. Every time that happens, we wanna show up and plug into those workflows.
Yeah. Graham, does this shift towards the consumption at any point kind of change the visibility in the business or?
You know, I think longer term it will improve it once we have kind of more experience in that consumption model. We do kind of see what that looks like today with the operations business. We have, you know, that level of experience that's informing the shift to this model.
Yeah.
There is this window of six - nine months where, kind of outcomes are less certain, and that's where we're gonna be really cautious about expectations.
Yeah. Let's talk about that now. You know, you have this path towards being sustainably positive by the second half of 2027, I think at the latest was the, was the quote. Help us understand that framework. You know, that's decent amount of way, but, you know, you can also have visibility into it. What's gonna be different about you guys then versus now? And where does, again, your confidence come from if you're saying, "Hey, second half of 2027 at the latest," is seems pretty, you know, robust.
Yeah. Look, I'll split it up into the up-market and down-market business. Our up-market business is 75% of our ACV. Our down-market business is 25%. With the accelerated right sizing of the down-market business that we're now undertaking, you know, we're gonna continue to really shift that mix. A couple years ago, we said we thought we could get the down-market business, which was almost a third of the business then, to 20% mix by the end of 2028. Earlier this year, we said we think we can do it sooner. We think we could get to 20% by the end of 2027. Now, I think it's in play that we get there, you know, by the end of this year or early next year. You start to get the mixed benefit.
Yeah
of a smaller down-market business. We're gonna deliberately drive the growth of that business down. It's -11% right now. It could get down to -20%.
Over the rest of the year. If we get it to a smaller and healthier place by early next year, and with the upmarket business taking a prudent view and, you know, kind of, being cautious around software, then just from sheer mix shift alone, call it 80/20 on a path to 85/15, and with an upmarket business that is starting to get some tailwind from the shift away from seats, that's where I get to my middle of next year, we're back to growth. That starts to show up as sequential revenue growth in Q3 and then year-over-year growth at the end of, or into Q4 of next year.
Got it. Got it. Henry, on the agentic side, you know, is there a future, whether it's 3-5 years from now, where a lot of the users utilizing ZoomInfo are gonna be just agents?
You know, I was wondering if I've said this before or if you just picked up on that question. Yeah, I think we believe that three to five years from now, there are gonna be significantly more agents accessing ZoomInfo than there are humans accessing ZoomInfo. That's what we're building for. That's how we're building our APIs. That's how we're building our transaction layer. That's how we're building our MCPs. That's how we're building our provisioning and consumption credit modules. We wanna win the agent today. We wanna be the easiest docs to read, the easiest ways to onboard our API, the most understandable for an agent. So we are building for a world where more of the users of the ZoomInfo data asset are agents than they are people.
What do you think, if I can get you to extrapolate a bit, what do you think that means in terms of headcount across a lot of these companies where there's people doing that sort of, you know, clicking now?
Yeah, look, I think that they're gonna be doing the action part after the clicking, 'cause a lot of the clicking today is happening to understand an account, to figure out what my talk track in that account will be, to figure out what my conversations at that account have been, to figure out if I had an opportunity at that account before, to figure out who the last person I talked to at that account is, who my buying committee at that account is, who to call at that account.
All of that work will get done by an agent that delivers for you the actual thing that a human needs to do, which is to engage with the account, to have context around the account and use that context to drive a deal forward, to understand which accounts are the best and in market today. All of that work where a human is doing, I think will get replaced by an agent.
Yeah.
The work that you really want the human for, engaging another human, driving a deal forward, understanding your point of view on an account, is gonna be what a human's gonna still be doing, but will be doing it in a higher velocity than they're able to do it today.
Not all doom and gloom for humans out there?
I don't think it's all doom and gloom in go-to-market for humans.
That's good to hear. Last one on that topic. Does that, you know, thinking about an agentic world a few years ago, that wouldn't have, you know, even been in people's vocabulary. Does that change the market opportunity? Do you think that shifts it up? Where, you know, there's a lot more agents doing work out there, a lot of people investing. Obviously, it's one of the hottest areas. Does that potentially set you up more attractively?
Yeah, we hope so. Look, we think that agents, I mean, this is not gonna be revolutionary. Agents need clean data
Yeah
To do their work in an effective way. You know, where you would have a human go do work, if they ran into a piece of bad data, they would recognize it's bad data, they would go self-correct that data, they'd keep moving forward. They could only do a certain number of tasks a day. If I give an agent bad data, it goes right through it scales infinitely, and it makes many, many, many more mistakes. I think the way that we think about the world today is that an agent will be able to consume significantly more data of ours than a human will be able to. They'll do it across a bunch of different areas than a human would be able to do.
Where we might just be working with an SDR team, our data has flexibility for SDRs, account executives, account managers, and we have the best B2B data asset in the world. We cover more companies more accurately, more data points. We have a robust identity graph that ties companies and people together. We think that that data asset becomes significantly more valuable in an agentic age than it did in a human, non-agentic age.
Yeah, I think that makes a lot of sense when we look at some of the data companies out there and how fast they're growing. They've accelerated. You would assume that to be the case. Graham, ZoomInfo, you guys have been very clear about what you're seeing happening in the market. You're going through this transition. At the same time, you've been taking pretty decisive actions to kind of preserve profitability, even expand it. You know, same thing with cash flow. How are you thinking about, you know, using your capital, your cash, and then where you're gonna allocate it, and how aggressively?
Yeah. We continue to, you know, weigh kind of several attractive options when it comes to deploying our cash, and it, you know, I think we'll be opportunistic depending on where the shares are trading, where our debt is trading. With the cash flow that we're gonna continue to generate, we'll be opportunistic on those fronts.
One last topic to hit. You know, if you're kind of seeing this transition towards, you know, 80% up-market ACV, you know, looking at the lower end of the market and saying, "Hey, maybe we don't need all of that," how should we think about the pathing for NRR between now and, you know, when you return to growth in a year or so?
Yeah. Look, we've been pleased with the NRR improvement over the last couple years. You know, the updated guidance would assume that NRR goes down for a period here, during this growth transition. We may deliberately drive it down market as we shift more and more of the renewal and expansion there, experience there to a digital motion. Yeah, look, I still think structurally the up-market business should be 100% plus retention business, and, you know, the next step there would be getting it closer to 105. That will, you know, be dependent on our success in executing this pricing model shift.
I think longer term, 80/20, 85/15 mix, you've got an up-market business that's got triple-digit net retention, you've got a down-market business that's just less dilutive to the overall business that we are, you know, potentially starting to get some better gross retention outcomes as we optimize the entry point for more flexible access to ZoomInfo for our smaller customers.
Not to get ahead of our skis, but for the up-market, could that NRR, you're targeting 105%, is there potential for beyond that over time?
Yeah, like absolutely. We talked about the expansion of kind of the TAM here when it comes to surface area and plugging into go-to-market work. I don't think I would put a, you know, a ceiling on that.
Great. Running out of time here. Really appreciate you guys being here. One thing we always like to leave on is, you know, when we're back here in 12 months, what do you think you guys are gonna be talking about that the audience might be surprised? Like, what's gonna develop that you're seeing?
I think we'll see, you know, if everything goes to plan, I think what we'll be talking about here in a year is that consumption has increased across our customer base. That because we got plugged into significantly more surface areas, consumption increased in the LLMs, it increased with our APIs, and then we're monetizing across all of those different surface areas, and our B2B data asset has become a key referential data asset for all of go-to-market AI.
I hope we're talking about a return to growth with better margins.
Very well said. I'm looking forward to seeing it.
Great.
Thank you, guys.
Thank you.