Zoominfo Technologies Inc (ZI) 2021 Q2 法說會逐字稿

Good day, and thank you for standing by.

Welcome to the ZoomInfo Second Year 2021 Financial Results Conference Call.

(Operator Instructions).

I would now like to turn the conference over to your host, Mr. Jerry Sisitsky.

Please go ahead.

Thank you, Grace.

Welcome to ZoomInfo's financial results conference call, highlighting our results for the second quarter of 2021.

With me on the call today are Henry Schuck, Founder and CEO 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, expect, anticipate, 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 sections 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 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 in the slides that we have posted to our Investor Relations website.

With that, I'll turn the call over to our CEO, Henry Schuck.

Thank you, Jerry, and welcome, everyone.

Q2 was another record quarter with accelerating revenue growth and improved operating margin performance.

We continue to see positive trends across the entire business, driven by our continued investments in our sales, marketing, product, data and engineering organizations and a strong demand environment for accelerating digital transformation across go-to-market teams.

This was our best ever second quarter for new customer additions, and we recorded the highest levels ever for both retention activity and customer engagement.

We saw accelerating growth with our largest customers, growing the number of customers who spend more than $100,000 a year with us, by 70% year-over-year, ending the quarter with more than 1,100 showing meaningful traction behind the investments we've made in our enterprise motion.

We're also seeing our investment in international payoff.

With more reps focused on the opportunity, we drove year-over-year international revenue growth greater than 75%, with international now representing 11% of our overall business.

In the second quarter, we delivered GAAP revenue of $174 million, representing 57% year-over-year growth, up 50% -- up from 50% in Q1 and 12% sequentially when adjusted for the number of days in the quarter.

Our culture of continuous improvement, defining new possibles and setting a high bar is resonating with our current and future employees.

We recently announced that we won Comparably awards for best companies for career growth and best leadership teams, as well as the Fortune Best Workplaces for Millennials award.

Our strong culture, combined with the growing investment in recruiting and talent acquisition drove the hiring of more than 575 employees this year as we near 2,100 employees worldwide.

As we continue to see an opportunity to drive best-in-class growth rates, we expect to invest in building out the worldwide team to capitalize on our total addressable market that we estimate has grown from $24 billion a year ago, to over $70 billion today.

In our conversations with customers, we find companies are still in the early stages of modernizing how they go to market.

They're just beginning to use data and insights instead of intuition and automated workflows instead of inconsistent one-off sales motions.

This is a secular shift that we believe will accelerate.

We estimate that today, the market is only penetrated in the single digits and Gartner has indicated that by 2025, 60% of B2B sales organizations will transition from experience and intuition based selling to data-driven selling, merging their sales processes, sales applications, sales data and sales analytics into a single operational practice.

To meet this trajectory, we've invested deeply in growing our product and engineering teams, adding senior-level talent across the board.

We've implemented new planning, prioritization and alignment processes between product engineering and product marketing that have strengthened the rigor, discipline and predictability of new software development and go-to-market launches.

Our product and engineering teams overdelivered, and we brought to market more meaningful products and features than any other quarter in our company's history.

In addition to the rapid pace of organic development, last month, we announced the acquisition of Chorus.ai, a leader in conversation intelligence.

I want to reiterate why this is a transformational acquisition for us and share some of the early feedback from our customers.

First, Chorus significantly expands our addressable market with a high-value, high net retention solution that is consistently rated 1 of the top solutions for go-to-market teams.

ZoomInfo and Chorus don't target the same buyers.

Our sellers know the power of conversation intelligence and can quickly and easily bring the solution to our more than 20,000 existing customers and new prospects.

The tight integration with our data asset creates more valuable workflows, bringing us closer to our vision of a modern and fully automated go-to-market platform.

Universally, every single sales team is doing 2 things.

They might be doing more, but at a minimum, they are, one, prospecting to find new business; and two, onboarding and coaching sales reps to improve their performance.

ZoomInfo had already helped hundreds of thousands of sales and marketing professionals find new business at the top of the funnel.

With the addition of Chorus, we can now help onboard, coach and uplevel their sales teams.

Chorus simplified the process of onboarding and training new reps by highlighting best sales plays, automatically recommending top scoring calls, curating a library of calls on similar topics, benchmarking metrics such as talk to listen ratios or filler words and surfacing new objections.

This allows sales leadership to onboard new reps faster, increase productivity and drive continuous improvement.

Chorus also accelerates our move into the engagement application layer, where sales and marketing teams are leveraging our world-class intelligence to connect with buyers via phone, e-mail, chat and video meetings in a more automated and efficient way.

We know that when we integrate into our modern go-to-market platform, our customers find increased value in our company, contact and intent data.

For example, when customers use Engage, we see meaningful improvements in their overall retention rates usage and engagement of our intelligence products.

We anticipate a similar trajectory as we integrate Chorus into the ZoomInfo platform.

We've received great feedback on the Chorus acquisition from customers and the value proposition is really resonating.

In less than 3 weeks since the closing of the acquisition, we have closed a number of transactions.

