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ZoomInfo Technologies (NASDAQ: ZI)
Q3 2024 Earnings Call
Nov 12, 2024, 4:30 p.m. ET
ZoomInfo Reports Solid Q3 2024 Results Amid Business Adjustments
Summary of the Call:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by. Welcome to the ZoomInfo third quarter 2024 financial results conference call. All participants are currently in listen-only mode. Following the presentation, there will be a question-and-answer session.
[Operator instructions] This conference is being recorded. Now, I’ll hand it over to your first speaker, Jerry Sisitsky, vice president of investor relations. Please proceed.
Jerry Sisitsky — Investor Relations
Thank you, Victor. Welcome to ZoomInfo’s financial results conference call for the third quarter of 2024. Joining us today are Henry Schuck, founder and CEO of ZoomInfo, and Graham O’Brien, our interim CFO. This call contains forward-looking statements under U.S. securities laws, including projections about business outlook and financial performance. These statements carry risks and uncertainties, and actual results could differ materially.
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ZoomInfo has no duty to update any forward-looking statements made during this call, except as required by law. For further information, refer to the forward-looking statements posted on our Investor Relations website. All metrics in this discussion are non-GAAP unless stated otherwise. A reconciliation can be found in our financial results press release or on our Investor Relations website.
With that, I’ll turn the conference over to Henry.
Henry Schuck — Founder and Chief Executive Officer
Thank you, Jerry, and welcome to everyone on this call. We see clear progress in our net retention rates and are optimistic about our financial outlook. After implementing new strategies in Q2 to strengthen our company, we concentrated on applying these strategies in Q3. A significant development was deploying a new business risk model, which has effectively decreased volatility surrounding future write-offs.
In Q3, we expanded the application of this model, achieving more than 55% of our new business transactions through upfront prepayments, a notable increase from 33% in Q2. We also re-evaluated risk, resulting in a reduction of high-risk small businesses in our pipeline. This adjustment, while essential for our long-term stability, may affect our growth metrics in the short term. However, performance from ZoomInfo Copilot exceeded our expectations.
Our net retention rate has remained stable at 85% for the third quarter in a row, reflecting our upmarket strategy and reinforcing both our $100,000 and $1 million-plus customer segments. In terms of financial performance, GAAP revenue reached $304 million, while our adjusted operating income was $112 million, reflecting a solid margin of 37%, both exceeding our earlier guidance.
We are focused on enhancing efficiency, particularly in driving cash flow. Unlevered free cash flow for the quarter was $111 million, a 17% increase year over year. This quarter alone, we repurchased 24 million shares, about 7% of our total outstanding shares. Since last March, we’ve reduced our share count by 68 million, or about 17%—a move we believe enhances shareholder value.
In a traditionally slower quarter for our upmarket initiatives, we saw robust enterprise growth. The number of our $100,000 customers increased by 12, marking the second consecutive quarter of growth, totaling 1,809 customers in this cohort, which now accounts for 44% of our annual contract value (ACV). We also recorded one of the largest increases in our million-dollar-plus customer segment.
Enterprise ACV, making up about 41% of our business, experienced a sequential growth of 1%. More organizations are choosing ZoomInfo due to our proven results that contribute to their revenue growth while decreasing costs. During this quarter, we secured contracts with esteemed companies like Commerce Bank, Samsung, BambooHR, Sonesta Hotels, Bentley, Clari, and Premise Health. Our partnership with Amplitude involved the consolidation of various data vendors and introduced ZoomInfo Copilot to 150 sales representatives, alongside support for their marketing efforts.
Just recently, The Economist joined our pool of $100,000 customers through a multi-year agreement that includes Copilot licenses, aimed at enhancing their sales and marketing efficiency. As they tackled challenges related to data accuracy and CRM improvement, our tools played a crucial role.
