ZoomInfo Technologies Inc. Q1 FY2021 Earnings Call

Good day, and thank you for joining. Welcome to the ZoomInfo First Quarter Year 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation there will be a question-and-answer session with operator instructions. I would now like to hand the conference over to your speaker today, Jerry Sisitsky, Investor Relations. Please go ahead.

Thanks, Carmen. Welcome to ZoomInfo's financial results conference call, highlighting our results for the first quarter of 2021. With me on the call today are Henry Schuck, CEO and Founder of ZoomInfo; and Cameron Hyzer, our Chief Financial Officer. After their remarks, we'll open the call to Q&A. During this call, any forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Expressions of future goals, including business outlook, expectations for future financial performance, and similar items, including without limitation, expressions using the terminology may, will and believe, and expressions which reflect something other than historical facts are intended to identify forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our filings with the SEC. Actual results may differ materially from any forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the cautionary statement included in the slides that we have just posted to our Investor Relations website at ir.zoominfo.com. All metrics discussed on this call are non-GAAP, unless otherwise noted. A reconciliation can be found in the financial results press release or on the slides that we have posted to our investor relations website. Lastly, we plan to be at a number of conferences and investor events over the course of the quarter, including our inaugural Analyst Investor Day event, which we are hosting in a virtual format on Monday, June 14, beginning at 3 pm, Eastern Time. This event coincides with our first ever user conference that we're also hosting that week. Please save the date. More detail and registration information will be available through our Investor Relations website over the coming weeks. We look forward to your participation. With that, I'll turn the call over to our CEO, Henry Schuck.