One customer, a B2B software lead generation firm, was evaluating competitive conversation intelligence solutions and chose Chorus due to the more accurate signals through better transcription.

They're using Chorus to uplevel the skills of their account executives and to drive process and sales methodology, ensuring reps are adhering to the best-performing talk tracks and asking the right question.

Another customer that powers an on-demand cloud-based workforce, chose Chorus after determining that it was the most robust solution following a competitive proof of concept.

They're using Chorus for their account executives and SDR team, for call coaching and driving consistent messaging across their calls.

And a very large professional services organization with nearly 20,000 employees selected Chorus to reduce new hire ramp time, identify and replicate winning behaviors on their sales team and to drive sales methodology adherence.

They chose Chorus due to the superior artificial intelligence, providing more accurate signals and strong platform integrations.

Chorus was rolled out to a segment of their account executives in 1 division.

And as we drive success there, we unlock a substantial opportunity for additional expansion.

We also continue to drive platform improvements and user enhancements to deliver more out-of-the-box functionality and workflows within our platform, while also continuing to drive increasing data coverage and data quality.

In Q1, I spoke about how we launched an all-new workflows product that enables go-to-market teams to use natural language to easily set up and trigger insight-driven plays that automate sales and marketing engagement and enablement.

In Q2, we added more new workflow trigger options for streaming intent, websites, scoops and funding.

These investments behind our workflow suite have doubled the percentage of customers in our elite package who are leveraging this advanced functionality.

We will continue to add even more new triggers and share our proven go-to-market playbook to help customers as they adopt, test and iterate new workflows.

Further, we expect that adding Chorus keywords and mentions as triggers and workflows will be a key innovation, enabling plays that have never been available to revenue teams before.

We also continue to bridge first-party and third-party data through our integrations.

ZoomInfo Sync gives our users the ability to unify their first-party Salesforce data with ZoomInfo data.

In Q2, we added the Salesforce opportunity object into ZoomInfo Sync, which enables users to include or exclude search results based on opportunity owner, stage type resource and created and closed date ranges.

Additionally, our intent products, which track consumption patterns to help go-to-market teams identify and engage prospects while they are conducting research as part of their purchasing journey, continue to experience significant growth, with active users growing more than 5x from June 2020 to June 2021.

Streaming intent and custom intent bookings, which became available after we acquired Clickagy, have nearly doubled sequentially in each of the last 2 quarters.

Engage, our sales engagement and automation platform, which I spoke about extensively on our last financial results conference call, had the most ever ACV added in a quarter.

And ZoomInfo Recruiter, while still small, saw the number of recruiter seats grow more than 10x sequentially in the second quarter.

Key features released in Q2 included our Google Chrome extension, reach out for recruiter, diversity and inclusion smart filters that enabled recruiters to achieve diversity and hiring goals, new integrations with leading ATS systems like Greenhouse and JobDiva and Engage for recruiters, which allows recruiters to set up talent flow communications to nurture candidates for a particular job opening.

Our ZoomInfo recruiter road map includes features that we are confident will drive digital transformation for talent acquisition and recruiting professionals everywhere.

For operations and data orchestration professionals, we released a landmark integration with Snowflake's cloud-based data warehouse, enabling the seamless delivery of ZoomInfo data to Snowflake for mutual customers.

This opens the door to more potential users across the organization, including analytics, business intelligence and strategic planning.

A Fortune 100 financial services firm defined their total addressable market using ZoomInfo's platform, and we established a real-time feed directly into their Snowflake instance to highlight changes happening across that total addressable market.

New executives coming and going, new office location openings, new funding rounds, new companies entering and leaving their total addressable market.

This live view of an ever-changing TAM is just 1 of the many use cases we can deliver through our Snowflake integration and highlights our ability to provide real-time data enrichment wherever our customers are building their go-to-market plans.

We also announced a new integration with Microsoft Dynamics 365, providing access to the full ZoomInfo platform available directly within the dynamic application.

And we also introduced a new connector integration from ZoomInfo to Zoho CRM.

With the continuing acceleration of our international business, we've made meaningful investments behind both data quality and data coverage, both internationally and especially in Europe.

In the last 12 months, we've increased company coverage, business professionals and contact data in Europe, all by more than 60%.

This meaningful expansion was driven by expanded title translation, improvements in our e-mail prediction and validation algorithms and a specialized team focused on international data.

In order to ingest and process the 250 million-plus changes that we make to contacts in our platform every month, we need robust, scalable systems and a talented team of people driving the high levels of accuracy and coverage across our data asset.

We've continued to build out this team, and we now have 400 global engineers, analysts, data scientists and researchers dedicated to delivering expanding data coverage with a focus on maintaining our high standards of data accuracy.

This team monitors more than 180 dashboards and is regularly testing data quality, manually testing tens of thousands of data points each month to further train and refine our evidence-based algorithms, resulting in our employment accuracy rates being at all-time highs.

All of these futures and platform enhancements and the continuous investment in data quality are driving improved logo retention and increased seat utilization, driving the highest levels ever for both retention activity and customer engagement in the quarter, which we expect will yield meaningful improvements to net dollar retention rates.

