ZoomInfo Third Quarter 2026 Financial Results Conference Call - ZOOMINFO TECHNOLOGIES INC

Financial Performance:

• Q3 GAAP revenue was $309 million, a 3% year-over-year (YoY) decline, exceeding the high end of guidance.
• Adjusted operating income was $119 million (up 1% YoY) with a 39% margin, up 150 basis points YoY.
• Unlevered free cash flow was $87 million, representing 73% conversion from adjusted operating income.
• Net revenue retention (NRR) slipped to 88% from 89% previously, driven by fewer and smaller upsells, particularly in the software vertical.
• Upmarket Annual Contract Value (ACV) was flat YoY after 3% growth in Q2; Upmarket ACV mix stands at 77%.
• Downmarket ACV declined 14% YoY.
• Unearned revenue was $421 million; Remaining Performance Obligations (RPO) were $1.1 billion, with $793 million expected to be recognized in the next 12 months.
• GAAP stock-based compensation was $31 million (10% of revenue).

Guidance and Future Outlook:

• Full-year 2026 GAAP revenue guidance raised to $1.2235–$1.2265 billion (midpoint implies 2% YoY decline).
• Full-year adjusted operating income guidance raised to $452–$455 million (midpoint 37% margin).
• Full-year unlevered free cash flow expected between $405–$425 million.
• Q4 guidance: GAAP revenue $294–$297 million; Adjusted operating income $113–$116 million.
• Management expects to reach the trough of growth headwinds soon, citing confidence in the GTM1 platform and consumption trends.
• Full-year guidance assumes no net benefit from the GTM1 rollout or pricing transitions; upside exists if these factors improve.

Business Segments and Product Lines:

• GTM1 Platform: Launched as a unified go-to-market AI platform integrating sales, marketing, and operations on a single data context; early feedback is positive.
• Consumption: Over 10,000 customers now access data via new surfaces (MCP server, CLI, updated API); consumption on these surfaces doubled sequentially.
• Acquisitions: Integrated 00.ai for agent team coordination and WorkBounce to enhance the semantic knowledge layer of the context graph.
• Product Integrations: Launched native integrations with ClickUp, N8N, and became the flagship data partner for Salesforce's new outbound sales agent, Hunter.
• Pricing Strategy: Introduced hybrid pricing models (mix of fixed arrangements and consumption) to move away from strict seat-based pricing.
• Key Deals: Closed record number of million-dollar customers; notable deals include a Fortune 500 industrial conglomerate (Master Data Foundation), SurveyMonkey, Tishman Spire, Odyssey, and Garner Health.

Market and Competitive Landscape:

• Software vertical (approx. 30% of business, down from 45% in 2021) remains pressured with longer sales cycles and larger buying groups.
• Non-software upmarket customers (finance, insurance, real estate, manufacturing) are expanding spend and outperforming the sector.
• Competition from "vibe-coded" AI applications is noted; customers are returning to ZoomInfo due to trust, data quality, and compliance requirements.
• Upmarket customer cohort (>$100k ACV) grew 4% YoY in ACV despite a 2% decline in logos; quality of the cohort is improving.
• Market trends show a shift toward agent-based workflows requiring governed, accurate data for entity resolution.

Risks and Challenges:

• Continued pressure in the software vertical affecting new business and upsells.
• Longer sales cycles and increased vendor scrutiny across the enterprise.
• Net retention decline driven by reduced upsell velocity in specific verticals.
• Consumption revenue recognition timing: Current usage is largely drawing down pre-existing credit commitments rather than generating new ACV immediately.
• Potential decline in ACV growth if market conditions worsen.

Management Commentary and Tone:

• Tone was disciplined yet optimistic regarding long-term durability and the "trough" of headwinds.
• Management emphasized the strategic shift to "upmarket" relationships and the value of high-quality, compliant data in the AI era.
• Confidence expressed in the GTM1 platform as the "best technology" the company has built, driving field excitement.
• Strong focus on capital discipline, evidenced by debt reduction and share repurchases.
• Leadership views the consumption trend as a durable growth driver once the shift to consumption-based pricing matures.

Analyst Questions and Answers:

• Net Retention & Upmarket ACV: Lower end of upmarket business faces headwinds causing the NRR slip; however, growth retention is holding well in non-software verticals.
• SurveyMonkey Deal: Customers are attracted by data quality, context, and security/compliance which "vibe-coded" competitors lack.
• Hybrid Pricing: Designed for flexibility to accommodate both fixed investment preferences and variable consumption models; aims to simplify barriers to consumption.
• RPO Decline: Attributed to fewer superseding deals, fewer large early renewals, and organic declines, though cash flow remains robust.
• New Surface Areas: Highest consumption comes from "Go-to-Market builders" (RevOps, SalesOps, engineers) building custom workflows, rather than a single specific industry.
• Agent Monetization: Agent teams monetize through bundled AI and data credits consumed via the hybrid model.

Other Key Points:

• Capital Allocation: Retired $35 million in senior notes for $31 million; repurchased $7.5 million of stock ($2.94/share).
• Debt Position: Net leverage ratio improved to 2.2x trailing 12-month cash EBITDA for three consecutive quarters.
• Litigation: Entered MOU to settle 2024 securities litigation for $44 million, with potential recovery of $25 million in legal costs via insurance.
• Restructuring: $29 million incurred in Q3, with total estimated charges of $33 million for the 2024 program.
• Customer Churn/Winback: Churned customers returning to ZoomInfo increased >10% YoY in the first three quarters.
• Platform Unification: Moving toward a single GTM1 instance where the entire go-to-market organization runs on one data source.