Great, thank you, Jerry, and welcome, everyone. The first quarter was marked by strong accelerating growth across all of our business lines. We delivered GAAP revenue of $153 million, representing 50% year-over-year growth and 12% sequentially, when adjusted for the number of days in the quarter. Adjusted operating income was $66 million, representing an operating margin of 43%. These results were driven by dependable execution across the entire company, from new business to product development to retention. Our focus on continuous improvement as a core cultural value and the execution we build on top of that has allowed us to deliver our near-term financial results consistently while setting us up for long-term durable growth. We have strong results across all areas of the business and I want to specifically call out that we achieved our best ever Q1 results this quarter on three dimensions: new business, new customer additions and retention activity. We doubled the number of new customers added this quarter compared to Q1 2020. We also had record renewals and upsells as a percentage of beginning ACV for our first quarter as we saw demand for our products continue to accelerate with companies looking to drive a digital data-driven go-to-market motion. While we continue to deliver on the near-term promise of this business, exceeding our quarterly financial guidance and raising our full year guidance, it is the conversations I'm having with customers and prospects that makes me confident that our long-term opportunity is even bigger than what we had first envisioned. When we founded ZoomInfo, sellers and marketers desperately needed a better view of their potential customers. And we were a world-class provider of company and contact data that could help them solve that problem. Our data was and still is today, a mission-critical need for businesses. Since then, we've innovated and invested hundreds of millions of dollars behind that data asset, continuing to drive material improvements in the way we gather, normalize, match and cleanse that data with the use of AI and machine learning, and leveraging that as the foundation of our fully scalable platform that powers the digitization of how companies go-to-market. From sales to marketing to account management, from the top of the funnel to the bottom of the funnel, and from new sales to upsells and cross-sells to renewals. Our platform starts with our market-leading and highly accurate data layer, delivers critical sales insights and signals, automates best actions with our next generation workflow software and our tightly integrated activation layer, Engage. This integrated suite of data and software helps businesses of all sizes and across all industries activate targeted opportunities in an efficient, scalable and repeatable way. As we continue to invest in automating workflows, expanding the coverage and quality of the data we publish, and leveraging that data asset across our platform's application stack, we're building a wider and wider moat around the company. As our data and platform grows, so does the addressable market where our solutions are making an impact. Today, we not only help sales people and marketers, but we also help recruiters and data operations and technology teams. We not only work with small and midsize companies across the United States, but we also serve enterprise companies around the globe. At our Analyst Day later this quarter, we anticipate providing a more granular and detailed view into our plans to target this large and growing market. The quarter included new and expansion transactions from a diverse group of customers across a broad spectrum of industries. From clean energy companies like Da Vinci Energy, to direct-to-consumer firms like Keurig, Uber, VariDesk and the Carolina Panthers. Even at a company that appears to be consumer only, if you look a little further, you'll almost always find a growing B2B motion there. We also brought on Experion, Hireworks and IDC, and a great customer story comes from Modern Chemical, which shifted from a growing and successful cold brew distributor to a provider of hand sanitizers sold directly to businesses in the middle of the pandemic. We're lucky to work with firms of all sizes from all industries, but we're especially proud to provide our solutions to companies that are able to leverage our data, technology and insights to drive growth in new and unknown markets with entrenched competitors. Our platform leveled the playing field for how these companies are able to acquire their customers. We also continue to successfully execute our large and growing enterprise opportunity, with a focus on driving more from the greater than $1 billion of seed expansion opportunity we've identified within our existing enterprise customers. Increasingly, our platform is becoming the strategic imperative for large organizations looking to transform their CRM from a system of record to a system of insights. This imperative and strategy is driven from the C-Suite, and has opened the door to meaningful conversations for us across the enterprise, while also leading to larger more transformational engagements. This quarter, we closed one of our largest ever transactions, a multiyear eight-figure deal, while we also more than doubled the additions to the greater than $100,000 ACV cohort year-over-year. As of March 31, we had more than 950 customers with $100,000 or more in ACV, up from more than 850 last quarter. While others trying to target the enterprise opportunity are still using FTP sites to manually drop and enhance files, we released our new API webhooks, allowing our customers to programmatically receive a continuous stream of our data and insights, technology that is a full generation ahead of FTP enrichment, and a material improvement to the more modern request and response method. This new functionality allows us to deliver more value to enterprises, and better target the data-as-a-service opportunity that we're uniquely positioned to win following our acquisition and integration of EverString. Additionally, during the quarter, we added more resources to capitalize on the growing international opportunity, where we saw new customers join us from Dubai, Sydney, Vienna, Rio de Janeiro, Helsinki and Berlin to name a few. March was our strongest month ever in our international segment, with increasing win rates and demand across Europe and accelerating traction in the UK, Ireland, Australia, New Zealand and Canada. International revenue grew 14% on a days-adjusted sequential quarter basis, as we continue to see international customers embrace data to drive efficiencies in their sales and marketing processes. On the product side, our investment to deepen our integration with Salesforce is paying off with rapidly increasing adoption of our new Salesforce sync capability. This capability allows users to marry first party Salesforce data directly into ZoomInfo filters, from account data to lead and contact data and now opportunity data. We saw more than eight-fold increase in the number of accounts that have enabled this bi-directional sync. Our sales engagement and automation platform Engage also continues to accelerate. Engage ACV doubled compared to Q4, 2020 and we're seeing a 25% increase in user adoption of the core ZoomInfo platform when customers combine the use of ZoomInfo and Engage. We also see the benefits of this adoption within our retention and renewal numbers, where customers who are dual users of Engage and ZoomInfo have materially higher renewal and retention rates than those who are ZoomInfo-only customers. This is one of the most exciting things about the Engage platform. It has multi-area benefits. Customers buy Engage, which increases adoption of both Engage and ZoomInfo. And investment behind Engage has material benefits across our recruiter and international packages where that product is a built-in offering. This quarter, we significantly expanded the integration points between Engage and the ZoomInfo platform, enhancing the ability to search and import contacts from ZoomInfo and Salesforce into Engage and allowing users to configure target market buyer personas to receive an automated feed of recommended contacts to pursue. More than 40% of active users have used these features just one month after release. We're also integrating in our Salesforce sync capability enabling customers to automatically synchronize Salesforce data in Engage, while we're adding additional integrations into CRM and marketing tools like HubSpot, and building out enhanced administrative and managerial controls within our platform. Our customers also continue to adopt a broad spectrum of our market-leading solutions, including our B2B intent data, which gets them closer to end market buyers by building automated workflows around intense spikes of topics relevant to their products and services. These data-driven motions have fueled a significant increase across our Intent products, with Intent ACV doubling year-over-year. Our Inbox AI product which automates the creation and enrichment of contact lead and activity data from a seller's inbox directly into CRM, tripled year-over-year. And from an overall platform engagement perspective, we saw 12% sequential increases in monthly and daily active user adoption, demonstrating our ability to scale users while also increasing their usage and adoption of our platform. The market reaction to our platform continues to be incredibly positive. Since our last earnings call ZoomInfo was named a leader by Forrester Research in the Q2 2021 Forrester Wave for B2B marketing data providers, receiving the highest possible scores in 18 categories, including data security and privacy, data acquisition and processing, integrations, APIs and applications, sales support, solution packaging and pricing and product roadmap and vision. Forrester stated that ZoomInfo is a best fit for organizations looking for a comprehensive data solution with an expanding array of complementary applications built on a shared data foundation. On top of that, we also received 26 number one placements from G2 and we earned the TrustRadius top-rated award for sales intelligence software for the fourth consecutive year. Finally, we attained GDPR and CCPA Practices Validations from TrustArc. The month-long process to achieve this validation included deep audits of our privacy practices and reinforces both our data privacy leadership and our focus on being privacy-forward to earn the trust of our customers. Over the last 12 months, we grew our team by nearly 50%. While we have spent the last year working from home, our focus on improving ourselves 1% every day has continued to drive an incredible amount of internal mobility as our employees challenged themselves to master new skills. From promotions to cross-functional moves, the opportunities for career advancement at ZoomInfo far outpace the industry average. We encourage every member of our team to embrace new responsibilities to achieve both personal and professional growth. And our employees are looking forward to getting into the office, many for the first time ever, and meeting their teammates in person. We plan to begin returning to the office in July and I'm excited to be able to gather in person with colleagues again, as we're preparing our offices around the world to accommodate a hybrid return to work model. I'm confident that this team will continue to define new possibles when we are all innovating, collaborating and learning together in person again. With that, I'll hand it over to our Chief Financial Officer Cameron Hyzer.