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ZoomInfo’s Strategic Moves and Q3 Performance: Growth and Innovation Ahead
Streamlining for Success: ZoomInfo harnesses AI-driven solutions to enhance sales and marketing strategies. A notable Fortune 50 client transitioned from a traditional firmographic provider to ZoomInfo’s comprehensive suite, joining the $1 million customer cohort.
With these tools, clients will utilize ZoomInfo to thoroughly understand their total addressable market within SMB and midmarket sectors. This allows them to identify accounts likely to purchase and create dynamic audiences for effective digital marketing. Additionally, ZoomInfo will assist in developing a more efficient outbound sales strategy. In Q3, ZoomInfo Copilot demonstrated remarkable performance in midmarket and enterprise sectors, surpassing our expectations due to its measurable return on investment.
Customers have reported that 25% of their entire pipeline can be linked to opportunities identified by Copilot, reflecting a 58% increase in prospect engagement rates and a 62% rise in email response rates. Coupled with an average productivity gain of eight hours a week per user, Copilot’s success is attributed to the integration of relevant customer context and top-tier go-to-market activation. The strength of our contact and company data provides actionable insights across hundreds of millions of entities.
Currently, our latest products analyze billions of data points daily, aiming to personalize engagements at scale. Recent innovations focused on enhancing Copilot’s capabilities and aligning products with market needs. We expanded our signal ecosystem to gather crucial go-to-market insights unavailable in traditional CRM systems, processing over 300 million daily signals that empower teams to perform more efficiently.
For enterprise sales representatives, we introduced signals for tracking buying groups and executive movements, while SMB sellers gained insights into business originations. We also incorporated unstructured data like earnings transcripts and analyst reports, all of which deliver valuable insights regarding customer satisfaction and competitive intelligence.
Integration capabilities have expanded, making Copilot accessible to more clients. New collaborations with platforms like Microsoft Teams and HubSpot enhance outreach for small and medium enterprises, while established integrations with Salesforce and Slack remain in place. Beyond prospecting, we aim to extend Copilot’s utility for account executives and management teams. Early indicators show that Copilot is breathing life into inactive accounts and generating demand for expansion.
This progress comes after ZoomInfo was recognized as a leader in the 2024 Gartner Magic Quadrant for Account-Based Marketing Platforms, reflecting the robust innovation driven by our product and engineering teams. The signs indicate that robust automation and AI efforts require high-quality data, and our customers have realized that conventional large language models effectively applied to their CRM data often fall short.
ZoomInfo Copilot creates a comprehensive view of the addressable market, detailing every account, buyer, and optimal engagement strategies. Our capacity to unify contextual data enhances the customer journey while delivering a multi-channel activation layer across sales and marketing, setting us apart in the market. As I hand it over to Graham, I want to express my gratitude to the entire team.
Our organization is making significant strides, whether in finance, product innovation, or sales. We are focused and aligned, striving to operate with urgency. In Q2, we established a solid foundation for growth, and I am pleased to report that our positive operational momentum translated into strong financial outcomes for this quarter. Our focus remains on enterprise growth, ensuring customer success through Copilot, and generating long-term shareholder value through increased levered free cash flow per share.
While we are not providing guidance for 2025 just yet, we intend to adopt a conservative approach to future communications based on navigating the SMB transition. With that, I will turn the call over to Graham.
Graham O’Brien — Vice President, Financial Planning and Analysis
Thank you, Henry. In Q3, we achieved $304 million in revenue alongside an adjusted operating income of $112 million, exceeding our previous guidance expectations. Adjusting for a Q2 charge and accounting for an extra day in Q3, sequential revenue growth showed a decline of 2%. Write-offs remained elevated but demonstrated signs of improvement as we concluded the quarter.