We again expanded and brought on a diverse group of customers this quarter, including venture capital firm Andreessen Horowitz, HVAC provider Comfort Systems, Sonesta Hotels, Bill.com, Staples, Office Depot and Monster.

We transacted with companies like Goosehead Insurance, a high-growth provider of independent personal insurance; and Korn Ferry, a global consulting firm.

We even worked with an HR and payroll software provider that increased year-over-year spend with us by 80%.

We are now the largest tech stack spend for their entire sales team, reinforcing that our platform is becoming the strategic imperative for large organizations looking to transform their go-to-market.

We are also driving accelerating growth in the enterprise opportunity.

As of June 30, we had more than 1,100 customers with $100,000 or more in ACV, up from more than 950 last quarter and compared to 850 the quarter before that.

Our strength in the enterprise is driven by a number of reasons.

First, we have meaningfully expanded the breadth of company data, providing better reach and coverage, helping us take share against legacy vendors.

Second, our investment in technology, including our robust integrations and partnerships with firms like Microsoft and Snowflake and our enterprise-grade APIs enable large organizations to enrich their customer data wherever it exists.

Third, our investment in people and processes with expanded enterprise sales leadership, larger and more specialized enterprise data solutions consulting and delivery and data services teams that are focused exclusively on the enterprise allow us to provide an elevated level of service for these customers.

And finally, we are a great value proposition for enterprises, as they can find everything they need in 1 place without worrying about switching key go-to-market infrastructure together through multiple vendors.

In closing, we continue to execute across all of our growth initiatives.

We had our best ever Q2 for new customer adds.

We drove the highest ever levels of retention activity.

And our data accuracy and coverage levels are at the highest in our history.

Our investment in customer onboarding, user experience enhancements and integrations are improving customer satisfaction and driving the highest levels of engagement ever.

International is taking off.

We saw great growth across the enterprise opportunity, and we continue to develop, acquire and integrate new functionality, delivering on our vision of the modern go-to-market platform.

With that, I'll hand it over to our Chief Financial Officer, Cameron Hyzer.

Thanks, Henry.

Q2 was a great quarter, with strong financial results that exceeded our expectations, and as a result, we are again raising our financial guidance for the year.

With broad-based strength we are seeing, we now expect to deliver revenue growth of 48% in 2021, up from our prior guidance of 41% at the midpoint of the range provided.

As we invest in additional growth factors, our focus remains on delivering durable revenue growth while still delivering -- while still delivering industry-leading levels of profitability.

As a result, we are increasing our adjusted operating income guidance to $291 million to $295 million.

This guidance includes the additional investment in Chorus, which is more than doubling revenue year-over-year, resulting in an $8 million to $9 million negative impact to adjusted operating income for the year that was not included in our prior assumptions for guidance.

The net result is accelerating organic growth with slightly lower adjusted operating income margins and increased absolute levels of profitability and cash flow.

In Q2, we delivered GAAP revenue of $174 million.

This exceeded our $161 million to $163 million revenue guidance range and represents 57% year-over-year growth, up from 50% growth in the prior quarter.

The acceleration in revenue growth this quarter was underpinned by organic revenue growth of 54%.

The success from both our enterprise and international motions, which are both growing faster than the overall business, helped propel the organic growth in Q2.

In the second quarter, adjusted operating income was $76 million.

This also exceeded our guidance range of $68 million to $70 million and represents an adjusted operating income margin of 43%, up from the first quarter.

As we move on to expenses, we increased our headcount investments across the board, ending the quarter with nearly 2,100 employees, up from 1,300 employees in June 2020 at the time of our IPO.

We expect to continue to invest across the entire organization with particular focus on product and engineering investments and the expansion of sales capacity to drive sustained growth.

Turning to the balance sheet and cash flow.

We ended the quarter with $400 million in cash, cash equivalents and short-term investments.

In the second quarter, we generated operating cash flows of $89 million, which included approximately $5 million of interest payments in the quarter.

Unlevered free cash flow was $92 million for the quarter, 120% of adjusted operating income.

As a result of our ability to drive consistently high levels of top line growth, we now anticipate unlevered free cash flow conversion rates in the 100% to 110% range as a percentage of adjusted operating income on an annual basis.

With respect to liabilities and future performance obligations, unearned revenue at the end of the quarter was $276 million and remaining performance obligations or RPO were $648 million, of which $505 million are expected to be delivered in the next 12 months.

As I've outlined in the past, calculated billings and RPO can be imprecise metrics to assess in-period activity and forward momentum.

As a result, we focus on days adjusted sequential revenue growth.

We delivered 12% days adjusted sequential revenue growth in the second quarter, continuing the strong momentum we achieved in the first quarter.

This strong sequential revenue growth gives us confidence to raise our expectations for the year.

As of June 30, we carried $750 million in gross debt and a net leverage ratio of 1.3x trailing 12 months adjusted EBITDA, and 0.9x trailing 12 months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements.

Following the close of the quarter, we acquired the assets and specified liabilities of Chorus.ai, for approximately $575 million in an all-cash transaction that closed in July.