Thanks, Henry. Q1 was a great quarter with strong financial results that exceeded our guidance. We saw broad-based strength across the business. And as Henry indicated, we achieved our best ever Q1 results for new business, new customer additions and retention activity. This quarter was also highlighted by our successful expansion with enterprise customers, growing sales of our newer products and strong international growth. As a result, we are raising our outlook for the year and now expect to deliver revenue growth of 41% in 2021, up from our prior guidance of 36% at the midpoint. We're also guiding to adjusted operating income in the range of $290 million to $294 million, up from our prior guidance of $280 million to $285 million. In Q1, we delivered GAAP revenue of $153 million. This exceeded our $144 million to $146 million revenue guidance range and represents 50% year-over-year growth and 12% sequential growth as adjusted for days in the quarter. In the first quarter adjusted operating income was $66 million. This also exceeded our guidance range of $61 million to $63 million, and represents a margin of 43%. During the first quarter, we continued to see strong new customer additions and positive momentum with respect to retention and upsell activity. We also continued to successfully execute against the large and growing enterprise opportunity. We had strong enterprise renewals and our enterprise upsell motion is really hitting its stride. In the quarter we doubled the number of greater than $100,000 ACV customers added as compared to the year ago period. As a result, as of March 31, we had more than 950 customers with $100,000 or more in ACV, up from more than 850 last quarter. We also continue to expand beyond software and business services with particular strength in finance, insurance, real estate and manufacturing verticals. Additionally, during the quarter, we added more resources to capitalize on the growing international opportunity, which resulted in days-adjusted sequential quarter international revenue growth of 14%. With international revenue growing faster than the overall business, we now have over 10% of our revenue coming from international markets. As we invest in additional growth factors, our focus remains on delivering durable revenue growth and absolute levels of adjusted operating income. As a result, as we drive elevated levels of growth, there's the potential that margins may be impacted. As we have outlined in the past, calculated billings and RPO can be imprecise metrics with noise obscuring the signal of in-period activity. As a result, we focus on days-adjusted sequential revenue growth, which is the growth in total revenue divided by the days in the quarter compared to the prior quarter. We delivered 12% days-adjusted sequential revenue growth in the first quarter, strong results relative to our expectations and great momentum for the remainder of the year. This performance provides further confidence in our ability to raise our guidance for 2021. As we move on to expenses, we increased our investment in research and development in the quarter as planned, investing to expand our data advantage and further extend the workflow and activation capabilities of our platform. We also continue to increase sales and marketing capacity to go after the large and expanding market opportunity. As a result in Q1 we delivered adjusted operating margins of 43% in line with guidance. Turning to the balance sheet and cash flow, we ended the quarter with $356 million in cash, cash equivalents and short-term investments. In the first quarter we generated operating cash flows of $93 million, which included approximately $7 million of interest payments in the quarter. As I indicated on our last call we repaid part of our term loan and repriced the remainder while issuing a new senior unsecured bond in the first quarter, contributing to the $34 million in cash use for financing activities. We expect those transactions will reduce our cash interest expense by approximately $3 million in 2021. Unlevered free cash flow was $98 million for the quarter, almost 150% of adjusted operating income, as both billings and collections were strong in the quarter. Looking forward, we anticipate unlevered free cash flow conversion rates in the high 90s or 100% as a percentage of adjusted operating income on an annual basis. With respect to liabilities and remaining performance obligations, unearned revenue at the end of the quarter was $262 million and the remaining performance obligations or RPO were $592 million of which $461 million are expected to be delivered in the next 12 months. As of March 31, we carried $750 million in gross debt at a net leverage ratio of 1.6 times trailing 12 months adjusted EBITDA, or 1.2 times trailing 12 months credit agreement EBITDA. Lastly, before we turn to guidance, I would like to welcome Prasadh Cadambi to the team. We announced that Prasadh was joining the company as Chief Accounting Officer in October, and since then, he helped his clients at KPMG get through year-end before joining us in March. He has led engagements with some of the largest software and subscription companies in the world, including Adobe and Salesforce. With that, I'll provide our outlook for the second quarter and updated outlook for the full year 2021. For Q2, we expect GAAP revenue in the range of $161 million to $163 million and adjusted operating income in the range of $68 million to $70 million. Non-GAAP net income is expected to be in the range of $0.11 to $0.12 per share. Our guidance implies year-over-year revenue growth of 46% at the midpoint and an adjusted operating income margin of 43%. We are updating our full year 2021 guidance as follows. We now expect GAAP revenue in the range of $670 million to $676 million, an increase from our prior guidance of $645 million to $655 million. And adjusted operating income of $290 million to $294 million, an increase from our prior guidance of $280 million to $285 million. Non-GAAP net income for the year is expected to be $0.49 to $0.50 per share, an increase from our prior guidance of $0.47 to $0.49 per share. Both amounts based on 405 million diluted weighted average shares outstanding. And we anticipate unlevered free cash flow to be in the range of $290 million to $295 million, an increase from our prior guidance of $270 million to $280 million. Our full year guidance implies 41% revenue growth. With that, let me turn it over to the operator to open up the call for questions.