The operational enhancements we have implemented are yielding results, with our business risk model disqualifying an unprecedented number of high-risk small business transactions. Exiting Q3, our refined SMB sales strategy is disqualifying over $2 million of higher-risk new sales monthly, a necessary trade-off aimed at improving revenue quality and mitigating future write-offs. We believe the issues that led to the accounting charge in Q2 are in the rearview mirror, as we witness stability and early growth in various business aspects. Our net revenue retention consistently remains at 85% for the third consecutive quarter.
Growth in our enterprise business continues as we bolster our $100,000 and $1 million customer cohorts, with a notable acceleration in annual contract value growth among our $1 million-plus customers. There is also strong initial traction for Copilot.
To sum it up, we are meticulously managing our operations and performing well against our key objectives. Enterprise annual contract value, now constituting around 41% of our business, experienced 1% sequential growth this quarter. With ongoing stabilization in midmarket sectors and a firm enterprise base, about two-thirds of our operations are progressing toward mid-single-digit growth or better.
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ZoomInfo Reports Significant Growth and Strategic Moves Amid Market Challenges
ZoomInfo, a leader in data and intelligence solutions for businesses, has announced a successful third quarter, showing a 22% year-over-year increase in its operations business. This growth is attributed to the ongoing demand for data services as companies aim to harness AI capabilities. The company reported that Advanced Functionality, driven by its popular tool Copilot, now makes up 38% of overall business revenue, an uptick from 35% in the previous quarter. Notably, Copilot has surpassed $60 million in annual contract value (ACV) for the quarter, exceeding initial projections.
As new sales and upsell opportunities arise, ZoomInfo has effectively advanced its platform. The company has seen significant success in migrating existing clients to Copilot, especially within midmarket and enterprise accounts. This transition has led to increased utilization and higher customer satisfaction, factors that typically indicate enhanced renewal rates and improved revenue retention. During Q3, ZoomInfo took the opportunity to repurchase a remarkable 24 million shares of its stock for $242 million, taking advantage of lower share prices.
Financial Position and Cost Management
These share repurchases resulted in a 7% reduction in total shares outstanding, bringing the total to 343 million, with $157 million in authorization remaining for further buybacks. The company continues to view its stock as undervalued, believing there is a significant gap between its market value and intrinsic worth. Operating cash flow for Q3 stood at $18 million. Additionally, ZoomInfo restructured its Waltham lease early in the quarter, incurring a $59 million termination fee while aiming to reduce future real estate costs by over $100 million. The company also settled a $30 million lawsuit related to publicity rights, thereby avoiding potential litigation expenses.
Debt and Future Projections
At the end of Q3, ZoomInfo’s cash and cash equivalents totaled $148 million against a significant gross debt of $1.24 billion. The company holds $650 million in senior notes due February 2029 and $590 million in term loans maturing in February 2030. Its net leverage ratio stands at 2.3 times the trailing 12 months adjusted EBITDA. Furthermore, ZoomInfo reported unearned revenue of $419 million with remaining performance obligations (RPO) at $1.05 billion, expected to be fulfilled within the next year.
Fourth Quarter Guidance and Analyst Insights
Looking ahead, ZoomInfo expects Q4 GAAP revenue between $296 million and $299 million, alongside adjusted operating income ranging from $103 million to $105 million. For the entire year of 2024, anticipated GAAP revenue is between $1.201 billion and $1.204 billion, with an adjusted operating income between $416 million and $418 million. Analysts should note the guided expectations for non-GAAP net income range from $0.92 to $0.93 per share, based on 378 million diluted shares outstanding.
Question & Answers Session
Operator
Thank you. [Operator instructions] Please limit yourself to one question. One moment while we compile the Q&A roster.
Alex Zukin — Analyst
Hi there, and thanks for answering. Can you comment on the demand environment as we transition into Q4? Notably, I observed some new players entering sectors closely aligned with yours.
Henry Schuck — Founder and Chief Executive Officer
The demand environment has remained steady since Q2. We’re witnessing strong demand in the midmarket and enterprise segments, especially for Copilot. However, our smallest business size, the SMB segment, continues to face challenges.