This includes a more than $100 million tax benefit associated with the asset purchase that we expect to realize over time in the form of reduced cash tax payments.

Concurrent with the acquisition, we issued $300 million in add-on security notes due February 2029, and $200 million of add-on term loan B with a maturity of February 2026.

At the time of the announcement, S&P upgraded our corporate debt rating to BB- along with upgrading our first lien securities to BB and upgrading our bonds to single B. Moody's also upgraded the issue level rating on our first lien to Ba2.

With that, I'll provide our outlook for the third quarter and updated outlook for the full year 2021.

For Q3, we expect GAAP revenue in the range of $182 million to $184 million, which includes an approximate contribution of $3 million from Chorus and adjusted operating income in the range of $72 million to $74 million, which includes an approximate contribution of negative $5 million from Chorus.

Non-GAAP net income is expected to be in the range of $0.11 to $0.12 per share.

Our Q3 guidance implies year-over-year GAAP revenue growth of 48% at the midpoint and an adjusted operating income margin of 40%.

When excluding the contribution from Chorus, the implied adjusted operating income margin from the core business is expected to be 43%.

We are updating our full year 2021 guidance as follows: We now expect GAAP revenue in the range of $703 million to $707 million, an increase from our prior guidance of $670 million to $676 million, and includes $8 million to $9 million of contribution from Chorus, not included in our prior guidance.

And adjusted operating income of $291 million to $295 million, an increase from our prior guidance of $290 million to $294 million and includes a negative $8 million to $9 million contribution from Chorus not included in our prior guidance.

Non-GAAP net income for the year is expected to be $0.50 to $0.51 per share, up from our prior guidance of $0.49 to $0.50 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 $300 million to $305 million, an increase of -- from our prior guidance of $290 million to $295 million.

Our full year guidance implies 48% GAAP revenue growth with approximately 4 percentage points of growth contributed by acquisitions.

This compares to our prior guidance of 41%.

With that, let me turn it over to the operator to open up the call for questions.

(Operator Instructions).

Your first question comes from the line of Stan Zlotsky from Morgan Stanley.

Congratulations on a very strong quarter.

At a very high level, when you look across all the results, certainly, all the growth metrics are accelerating up into the right.

Is it fair to say that there's just -- there's a fundamental shift that's happening right now and that shift is actually accelerating in its pace, and you guys are really seeing the benefit flow through your growth numbers?

Stan, I think that what you're seeing is a continued shift in a trend to digitize the way companies go to market.

And I think we have a larger sales force, a product that touches more companies than it ever has and a more complete offering for the market.

But this secular trend towards digitization of how companies go to market, that's existed.

And I think it's going to be around for a long time because most of the customers we're talking to are still in the very, very early stages of the digitization efforts.

Got it.

And then on Chorus.ai, Henry, you mentioned -- sorry, Cameron, you mentioned $8 million to $9 million of revenue for the full year.

How much was the impact from deferred revenue write-downs -- ballpark?

So that's not, I think, a metric that we're disclosing at this point.

Next up, we have Alex Zukin from Wolfe Research.

So Henry, for you, maybe the first one, if you think about the incremental value that you're starting to deliver to your customers by transitioning from a data to a software vendor, what -- how do we quantify that in terms of the income?

Because it feels like you can get more as you stay with your customers longer as you continue to consolidate and increase the value of the overall platform.

So would just love to get a sense for how you're thinking about that.

Yes.

Let me take the first part and see if Cameron has anything to add.

I think first, 1 of the things that we're excited about is we can land with data and insights.

And every customer needs data and insights to go to market.

There is just no question about it.

Their sales reps are prospecting for new business.

Their account managers are looking for opportunity within their accounts, and they just don't have the data and the insights at their fingertips in order to do that effectively or efficiently.

Once we've landed with that, customers are looking to continue to sophisticate their go-to-market motion.

They don't just add data and insights and say, "Hey, we're good for our digitization effort.

They want to add chat to their website.

They want to add sales automation to the way their sellers reach out them.

They want to add conversation intelligence to optimize the middle of the funnel.

And so we're right there in every 1 of those conversations as those customers launch those sophistication motions.

And we're able to offer -- we're able to offer solutions that are not only best in class in and of themselves but they're also competitively differentiated because they have our data asset embedded inside of them.

And so we see a big opportunity to continue to add those solutions into our customer base.

And I think the way that I would quantify that, Alex, if you look back at the materials we put together with respect to the TAM in the Investor Day, you'll see that our core intelligence TAM when we went public was $24 million and grew to $26 million.

There's additional data that's in there in the [DAS] version.

But then as you add those other segments, whether it's the Engage part of the business or whether it's a recruiter as an adjacent workflow or now as we're adding conversational intelligence, that almost doubles the TAM that we're focused on.

And I think that, that is a good indication for how much incrementally we think that we can earn from customers as we continue to add more and more value for them.

Understood.

And then Cameron, maybe just another 1 for you.

When you think about the percentage of the migration by the end of the year to the new platform, remind us what the average uplift is when you're migrating customers to the new platform?