Thank you. Our first question is from Siti Panigrahi with Mizuho. Please go ahead.

Thanks for taking my question. Henry, you talked about the strong upsell and renewal. I'm wondering what percentage of your customers, mainly enterprise customers, are now using the Engage platform? And also, could you talk about Clickagy and EverString, you said last quarter completed the integration? What sort of adoption or cross-selling you saw in the base?

Yeah, great. I think first, Engage is still very, very new. And so it's a tiny, tiny percentage of our customer base that's using Engage today and so we feel really good about the upside opportunity there. We're getting great feedback from the customers who are on it. Like I mentioned, we're seeing higher renewal and retention rates from the customers who are using both ZoomInfo and Engage. And then every investment dollar at Engage doesn't just go to enhance Engage but it also goes to enhance our offerings internationally and our recruiter offering where Engage is built into those packages. And so we feel really good about the investments there, but it's still really early innings for that. On Clickagy and EverString, what we did with the Clickagy asset is that we built it into the industry's first streaming intent product. And that product is growing tremendously across our base. It's also built into our elite package. And so we're driving more prospects and customers from our advanced and professional versions of our platform into the elite version of our platform where they get Intent, streaming Intent within that platform. And that asset from a data perspective is feeding our intent offering which we think is one of the offerings that will be here for years and years to come. Our customers want to be in front of their prospective customers when they're in market for their products and services, and Intent gives them visibility into what their prospective customers and prospects are doing and researching online. And so we feel really good about that offering and the Clickagy asset being leveraged. On the EverString side, we fully integrated the EverString data asset into our data-as-a-service offering. And that's a key offering within our enterprise customers. And in that very large deal that I talked about in the prepared remarks, that customer is also taking advantage of enrichment that's being stitched through the combination of the EverString and ZoomInfo data assets.

Thank you.

Our next question comes from Mark Murphy with JP Morgan. Please go ahead.

Yes, thank you. Congrats on a terrific start to the year. I wanted to ask you — I think mathematically Cameron, there's $8 million of revenue upside in Q1, but the fiscal year guidance is moving higher, I think by about $23 million. So are you seeing something different in the pipeline that's driving greater confidence in the rest of the year? In other words, maybe this international strength is something you see that flowing through? Or is it more Engage and recruiter offerings starting to feather in in the back half?

So, yeah, I think, first off, certainly the ACV that was generated in Q1 above our initial model and guidance is more than the $8 million revenue that was recognized. So that certainly contributes; that we'll continue to see that revenue kind of throughout the year. And I do think that from an execution standpoint, we're firing on all cylinders with respect to many of the expansion opportunities that we have both internationally and with Engage and in the other new products. So it does provide us with a healthy baseline to bring up our growth assumptions.

Okay. If I could sneak in just a very quick second one. Henry, can you just explain why is international growing faster than domestic? Just given, there's a stronger economic rebound domestically, then we have more of the COVID flare ups that are still happening internationally?

Yeah, Mark, I think a couple of things. First, internationally, there's obviously lower penetration there than there is domestically, I think is the first thing. I think the second thing is, there really isn't an offering internationally that can bring together data coverage and technology for go-to-market teams the way that we can. And so when we're going there, it's largely evangelistic, but the customers are really excited about the opportunity to use data, oftentimes, for the first time to impact their go-to-market effort. The market is ready for this type of solution internationally; they haven't seen a packaged solution the way that we can bring it before. And so when we're able to show them how they can actually truly digitize the way they go-to-market, the response has been overwhelmingly positive.

Excellent. Thank you very much.

Our next question comes from Alex Zukin with Wolfe Research. Please go ahead.

Hey, guys. Thanks for taking my question and congrats on the quarter. So maybe just the first one for Henry. Couple, obviously, the standout numbers with a 50% plus growth and $100,000 customers and you call out an eight-figure deal. So can you maybe talk about the pipeline for the rest of the year and comment on whether the pandemic is actually driving some shortening of sales cycles for you, given the pull from the demand environment and even the push from your brand equity, really coming together post IPO as well?