Graham O’Brien — Vice President, Financial Planning and Analysis
Our net revenue retention has stabilized at 85% for the third consecutive quarter, indicating less downsell pressure and more upsell opportunities in midmarket and enterprise sectors.
DJ Hynes — Analyst
Henry, regarding your $1 per share levered free cash flow target for ’24, do you see it necessary to recover revenue to achieve this? Can growth materialize without an uptick in revenues?
Graham O’Brien — Vice President, Financial Planning and Analysis
There are various strategies to increase levered free cash flow per share, but prioritizing top-line growth is essential. Should that not be realized, we would then consider margin expansion and continuing share retirements.
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Company Leadership Reflects on Q3 Performance and Strategic Outlook for 2024
Q3 Revenue Guidance Remains Conservative
In the third quarter, the company reported a revenue decline of 2%, with similar forecasts for Q4. Executives are cautious about their projections for early next year, citing a conservative approach to guidance. While there was positive momentum at the end of Q3, the focus remains on careful forecasting, particularly given the business’s largest expiring quarter ahead.
Challenges in the SMB (Small Medium Business) Sector
Analyst Brad Zelnick from Deutsche Bank sought clarification regarding the SMB sector changes. Graham O’Brien, Vice President of Financial Planning and Analysis, confirmed that the major adjustments were addressed in Q2. They had cleared previous charge-offs tied to smaller customer segments, but cautioned that stricter credit practices may continue to hinder growth in that area. In Q3, they disqualified about $2 million in high-risk transactions monthly, up from $1 million in Q2. These factors may contribute to a decrease in SMB revenue as a percentage of overall business until the new business risk model fully takes effect.
Operational Margins and Cost Reductions Looking Forward
With Q3 margins reported at 37%, projections for Q4 suggest a dip to 35%. O’Brien discussed plans to improve operational margins by focusing on levered free cash flow per share. Analysts, including Elizabeth Porter from Morgan Stanley, inquired about real estate changes and their potential effects on operational cost improvements through 2025.
Copilot Adoption Shows Strong Growth
Discussions around the new Copilot feature highlighted a positive customer reception, with the CEO, Henry Schuck, noting double-digit growth in migrations. Notably, 25% of new opportunities were attributed to Copilot assistance, providing a boost to sales engagements.
Sales Resource Strategy Shifts Towards Midmarket and Enterprise Segments
Parker Lane from Stifel questioned planned sales resource allocations as 2024 approaches. Schuck reaffirmed the company’s strategy to reallocate resources from SMB toward midmarket and enterprise segments to capitalize on growth opportunities in those areas. This shift aims to enhance overall sales effectiveness while fostering a self-service environment for lower-tier segments.
Overall, company leadership is implementing a cautious but strategic approach as market conditions continue to evolve.
Growth Strategies Amid Changing Market Conditions
Parker Lane — Stifel Financial Corp. — Analyst
Thank you.
Operator
Thank you. One moment for our next question. Our next question will come from the line of Brent Bracelin from Piper Sandler. Your line is open.
Hannah Rudoff — Piper Sandler — Analyst
Yes. This is Hannah Rudoff on for Brent today. Thanks for taking my question. I want to ask about the Data as a Service business. It sounds like you’re seeing really solid momentum with your Copilot product. Are you seeing similar strong growth with the Data as a Service product?
Graham O’Brien — Vice President, Financial Planning and Analysis
Yes. Our Data as a Service business is growing at an impressive 22% year over year. We are particularly pleased with the strong adoption among our enterprise and strategic segments, where customers are using the service to optimize their AI solutions by cleansing data in various systems including CRMs and marketing automation tools.
We are confident that this momentum will carry into 2025.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Koji Ikeda from Bank of America. Your line is open.