And how is the introduction or Chorus and Insent, does that actually accelerate that process?

So certainly, when we migrate customers on a like-for-like basis, so they're taking the same number of seats, the same level of functionality and data that they're integrating, that's a -- that's a nonevent in terms of what they pay us.

It's a flat renewal to a large extent or we would target an inflation-like renewal, which is what we get normally.

What we do see is that customers do tend to take on additional functionality.

They tend to roll it out to more of their users and they tend to take on additional data as well.

And that's really just a testament to the value proposition of the new platform.

So certainly, as we're including additional things like chat or conversation intelligence, in that discussion that is another opportunity for us to continue to expand with our customers and continue to deliver them more value.

Moving on.

We also have Mark Murphy from JPMorgan.

I'll add my congrats on a very solid quarter.

Henry, you had commented that Q2 reached the highest level of customer engagement.

And I'm curious, how are you defining and measuring it?

For instance, are you looking at the minutes per day logged in?

Or the number of transactions or API calls or daily active users, et cetera?

And just what is the underlying driver of seeing that strong engagement?

Yes.

Well, we look at usage in a number of different ways.

We look at log-ins versus -- over usage.

We look at DAU/MAU.

But we also look at usage across specific product modules.

This was a pretty exciting quarter because we saw really meaningful increases in usage of our Salesforce Sync products, our Intent products, our exports through our Workflows product, our reach-out product, our websites product.

All of those jumped in the quarter.

And overall, we saw a higher level of engagement overall by users using the platform and using it throughout the month -- throughout the quarter.

Okay.

And as a follow-up, I'm wondering how penetrated do you think you are today just in terms of the seat count within the sales organization of a typical customer.

I recall, I think that might have been sitting somewhere around 3% about a year ago among large enterprises.

There was some kind of a slice that was sort of low single digits.

And I'm just interested in where you see that today and maybe where that can go over time?

Yes.

So I think, look, we're still very -- we're still single-digit penetrated across the customer base.

I think the key thing that we're excited about is just within our existing enterprise customers, we see a billion dollar opportunity to expand seat count -- we've just expanded seat count across our enterprise customers.

And if you think about the broader total addressable market, there are 13.5 million salespeople in the United States.

And we think every person who's selling a product or service to another business should be a customer of ZoomInfo's.

And so still a large market in front of us on all of the different solutions that we sell.

And Chorus expands the total addressable market for us as well.

Next up, we have Nikolay Beliov from Goldman Sachs.

As evidenced by the sequential increase, the enterprise traction you're seeing across the 1 billion captive opportunity -- Cameron, can you please break down for us the drivers for the revenue reacceleration?

Is the increasing enterprise traction, number one, followed by intent or whatever the case might be?

And secondly, if you don't mind, double-clicking on the enterprise traction and the reasons for you winning there, what win rates are you seeing?

What have you done to reduce friction for adoption for your platform in the enterprise?

So I'll give you the kind of high-level growth drivers, then I'll let Henry drive into kind of the execution around that.

But it's a great question, Nikolay.

I think the various different growth vectors that we focus on, I think we're continuing to execute against them largely in the order that we've identified in the past.

So the largest opportunity is that enterprise motion.

And we've seen really good traction both in terms of those number of customers that are now over $100,000 [came -- in] ACV: that's now over 1,100.

That's helped drive upsells and retention as well.

As Henry mentioned, we had our best quarter from retention activity that we've ever had.

And we continue to see new customers coming in from a variety of different industries and geographies.

So the second driver has been the international motion, and we've seen that accelerate as we focused on it and made more investments in having specific teams focus on international regions as well as improving our international data and platform to address that.

And then thirdly, we're continuing to see real traction with the alternative use cases or adjacent use cases and other features and functionality.

I think Henry laid out that Engage continues to go really well.

The recruiting platform has gained a lot of momentum in the second quarter, and we're excited about that.

And as we bring on other features and functionality like Chorus, we're excited about what the integration can do within the platform.

And I think just on the enterprise side, a couple of things that I would touch on that are driving our execution there.

Number one, we've hired an experienced team of enterprise sellers at ZoomInfo.

We're now focused on the enterprise opportunity segment and to the customer base so that they can be focused on those opportunities and be supported by customer success managers who are responsible for keeping up the health in those accounts.

On the product side, we've invested behind the integrations with platforms like Snowflake behind the enterprise-grade APIs and also behind integrations with Microsoft and Microsoft Dynamics.

Our integration of EverString has given us a really solid data asset from a data as a service perspective and allows us to deliver enrichment across the enterprise against companies and contacts of all sizes.

And then the Intent data and the Intent package that we've put together after the Clickagy acquisition, is also driving our motion inside the enterprise as well.

Our next question comes from the line of Siti Panigrahi from Mizuho.

It's definitely impressive to see this enterprise traction.

I was wondering if you could give us some kind of trends you're seeing in the small and mid-market.

I know you guys don't disclose ACV or [tense hundred], but any kind of trend you see in this year versus last year?

That would be helpful.