Yeah, I think actually one of the things to think about with that eight-figure deployment is really how it came together. This was a company that four years ago had come to us with just 300 users, they were on one of our legacy platforms. They continued to add seats over time. Then in 2019, they migrated to our combined platform. Once they got there, much like many of our other customers, they really started an acceleration of what was possible with all of the other data assets and technology and software tools we had built into the new platform. This customer started adding new seats, because the legacy platform didn't have as much data coverage as the new platform. So they started adding new users. Then they baked us into their CRM system. Then they adopted Intent data. Then they upgraded to the elite edition where they could get Intent and workflows and lead scoring and routing and account enrichment. And then they added Inbox AI. So this is a customer that has been with us for years, but once they got onto the new platform and migrated over there, they were able to really open to all of these other features and functionality and data sets that we can offer. We're seeing more and more customers in the enterprise, but also across our customer base, come to that same realization, and start taking us up on all of the enhanced offerings that we're able to provide them. In the enterprise, another tailwind for us is the acquisition of EverString, which significantly broadened the data coverage we're able to provide for enterprise clients, meaning we're enriching more data for them. When we plug into CRM, we're resolving back to entity and contact records within ZoomInfo more often than we ever were. So we're seeing an enhanced opportunity within the enterprise to finish that transformation from CRM being that system of record to CRM being a system of insight. And then we've invested for the last year behind the go-to-market motion in the enterprise as well. That comes from a product perspective where we continue to enhance the offerings that we offer in the enterprise, but also from a go-to-market headcount and talent perspective where we brought in new enterprise leaders and reorganized the segmentation of accounts in the enterprise, so that we can make sure that we're really articulating the value we can provide across an organization. And so you're seeing a lot of that come to fruition now.

Got it. That's super helpful. And then Cameron, just maybe one for you. I know you love these questions. But if I look at the delta in patterns around calculated billings versus current RPO, you're seeing sequential trends in billings for Q1 versus Q4. But if I look at the sequential change in current RPO, it's about the same roughly on a dollar basis in terms of the amount of current RPO added from Q4 to Q1. So can you walk us through was there anything different in the billings calc that made that bigger versus depressed CRPO calc or any help there would be appreciated?

So I'll start with billings as an imprecise metric, as well as RPO, as you kind of think through just based on the amount of noise you get from timing of billings, duration of billings, expiration of contracts, et cetera. And that occurs within the RPO based metrics as well. One of the things to consider is that Q4, just seasonally, is our strongest quarter from an in-period activity perspective. So the amount of bookings that you get in terms of RPO tends to be largest in Q4. And that's kind of pulled forward as you think about the expiration of contracts in Q1, which tends to warp that comparison a little. But again, I think if you're looking at in-period activity, and how to best gauge that, the nuance is symmetric; there's always going to be sequential growth in revenue as you adjust for days. If you look at that, the Q1 sequential growth relative to Q4, once you normalize for the acquisitions, was actually a modest improvement.

Understood. Thank you, guys.

Thank you. Our next question is from Michael Turrin with Wells Fargo Securities. Please go ahead.

Hi there. Thanks. Good afternoon. Cameron, the unlevered free cash flow number certainly stands out as well. I think more than 60% margin is certainly impressive. You mentioned in the prepared remarks some billings and collections related commentary. But is there anything else from a seasonal profile perspective for us to be mindful of as we model that line out through the course of the year, given the upside that was more pronounced than we were modeling? Thank you.

Yes, sure. Great question. Q1 is always strong from an unlevered free cash flow perspective, just based on the normal seasonal strength of sales activity in Q4. So we collected on what was a great quarter in Q4 plus we have continued to implement operational improvements around collections that have yielded really strong results. If you think about in a SaaS business, think about it as days billings outstanding as opposed to days sales outstanding. If you take days billings outstanding, we've actually improved to a level that's even better than our pre-pandemic levels had been, which helped to drive cash flow in Q1 and then certainly we did have a really great quarter from a sales and billings perspective in Q4 as well that also helped to drive incremental cash flow. So, overall as a result of the operational improvements and improving growth, we do expect that our free cash flow conversion will be improved in 2021. And as I mentioned in my prepared remarks, we expect it to be in the high-90s, or around 100% as a percentage of adjusted operating income for the year.

Helpful. Thanks. Nice start to you.

Our next question is from Stan Zlotsky with Morgan Stanley. Please go ahead.

Perfect. Thank you so much, guys. I wanted to go back to the question on the international opportunity. The start certainly very impressive to the year in that part of the business. How are you thinking about it for the remainder of the year? What are some of the new initiatives that you're hoping to implement as we go forward?

Sure. I'll jump in and Henry can add color if he wants to. We're really excited about the momentum and success from the early investments we've made in international markets. And we expect to put more wood behind that effort. One of the exciting things is that the effectiveness and efficiency and scalability of our international teams has been similar to that we've seen in the U.S. The hardest part has been the travel restrictions that we've experienced. If we would have had offices open in Europe and probably Australia already, we likely would have accelerated faster if it weren't for COVID. As the world opens up to travel and landing teams to see teams in those regions, we do plan to often open offices internationally, to further pursue the strength that we're seeing there.