Koji Ikeda — Analyst
Thanks for taking my question. I’d like to follow up on the exit growth rate for Q4 as we look toward 2025. Notably, the growth rate for Q4 seems to be slightly lower than previous guidance. Can you highlight a few key factors that could ensure 2025 revenue growth remains positive instead of becoming flat or negative? Thank you.
Henry Schuck — Founder and Chief Executive Officer
The primary areas we are focusing on for growth are in our enterprise and midmarket sectors. We are optimistic about our growth in the enterprise segment, and we see significant potential for re-acceleration in the midmarket, particularly within the software vertical.
Additionally, we have noted improved retention rates for two consecutive quarters following a period of decline, especially after experiencing reduced sales pressure over the last two-plus years. We are managing growth carefully between our three segments, focusing on both quality and sustainability.
Graham O’Brien — Vice President, Financial Planning and Analysis
As of now, we continue to see positive momentum into October and November, although our guidance remains conservative.
Koji Ikeda — Analyst
Thank you.
Operator
One moment for our next question. This question will come from Taylor McGinnis from UBS. Your line is open.
Taylor McGinnis — Analyst
Hi, thanks for taking my question. Regarding the SMB segment, I know you’ve mentioned disqualifying over $2 million in higher-risk new sales monthly, an increase from $1 million in the previous quarter. Can you clarify if this pertains to existing customer renewals or new customers? I’d like to get a sense of how we should expect growth to skew in the near term between existing expansions and new sales. Also, please elaborate on any changes in the Q4 guidance related to SMB impacts.
Graham O’Brien — Vice President, Financial Planning and Analysis
The disqualification figures you mentioned pertain to new business from new customers. In Q2, we were disqualifying about $1 million in new business per month, and this has now doubled to $2 million with our new model in Q3.
While this disqualification is a short-term obstacle for new sales, it is aimed at high-risk customers unlikely to pay. This strategy should lead to a stronger revenue base over the mid-term as we attract higher-quality business in 2025.
Taylor McGinnis — Analyst
Great, thank you.
Operator
One moment for our next question. Our next question comes from Arti Vula from JPMorgan. Your line is open.
Arti Vula — JPMorgan Chase and Company — Analyst
Thank you for taking my question. This is Arti, filling in for Mark Murphy. My question involves companies investing in solutions and hiring strategically. Are you seeing any benefits from such investments among your larger customers?
Henry Schuck — Founder and Chief Executive Officer
To clarify, are you asking about companies developing solutions for the wider market or those creating them for their internal use?
Arti Vula — JPMorgan Chase and Company — Analyst
Correct. I’m asking about those building solutions for the broader market and hiring sales representatives to promote those solutions.
Henry Schuck — Founder and Chief Executive Officer
For broader market solutions, we haven’t seen a pronounced effect. However, we do observe benefits from larger clients who are developing internal AI solutions to enhance their capabilities with the help of our Data as a Service offerings.
Arti Vula — JPMorgan Chase and Company — Analyst
Thank you for the clarification.
Operator
One moment for our next question. Our next question comes from Jackson Ader from KeyBanc Capital Markets. Your line is open.
Jackson Ader — Analyst
Thank you for the opportunity to ask a question. I am curious about the differences between SMBs and the midmarket. What reason are SMBs not realizing the value that midmarket customers do, and how is this impacting their engagement with ZoomInfo?
Graham O’Brien — Vice President, Financial Planning and Analysis
A substantial portion of our SMB customers do see the value in our services, and we continue to grow those relationships. The challenge lies primarily with a segment of lower-end SMB clients, particularly when we need to ensure we are not extending credit to high-risk customers. Nonetheless, we still aim to engage with and expand among that broader base.
Jackson Ader — Analyst
For a quick follow-up, could you discuss how the recent years, especially during the pandemic, compare to pre-pandemic conditions regarding your data offerings?
Company Expands Data Network Amid Conservative Guidance Strategy
Henry Schuck — Founder and Chief Executive Officer
We feel confident about our data security. We’re continuing to grow our contributory network and community network. Currently, we are adding various new data signals to our platform.