I know like you did a tough few quarters right after IPO last year, but any sort of trends or any kind of sales funnel?

Or how should we think about linearity this year?

Yes.

And the great thing about our platform is that it really is applicable to sales teams regardless of size, and we can take companies from low levels of maturity all the way up to very high levels of sophistication.

So it is applicable kind of across the board.

And we continue to see real strength in small business and mid-market as well.

I think we've focused a lot of effort on the enterprise because there is a much larger expansion opportunity if we're selling a small enterprise deal, and we can grow that to be millions of dollars over time.

But we still have a large team.

We're continuing to grow our efforts in terms of sales capacity to bring on small- and medium-sized customers because those customers are good customers and have a smaller potential but a potential to grow over time.

And we've actually seen that as we've invested in our customer success motion and continue to invest in the platform that we've seen our retention metrics across the board go up.

So we've seen more of our small and medium-sized businesses stay with that.

Part of that is the improving economic environment that we're in, but also that we continue to deliver value and help them drive their growth motions.

Your next question comes from the line of DJ Hynes from Canaccord.

Congrats on the great quarter.

Henry, you gave us an update on some of the international data improvements.

But do you feel like the coverage and the quality of the data is now where it needs to be internationally to put some real sales muscle behind it?

And then I guess, part 2 of that question would just be, can you remind us like how different the data collection practices are in international markets?

Like how different are the rules in terms of what you can and cannot do?

Yes.

So look, first, I think across the board, across our industry, we have the best international data platform that exists.

I also think that we're going to constantly improve all of the data assets that we have, whether they're international or domestic.

And we have a team of 400 data analysts and engineers who are constantly focused on improving that data asset.

And with the number of changes as people move jobs and companies grow, we have to have an engine that keeps up on all of those changes across 100 million companies, 130 million business professionals.

And you can't do that with just humans alone.

And you can't do that with just machines alone.

You have to combine it to, to get the best of the best accuracy and the best coverage on those accounts.

I do believe we have a solution that's worth investing behind.

We've invested behind our go-to-market organization internationally.

We continue to invest behind data organization internationally.

From a data collection method or a data collection perspective, number one, we're doing with our notice and choice program more from a GDPR and compliance perspective than any company in our industry.

And we're really proud of our privacy first stance with the way that we collect data, the way that we're transparent about how customers can access and update that data within our platform in an automated way.

We are way ahead of the industry from that perspective.

I'll give you a sense of some of the work that we've done in the last quarter that's increasing that coverage.

I talked about how European coverage is up 60% across the board.

One of the things that our team was able to do was actually go into our data asset and translate 650,000 titles in Danish, French, German, Italian and many other languages, mapped those titles back to English so that we can go into the data asset that we've already collected and find records that can be published within our platform.

And so that work where you combine a human in the loop, with all of the data collection methods that we already have, is really driving the growth within the European and international data sets.

But we'll continue to make investments there.

Moving on, we also have Koji Ikeda from Bank of America.

Henry, Cameron, -- congrats on a nice quarter.

Just 1 for me.

Thank you for the commentary in the prepared remarks on the recent customer wins with Chorus.

It's really great to hear you're getting customer traction so soon post acquisition.

I was wondering if you could dig a little bit more on Chorus.

I was really curious what you're hearing out there from partners and maybe your larger customers on the acquisition and maybe how the Chorus technology fits with their overall go-to-market strategies.

Yes.

So really positive feedback from our customers since the acquisition.

I have a number of Chorus recordings where our customers are saying, "Wow, I didn't know you guys had this.

I just saw the acquisition, we're excited to start talking to you about bringing conversation intelligence into our companies." And that's spread across our largest customers to SMB customers.

I know on the last day of the month on the ZoomInfo side, we have reps who are able to sell both a package of ZoomInfo and Chorus into the new customer base.

And so we're seeing great traction, great receptivity from our customers about the combined solutions and excitement about what we're going to be able to do when we integrate Chorus into ZoomInfo.

I think the other thing is that our customers have seen the work we've done with EverString, the work we've done with Clickagy, the product road map on Insent and they have a lot of trust in our ability to take a technology asset, integrate it with our data asset and then innovate on top of it to bring to market a much more robust and full solution.

And so they're excited about what we're going to be able to do in the conversation intelligence space.

Got it, Henry.

And just 1 quick follow-up.

You mentioned once Chorus is fully integrated into ZoomInfo -- any sort of color on the time line on when we could expect that to happen?

We expect to have Chorus fully integrated into ZoomInfo before the end of the first half of 2020 -- 2022.

Moving on.

We also have Michael Turrin from Wells Fargo.

Cameron, the rule of 100 puts you in some rare company here.

Can we just go back to how you're managing some of the trade-offs?

I know you previously referenced how sales capacity is really the biggest constraint to growth.

Maybe we can revisit the margin framework you laid out?

And given the accelerating top line you're seeing, just any added comments that are useful.

Yes, sure.

We are continuing to focus on making investments to drive durable growth over time.

I think that we have such a big opportunity in front of us and are really well positioned to take advantage of that, that we're going to continue to invest in the business, invest in our product and engineering capabilities as well as our sales capacity to drive growth.