So just to piggyback on that Cameron. As we think about the back half of the year, are you figuring in greater amount of T&E between returning to the offices domestically, and potentially also other international locations opening up?

It'll be modest at best, realistically, our sales motion doesn't rely on a heavy amount of in-person visits. There will be some training, but our expectation is that will be modest, with some experienced folks that are deeply ingrained in the culture over there to start offices, and then ramp with local hires and success that would follow.

Got it. Thanks, guys.

Thanks Stan.

Our next question is from Terry Tillman with Truist. Please go ahead.

Yes, thanks for taking my question and congrats as well. Henry, maybe on the Salesforce sync innovation — the bi-directional data feed — what kind of revenue do you actually get from that? And whether it's Salesforce or other ISVs? The second part is, I would think as you're starting to get the seven-figure and eight-figure transactions people are going to take notice. So I'm curious what you're seeing now on the ecosystem development side? Thank you.

Thanks, Terry. I think on Salesforce, the capability we've opened up is in our advanced and elite packages. Customers will need to migrate from the Professional Edition, which is kind of our starter edition, to advanced and elite to take advantage of the Salesforce sync capability. We obviously believe this is an incredibly valuable feature because it allows you to take your first party Salesforce data and marry it to ZoomInfo data to get tighter filters and better views on where your opportunities are, what accounts you should be engaging with, which contacts and leads are no longer at their firms. You can see that with a couple of clicks inside the ZoomInfo platform. So really powerful technology and we're using it as a lever to migrate people to the more advanced solution packages. From an ecosystem perspective, last quarter, we announced a partnership with Snowflake and their data marketplace. Next quarter, you'll see us announce a couple of new partnerships with customers where our data and our platform can be embedded in a number of different go-to-market platforms and systems. We really do believe that not only should our customers be engaging with our platform on ZoomInfo application, but that we should also be embedding those solutions inside of the systems that they go to market with whether that's sales automation, or CRM or marketing automation. So really expanding that ecosystem has always been a goal of ours. You'll see us continue to do that over the next quarters.

Thank you.

Our next question is from Raimo Lenschow with Barclays. Please go ahead.

Henry, can you talk a little bit about the evolution on the recruiting side? So where are you in terms of your ability to cross-sell and upsell in terms of sales and engineering, et cetera? And what momentum are you seeing there? Thank you.

Hi Raimo, thanks for the question. What I would tell you is we're still really early with the recruiter platform. We are in market, we do have paid users of the platform, and we expect to do a much larger launch in June. We expect that launch to start with focus on existing customers, particularly in the enterprise and upper mid-market. Ultimately, what we're building throughout this quarter and throughout the rest of the year is really a digital motion from candidate sourcing to candidate engagement to interview. The ability to give recruiters a suite of not just data, but technology and tools that let them interact with that data and then feed that interaction and activity into their ATS systems. We're working on a number of new ATS integrations for the recruiter package. We expect to have a dedicated go-to-market motion on the recruiter product this quarter, and then we expect to accelerate that in the back half of the year as well.

Okay. And then one follow-up for Cameron. I thought a debt refinance — can you just remind us the benefit you get from that and what's the next step going forward?

Sure. There are a couple of benefits that we get from that. One is we took advantage of a really strong rate environment in February, so we lowered our rates across the board between both the term loan and the new bond. Additionally, it gives us added flexibility going forward. The unsecured bond obviously has fewer covenants which also enables us to take on more term loan debt if we needed it going forward for potential acquisitions or other growth initiatives. And then finally, we also increased the size of our revolver to $250 million, again, to give us more flexibility going forward if we find good opportunities for continued investment.

Perfect. Thank you. Congratulations.

Thanks Raimo.

Our next question is from Brent Bracelin with Piper Sandler. Please go ahead.

Good afternoon. Henry, I wanted to follow-up on a common thread that's being asked here around the amazing strength of the business. I vividly recall a conversation with an investor just nine months ago, where we had a heated debate around whether or not you could sustain 30% in 2021. Q1 marks the third straight quarter of accelerating growth, 48.5% to the highest in more than two years. My question: what's changed over the last six to nine months where the expected growth rate of your business would improve from what 27% consensus was to now 41%? That is a material change and we're still in a global pandemic. It feels like a lot of small things seem to be working. Maybe it's just the power of the platform that's resonating. Any additional color would be appreciated because the magnitude of the change seems much stronger than anyone expected nine months ago.

Brent, thank you for the question. I wish I could tell you there was one silver bullet here. There really isn't. The thing that I see in this business every day goes back to that cultural focus on best-in-class execution, getting 1% better every day. What you see in every department over the last nine months is that they don't even look like they did nine months ago. We've advanced in every area of the business. We've become more sophisticated in every area of the business. We've brought new talent and stronger talent in every area of the business. We push our employees to improve in every area of the business. This is going to be a business that consistently executes for the long-term. We're building a durable growth business that's focused on best-in-class execution. You're seeing that come through.