Therefore, from a data perspective, we have more contributors, more community members, and a wider range of signal data that we’re licensing and integrating into our Copilot product. This growing ecosystem reassures me that our data advantage will keep expanding.
Jackson Ader — Analyst
Got it. OK. Thank you.
Operator
One moment for the next question. Our next question comes from the line of Michael Turrin from Wells Fargo. Your line is open.
Michael Berg — Analyst
Hi. This is Michael Berg for Michael Turrin. Thank you for taking the question, and congratulations on a successful quarter. I wanted more insight into the increased conservatism reflected in your guidance. You’ve mentioned write-downs and the current macro environment. Could you elaborate on that? I’d also like to add a quick follow-up after.
Graham O’Brien — Vice President, Financial Planning and Analysis
Sure. We prioritize consistency in our guidance, aiming to provide expectations we can meet or surpass. As Henry mentioned, we plan to take a conservative approach moving forward, which means we are factoring in reduced operating momentum from recent quarters. Essentially, we consider various possible outcomes based on the information we currently have.
Michael Berg — Analyst
Got it. Helpful. Regarding the Copilot, you stated $60 million in Annual Contract Value (ACV). Is that amount in addition to the $18 million reported in Q2, or does it represent the total since launch?
Graham O’Brien — Vice President, Financial Planning and Analysis
That’s a total figure that includes the $18 million.
Michael Berg — Analyst
Got it. Helpful. Thank you.
Operator
One moment for our next question. Our next question comes from the line of Brian Peterson from Raymond James. Your line is open.
Johnathan McCary — Raymond James — Analyst
Hey. Thank you. This is Johnathan McCary filling in for Brian. I have one question. Can you provide any updates about Annual Recurring Revenue (ARR) performance by sector? Graham, you touched on it when discussing software ARR stabilization, but I’m curious about traction outside of software and technology. Any insights would be appreciated. Thanks.
Graham O’Brien — Vice President, Financial Planning and Analysis
Absolutely. Software retention has improved for the second consecutive quarter after a decline that started towards the end of 2021. Other sectors continue to see growth, with some achieving double-digit gains or high single-digit rises. Specifically, we’ve observed strong growth in manufacturing, finance, transportation, and logistics this past quarter.
Johnathan McCary — Raymond James — Analyst
Great. Thank you.
Operator
One moment for our next question. Our next question comes from the line of Tyler Radke from Citi. Your line is open.
Tyler Radke — Citi — Analyst
Thanks for taking my question. Regarding Net Revenue Retention (NRR), could you explain the factors influencing it? It seems you are experiencing positive momentum in the enterprise sector, which likely supports this effort. When do you anticipate seeing improvements? Additionally, with your initiative to reduce lower-quality customers, you previously mentioned extending prepayment restrictions to cover 55% of your customer base. Is that the maximum you foresee, or is there room for further increases?
Graham O’Brien — Vice President, Financial Planning and Analysis
Sure. The key aspects affecting retention include maintaining enterprise performance above 100% and bringing the midmarket segment closer to that figure. These elements will be significant in enhancing our retention over time. Notably, retention measures reflect a trailing 12-month or year-over-year snapshot, which means current activities may take a while to appear in those figures, though we’re optimistic about the trend.
Regarding disqualification, the current rate of approximately $2 million should remain steady as we proceed, ensuring that a larger portion of our new sales pipeline adheres to our updated business risk model.
Tyler Radke — Citi — Analyst
Thank you.
Henry Schuck — Founder and Chief Executive Officer
To build upon that point, our NRR opportunities lie particularly in the midmarket and enterprise segments. With Copilot gaining traction, it enhances our engagement with existing customers for upselling and renewals, and aids in curbing down-sell rates. We are witnessing that improvement particularly in the midmarket software sector, where Copilot is helping facilitate growth.