I think the natural state of the business, as we laid out at our Analyst Day is that at the 40-ish levels of growth, we expect to deliver mid-40s operating margins.

And obviously, we've been able to accelerate a little above that in terms of growth levels.

And we've seen our margins be at a good solid level at 43% here, and we expect to deliver 40% next quarter as well.

So I think as we continue to look forward, we're going to continue to keep our foot on the gas in terms of adding sales and marketing capacity as well as engineering and product capabilities in order to continue that growth for as long as we can.

And I think naturally, as you get to a rule of large numbers or growing off of a larger and larger base, we'll see that growth level may come down a little.

But with that, we'll bring our margins up above the mid-40s levels as our growth comes down a little off a bigger base.

Great.

Just a quick follow-on.

I want to make sure I clarify.

You mentioned increasing expectations for just free cash flow conversion.

We saw it's elevated again here this quarter.

Could you just add any detail on what's driving that improvement?

Was that expectation?

Is that ongoing?

Or was there a time frame attached to that?

Yes.

No, I view that as an ongoing expectation that we'll be able to deliver unlevered free cash flow as a percentage of adjusted operating income in the 100% to 110% range for quite some time to come, particularly as we're growing at accelerated levels.

Next up, we also have Parker Lane from Stifel.

Henry, another 1 on Chorus.

In those initial conversations you've had since the deal closed, do you get the sense that most of the budget here is going to be greenfield?

Or are there are a lot of customers out there that are using adjacent systems, like learning management systems, to address the sales coaching opportunity today?

Yes.

Our sense is that this is a new category of technology, a lot -- that most of the opportunity is white space.

Much like what we see with ZoomInfo, once a sales leader sees the opportunity of what they get when they implement a tool like ZoomInfo when they implement a solution like Chorus, they find budget for these types of solutions.

And quick time to value and the ROI you get on ZoomInfo, what you get on conversation intelligence with Chorus, is so compelling that the sales cycles on both solutions are similar -- on the ZoomInfo side, it's sub-30 days.

And so we're pretty excited about being able to continue to demonstrate that to the market.

Thank you.

Next, we have Taylor McGinnis from UBS.

So I know NRR last year, I think, was around 108%.

But just if you're able to provide any color on how that's been trending recently, just given the better retention numbers and increasing deal sizes.

And I know that the mix between enterprise and SMB impacts that as well.

And then maybe like a part 2 of that, curious to the extent Engage, recruiting and other offerings might start to become more meaningful contributors to that.

So we do report our net retention on an annual basis, given that it's an annual calculation kind of starting at the end of the year, going to the end of the next year.

What we do look at is the retention activity that we see.

So that's -- those customers that are renewing within a quarter and the upsells that we're generating within a quarter.

And we have seen that Q2 was the best quarter we've ever had from a retention activity perspective, and I think that gives us confidence that we will see higher net retention in 2021 than we saw in 2020.

And certainly, part of that is all of the investments that we've made in terms of our operational capabilities, investing in the customer support and customer success teams, investing in improving the product and providing additional functionality.

And certainly, as we see more and more of our customers take on advanced functionality or add-on features like Engage or other things, that certainly helps the retention as well.

And certainly, while a factor, I think it's a less impactful factor, but the mix shift of the business should help over time as well.

I think the Engage part of the business and Chorus are still relatively small.

But as those grow -- and they're certainly growing faster than the overall business -- we do anticipate that, that will become more meaningful.

But I'd expect it's more meaningful in 2022 and 2023 than it necessarily might be in 2021.

Moving on, we also have a question from Terry Tillman from Truist.

This is Joe Meares on for Terry.

So I'm just wondering, how should we think about the evolution of KPIs going forward now that you have a very large base of $100,000 customers?

Are there any other metrics we should watch, like potentially million dollar customers -- could you share that?

Or maybe average number of products per customer?

Just wondering there.

So I think I'll start with the average number of products per customer.

Certainly, we've developed a platform where our customers take different levels of functionality.

And in some cases, the functionality is bundled into those levels and in other cases, it's an add-on.

So I think that the average number of products per customers is not going to be the cleanest metric that we can look at, particularly as we change bundling going forward, which is certainly a possibility.

In terms of million dollar customers, we'll continue to assess that.

We do have quite a few customers that are spending over $1 million with us, but we found that, that $100,000 level is a pretty big differentiator in terms of the amount of value that we're providing to a customer.

I think that those customers tend to really have an enterprise point of view and are continuing to invest in their internal capabilities to take advantage of the tools that we provide much more so than smaller customers.

So I think that's the most relevant metric to focus on at this time.

Next up, we have Brian Peterson from Raymond James.

Congrats on the really strong results.

So I just wanted to hit on international real quickly.

I'm curious, is there any commonality in where you're landing there, either in terms of country or in market or use case?

Just curious what's driving that success.

Yes.

I think first, what we see internationally is that the international go-to-market motion is meaningfully behind the U.S. go-to-market motion.