Something in here for sure. Cameron, just quickly on the non-tech vertical, you called out finance, insurance, real estate and manufacturing. Are you seeing those as incremental helping drive the logo strength beyond your strong adoption in tech, or are those new areas helping offset any slowdown in the traditional tech market where you're really strong?

Yes, and I really view it as incremental — they're coming off of a relatively small base, but even within software and business services segments which have traditionally been early adopters for our business, we continue to see really strong growth and strong enterprise growth. Those parts of our business are still growing in this quarter in the 40s as a percent. They continue to do really well. And then we're picking up incremental growth from some of those newer verticals that have traditionally been a little slower in terms of adoption.

Great. Well, impressive. Thank you.

Our next question is from Tom Roderick with Stifel. Please go ahead.

Great. Hi gentlemen, thank you for taking my questions. Henry, as this business continues to scale and you find more seven- and eight-figure deals, it seems like there's a lot of things you need to be adding and investing in to support larger deals and nurture those relationships as they continue to get bigger. Can you talk about what functions you've put in place in sales to support larger deals, to support the nurturing of those relationships as they continue to get bigger and ultimately how you know when your customers are ready to pull the trigger on much bigger deals? And secondarily, how is the competitive landscape changing as you're finding your way into those seven- and eight-figure deals?

Tom, thanks for the question. If you look at how our go-to-market organization is organized today and compare that with two years ago, we've really sophisticated the way we go to market, especially in the enterprise. Today, we have a robust solution sales team. This team comes in for more sophisticated engagements and solutions that we're selling into. When we bring that team into deals, we see material upside on the size of the deals we're able to close, and the sales cycles shrink when we bring that team in. We inherited a very strong sales engineering team with our acquisition of EverString; the former CEO of EverString is now running that motion for us here at ZoomInfo. It's an incredibly strong motion, they're integrated into our sales motion. So in the enterprise, it's not just an account executive or an account manager — you have an account executive and account manager, a solution salesperson, and then someone from sales engineering who's focused on the data aspect of the business. We're really able to do consultative selling in those situations. All of those resources just weren't here two years ago. We've been thoughtful about where we hire and how we support our enterprise sellers with the right resources that not only make them successful, but that make the enterprise customers excited to engage with us in consultative ways, and we're seeing that pay off across the enterprise.

Got it. And then the follow-up on competitive landscape as deals get larger?

Not really; the competitive landscape as the large deals get larger is still pretty unchanged.

Got it. And one more — you've had success with tuck-in acquisitions that become critical components of the product offering. How are you supporting the corporate development function as you make these acquisitions and integrate them effectively? Is that team getting larger? Are you prepared to do larger deals going forward?

Yes. We continue to believe that M&A is going to be a strong growth driver for us, particularly where we can find a solution that gets remarkably better with our data asset as a shared foundation that we can sell across our go-to-market teams. We view M&A as a strategic differentiator. We are going to continue to grow that corporate development team. I think you will see us continue to do M&A deals throughout 2021. The way we look at deals is we don't tend to get fixated on size. We stay focused on whether this is an asset that all of our sellers can sell, can we quota it out to our quota carrying representatives, can we enable them to sell those solutions, can they become core parts of our offering, and can they become strategically differentiated because of our data? If we can line those things up, we'll be excited to do the deals and we'll be size-agnostic.

Wonderful. Congratulations on the results. Thank you.

Our next question is from David Hynes with Canaccord. Please go ahead.

Hi, guys. Congrats on the results. If you had to characterize the record number of new customers that you're adding, would you attribute it more to top-of-funnel strength or improving win rates? And a follow-up: if you don't win, what's typically the top reason a deal is lost?

I'll hit the first question and then Henry can talk about why we might not win. At the top of the funnel, we are seeing more leads and more qualified leads than we've ever seen before. We also continue to see our win rates improve over time. A lot of that is due to being focused on getting 1% better every day, and when you apply that across multiple layers within the funnel it compounds into real success across the board. That's what we're seeing in Q1.

David, when we lose, in almost all cases we're not losing to a competitor or a different solution; we're really losing to no decision. What we're focused on doing internally from an enablement perspective is to ensure that when we're engaged with a company, we're engaging all the right decision-makers who can make a purchase. We want to get all the right people to the table so we can best articulate the value of our solution to the entire organization. We're not seeing a lack of a certain product feature or data coverage as a primary reason for losses; it's typically no decision.

Yes. Makes sense. Thanks, guys.

Our next question is from Kash Rangan with Goldman Sachs. Please go ahead.

Thank you very much. Congratulations in the quarter and congrats on hiring Prasadh as well. I have two questions for you, Henry. One is, as we get past the vaccination phase and hopefully open up, is there a possibility that a fair amount of selling activity will shift back to in-person meetings, and therefore digital engagement as a source of leads might take a backseat as people go out to meet clients in person? And secondly, as you look at Engage, how much more whitespace is there for Engage before you bump into other established categories in the CRM space?

