It was an exceptional set of results. Having recently sold all of my Pinterest shares and redeployed half into Zoominfo, I am convinced it was the right move after this call. I just could not find anything not to like. Here are my excerpts, a summary of the historical numbers and some thoughts (I did not summarise the full Q&A), which as Saul said was even more exceptional and worth a read.
PR: https://ir.zoominfo.com/news-releases/news-release-details/z……
Prezzo: https://ir.zoominfo.com/static-files/c874fe43-fcc7-4f3f-ab62……
Webcast: https://ir.zoominfo.com/events/event-details/zoominfo-first-…
CEO:
Sales execution:
The first quarter was marked by strong accelerating growth across all of our business lines.
WSM: This is how the CEO chooses to OPEN the call. That, on its own sends a clear message to me.
our long-term opportunity is even bigger than what we had first envisioned.
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.
What it is they do:
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.
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
International growth:
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 day’s adjusted sequential quarter basis.
Salesforce partnership:
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.
Engage:
Engage ACV doubled compared to Q4, 2020 [WSM: that’s a double sequentially!] 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.
WSM → In the Q&A he does say that this is off a very low base still, though
Intent:
Including our B2B intent data, which gets them closer to end market buyers by building automated workflows around intense spikes [ph] of topics relevant to their products and services. These data-driven motions have fuelled a significant increase across our Intent products, with Intent ACV doubling year-over-year.
Inbox AI:
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.
Engagement:
overall platform engagement perspective, we saw 12% sequential increases in monthly and daily active user adoption.
Team:
Over the last 12 months, we grew our team by nearly 50%.
WSM: → This looks like tremendous acceleration to me:
- New customer growth: doubled yoy
- Upsell: record as % of opening ACV
- International growth: international grew 14% qoq (69% annualised), and within the Q the month of March was the best ever.
- Product adoption: Salesforce sync - 8x increase, Engage ACV up 100% qoq!!, Intent ACV doubling yoy.
- Engagement: 12% sequential increase (57% yoy) in MaU and DaU.
CFO:
we achieved our best ever Q1 results for new business, new customer additions and retention activity.
During the first quarter, we continued to see strong new customer additions and positive momentum with respect to retention and upsell activity.
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.
With international revenue growing faster than the overall business, we now have over 10% of our revenue coming from international markets.
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.
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.
Guidance:
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.
WSM → So guiding for 6% qoq / 46% yoy
Q&A EXCERPT
Question from Brent Bracelin, Piper Sandler:
Good afternoon. Henry, I wanted to follow-up on a common thread that’s being asked here. Just around the amazing strength of the business. I vividly recall a conversation with an investor just nine months ago, where we had this 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 here, what’s changed over the last six to nine months where the expected growth rate of your business would improve from what 27% consensus us to now 41% that is a material change last time I checked it, and we’re still on a global pandemic. So it feels like a lot of small things seem to be working. Maybe it’s just the power of the platform that’s resonating. I don’t know. But any additional colors you can give us here because the magnitude of the pace of change in the growth rate certainly seems much, much stronger than anyone’s thinking just nine months ago?
WSM → ‘nuf said. As Saul said, read the whole thing, but this was exceptional for me. This is a QUESTION from an analyst! The CEO goes on to say it’s not just one thing but a lot of things across the whole business fuelled by their culture of constant improvement which is driving the growth.
SOME SUMMARISED NUMBERS
Revenue
**Rev Q1 Q2 Q3 Q4**
2019 73.1 79.4 87.5 96.1
2020 103.6 111.2 123.6 139.7
2021 153.3 162
QoQ
2019 9% 10% 10%
2020 8% 7% 11% 13%
2021 10% 6%
YoY
2020 42% 40% 41% 45%
2021 48% 46%
WSM → Q2 is guidance so not the actual number; they’ve beaten 100% of the times in the past, so pretty confident they will end >50% yoy in Q2. Note a couple fo things: the seasonality in the business, with the first half being relatively slower growth than second half and the 10% QoQ for Q1, which is 2%pts higher than last year. And the accelerating YoY revenue growth trend.
RPO
**RPO Q1 Q2 Q3 Q4**
2019 257.1 277.5 340.7
2020 376.4 413.5 457.6 559.0
2021 591.6
YoY
2020 61% 65% 64%
2021 57%
WSM → The CFO cautions that this metric is a bit messy, so probably not good to focus on one Q only, but rather on the trend. So looking at that - note the (on average) higher RPO growth rate than the Revenue growth rate, which bodes very well for future revenue generation
FCF%
**FCF% Q1 Q2 Q3 Q4**
2019 42% 49% 54% 43%
2020 53% 47% 47% 55%
2021 64%
WSM → Just look at that improving FCF trend! And improving off an already exceptionally high baseline. Amazing. And not something that all CEOs give equal attention to (Cloudflare for example does not - arguably - pay enough attention to this part of the business) - he mentions specifically that they worked on improving collections.
MARGINS
**GP% Q1 Q2 Q3 Q4**
2019 88% 88% 88%
2020 87% 89% 88% 88%
2021 89%
**OpM% Q1 Q2 Q3 Q4**
2019 50% 52% 54% 49%
2020 47% 49% 47% 45%
2021 43%
WSM → Gross margins are solid as a rock at close to 90% for two years now. And Operating margins are trending down a bit but still very high, and this is by design as they invest for growth. I can’t see anything wrong here and my conviction in the company is certainly growing.