You can think of them as kind of 5 to 7 years behind the U.S. And so when we come into that market and they see the solutions that we're providing, it's largely evangelistic.

And I think that what -- the other thing that we see, the other area that we're focusing is -- we're focused on is English-speaking Europe today.

And so as we focus -- we're focused on that market.

And so that's where we're landing mostly today.

And we're continuing to build out the rest of the international data asset.

And as we build that out, we'll continue to put more investment behind go-to-market motion in those different countries.

And I think to add on to that, what we've seen in terms of real success is it's -- we are investing in our team to drive sales.

We're seeing a real lift from that.

So in the first and second quarter, we've continued to invest in a team that until we can physically get them there, past all the COVID restrictions, they're sitting in Boston, they're getting up early and aligning to time zones in Europe, mostly focused on the U.K. and Ireland, but also bringing customers from other countries as well.

That's where we're seeing the biggest lift, mostly because it's the investment that we're making.

So excited about, particularly as the world opens up a little in the future, excited about continuing to invest locally in a number of countries.

Thank you.

Next up, we have Raimo Lenschow from Barclays.

Congrats from me as well.

Can I kind of ask another Chorus question?

Sorry about that.

Henry, if you look at -- at the moment, it's like you're going to do a real powerhouse in B2B.

But if you look at conversational AI and what you could do, there's a lot of B2C potential as well.

And there's a lot of stuff going on in the market around that.

How do you think about that opportunity and where you want to focus on with this asset?

Raimo, thank you.

Look, we're focused exclusively on the B2B opportunity, where we think it's a huge opportunity, 700,000 companies that sell to other companies.

13.5 million salespeople in the United States that we think could be taking advantage of these solutions.

So I think there are a lot of really interesting use cases for conversation intelligence.

I think today, we're going to be focused on the B2B use cases, particularly around recruiting and go-to-market.

But we also see an opportunity with conversation intelligence in the recruiting and talent acquisition space as well.

And so you'll see us operate within those confines.

Yes.

Okay, perfect.

And then 1 follow-up on international.

Like so really strong growth.

You talked about the sales coverage that is up quite significantly.

Can you talk a little bit about the build-out there?

Because it's still a small part of the overall revenue.

How do you think this will evolve?

Like at the moment, obviously, you're starting from a low base, but like how do you think this will kind of shape up for you in the long run in terms of the mix that you're kind of trying to aim for?

Yes.

When I think of that, Raimo, I look at much larger companies that have gone through a similar journey.

So you look at Salesforce, for instance, or someone like that, they generate 30-plus percent of their revenue from international markets.

And I think that the great thing for us is there's still a lot of opportunity domestically.

So we're going to see great growth domestically.

But I think over the really long term, looking at something that's over 1/3 of our revenue coming from international markets is certainly a real possibility and something we dig for.

Thank you.

Moving on.

We also have Brent Bracelin from Piper Sandler.

This is Clarke Jeffries on for Brent.

First question is, looking at some of the new and expansion customers highlighted over the past few quarters, I think what continues to stand out is the traction verticals outside of software and business services.

The first part of the question is, how would you characterize the contribution from those customers in driving the acceleration in $100,000 deals?

And then second part, is there a potential narrative here that some of the traditional industries maybe have overinvested in systems that improve the B2B process, whether that was workflow automation, invoicing, but there maybe wasn't an awareness in sales intelligence and where there could be an opportunity to lift the total overall funnel of opportunities and what we're seeing today is really that market awareness being unlocked?

So I'll take the first part on the contribution.

Certainly, those, call it, non-early adopter industries -- so for us, the industries outside of software and to a lesser extent, business services -- are certainly growing more quickly than those core industries, but we continue to see real growth from software and business services as well.

But at this point, less than 2/3 of our overall ACV or revenue come from software and business services.

And certainly, that translates not just to small customers, but we're seeing more and more of our customers in the over $100,000 cohort also come from those other industries as they're becoming aware of our solutions and continuing to look at how they can apply better motions and more data-driven motions to their go-to-market overall.

I'll let Henry just dive into kind of what he's hearing from customers specifically.

Yes.

Clarke, I think the thing that never ceases to amaze me as we have these enterprise conversations is how analog and manual the sales process is at so many large enterprises.

And there is a real appetite in the executive level to change that.

And they know that they made a real investment behind CRM and they want that to be -- they want CRM to be engaging.

They want it to be insightful.

They want their reps to be in it and to be excited about engaging with it.

And they view ZoomInfo as a bridge to provide those insights and really enable CRM for the frontline sales team.

And so we're excited about seeing that opportunity, and we think that in the nontraditional industries, particularly, that there is a tremendous appetite to digitize the way they're going to market.

Thank you.

And I'm showing no further questions at this time.

I would like to turn the conference back to our CEO, Mr. Henry Schuck for any closing remarks.

Great.

Thanks, everyone.

I appreciate you joining us today and look forward to meeting with more of our investors as we continue through the back half of 2021.

Thank you.

Thank you.

Ladies and gentlemen, this concludes today's conference call.

Thank you all for joining.

You may all disconnect.