Thanks, Kash. First, we really believe that digitization of the go-to-market motion is a one-way door and a durable change. That's not going to go back. We don't view this as a temporary reallocation of T&E or conference spend. There are strong secular tailwinds at work across companies of all sizes that were at work before the pandemic hit. We feel those tailwinds and see the market growing; more and more people are raising their hands to want to go-to-market in a data-driven way. That's happening with customers of all sizes, from the largest enterprises to small businesses, and we play a critical part in their ability to go-to-market in an efficient and scalable way. There will be more travel hopefully in the back half of this year, but that's not going to change our growth position. Regarding Engage, lots of whitespace. We're super early in that category. There is a lot of whitespace around sales automation and getting the most out of your sellers by automating their daily tasks and integrating that back into CRM systems and systems of record. I don't view Engage as bumping into CRM or running out of whitespace. We see a large market where we're really early and we've seen no signs of penetration across our customer base.

Thank you very much.

Our next question is from Koji Ikeda with Bank of America. Please go ahead.

Hi guys, really nice quarter. How much of the Q1 bookings outperformance and the pipeline built during the quarter, especially with the bigger deals, is coming from organizations that are still operating with a pandemic mindset versus organizations that are now really preparing for the post-pandemic world?

I think we don't see organizations as still operating with a pandemic mindset anymore. That's largely behind us. What we're seeing is organizations trying to bring to life their CRM systems, marketing automation systems, and sales automation systems, and getting high ROI and real engagement out of those systems. They view us as a strategic partner to fill those systems with insights and drive adoption and engagement from frontline sellers and marketing teams through those systems. So I don't think anyone is focused on a pandemic mindset; everybody is focused on digitizing their motion.

Got it. Thank you for taking my questions and congrats on a great quarter.

Thank you.

Our next question is from Robert Simmons with RBC Capital Markets. Please go ahead.

Hi, thanks for taking our question. Henry, could you talk about what you're seeing from the more impacted industries?

Sure. Historically, those more impacted industries have been a smaller portion of our business — pre-pandemic it was only about 4%. We are seeing certain areas start to come back more strongly. If you think about retail, there are a number of retail customers that are coming on. Even in industries like sports and hotels, we're starting to see an uptick; we signed the New York Giants and Carolina Panthers in the quarter. We also signed some larger hotel chains as well. So I think we're starting to see those come back, but again, it's a very small part of the business and not a material driver to growth at this point.

Got it. Great. Thank you very much.

Our next question is from Brian Peterson with Raymond James. Please go ahead.

Great, thanks. This is Alex calling for Brian. Henry, just one for you — I'm curious about the time to value of your platform for customers. With go-to-market models changing during the pandemic, has the time to value changed in the last year with customers, and are certain verticals getting faster ROI?

Yes, we've always been proud of our quick time to value. This is a solution you can buy on a Monday, be onboarded in one day, and be seeing value by Friday. There are different types of implementations: a deeper implementation with a data science team building complicated models might take six to eight weeks, but even there we feel like we're adding value throughout that period and getting to a full deployment by the end of those weeks. Mostly, sales teams ramp quickly on the product and see value right away. So really quick time to value across companies of all sizes.

Great. Thank you.

And our last question will be from Pat Walravens with JMP. Please go ahead.

Great. Thank you. And let me add my congratulations. Henry, can you give us an example of something that you would like your platform to be able to do in the future that it can't do today?

Sure. One area of opportunity is aligning sales and marketing together. Today we have a number of solutions that serve both marketers and sales people. In the future, tying together those use cases and aligning them in our platform is a huge opportunity. Think about our website tool or our form complete tool — these help marketers drive top of funnel conversions. Having that top of funnel conversion feed into an SDR view and notification inside ZoomInfo that drives the next best action based on automated workflow motions would be powerful. If the marketer sets that up, a lead comes in, it's automatically assigned to an SDR; the SDR has a view inside ZoomInfo where they see the leads assigned to them and they have one-click actions to drive an outbound call or automated email flow. Analytics are provided underneath so marketers and sellers are fully aligned from top of funnel to bottom of funnel. That's a big alignment we're well positioned to do because we already have the eyes of marketers and sellers within our platform. We have many of the pieces and we need to tie them together.

That would get rid of the problem of marketing qualified lead versus sales qualified lead?

Yes. I would certainly align those two stakeholders under one umbrella for sure.

Yes. That would be cool. Thank you.

Thank you, everybody. We're excited to be hosting our first ever Analyst Day on June 14. We really hope that you'll join us as we do a deeper dive on the business and the durability of our growth and profitability model. I'm confident that it will be a fun and engaging event. We hope to see you all there June 14th. Thank you.

Thank you. This concludes today's conference call. Thank you for your participation and you may now disconnect.