In our strategic upmarket segment, we notice a rising interest in our Data-as-a-Service (DaaS) solutions, as companies increasingly invest in internal AI development requiring clean, complete, and accurate data. We’re aggressively promoting Copilot in midmarket and enterprise categories while also experiencing notable growth from DaaS in the strategic segment. Furthermore, in the SMB realm, we are recruiting healthier customers who are opting to pay upfront.
As we reflect on this transition starting Q2 of this year, we will see the benefits next year, with a revitalized customer base that paid upfront, reducing the impact of potential write-offs. Additionally, we have effectively removed the riskiest customers from our group. Thus, we anticipate a stronger overall customer cohort moving forward.
Operator
Thank you. Our next question comes from Rishi Jaluria from RBC Capital Markets. Your line is open.
Rishi Jaluria — Analyst
Thank you for taking my questions, and I apologize for any background noise. I quickly want to revisit…
Understanding Copilot’s Competitive Edge in the AI Market
Henry Schuck — Founder and Chief Executive Officer
When it comes to developing go-to-market AI solutions, it’s crucial to have the right data. Our experience shows that relying solely on internal data from systems like CRM or data warehouses falls short. Customers often tell us they struggle to create effective AI solutions using just this data. Comprehensive and accurate data is essential, but information from static records does not portray the full market landscape.
The data held within these systems is not dynamic. It doesn’t reflect real-time changes and insights such as news releases, job postings, or earnings calls. Attempting to build go-to-market AI based on outdated data leads to ineffective solutions.
We firmly believe that our B2B data asset, built over the past 20 years, forms the solid backbone necessary for developing AI solutions. Companies that start with different data foundations tend to encounter numerous obstacles. Our established B2B data, combined with new signals, positions us strongly in the AI market.
When discussing future agentic capabilities, we view it as building tasks for roles like account executives and managers. Our foundational data provides a comprehensive view of market potential, including company and individual signals indicating market engagement. We aim to enhance tasks like prospect research and account planning with AI, ultimately streamlining the workflow for sales professionals.
Rishi Jaluria — Analyst
Thank you for your insights.
Operator
Thank you. Our next question will come from Patrick Walravens from Citizens JMP. Your line is open.
Patrick Walravens — Analyst
Thank you. Henry, how do you foresee the industry evolving in the coming years? From my perspective, there seem to be five segments: data, revenue enablement (like Seismic), engagement (like SalesLoft and Outreach), conversational intelligence (like Gong), and revenue forecasting (like Clari). Your company spans several of these categories. What’s your outlook?
Henry Schuck — Founder and Chief Executive Officer
I believe the advent of generative AI marked the start of a new competitive race. While some companies hesitated, we invested heavily in our AI capabilities like Copilot. We made our platform AI-first and moved decisively to capitalize on this trend. In the next few years, the segments you mentioned will undergo significant transformations. However, the one constant will be the necessity for high-quality data to drive AI solutions. Our foundational data equips us to excel in this evolving landscape.
Patrick Walravens — Analyst
If I may follow up, you mentioned the reactivation of dormant user seats through Copilot. Can you elaborate on that?
Henry Schuck — Founder and Chief Executive Officer
Certainly. Any user base naturally consists of active and inactive users. Copilot has successfully re-engaged several users who had been less active. Each day, we provide users with valuable signals about their target accounts, allowing them to see what’s relevant. By utilizing AI, we track key moments in these accounts and communicate them through email, Slack, and Teams, enabling effortless engagement with the right prospects.
Patrick Walravens — Analyst
Thank you!
Operator
Thank you. I’ll now turn it back to Henry for final comments.
Henry Schuck — Founder and Chief Executive Officer
Thank you all for joining us. While we understand that one or two quarters do not define trends, we see encouraging signs in our operations. Our focus remains on providing exceptional value to our customers, which we believe will drive long-term shareholder value through increased cash flow per share.
Thank you, and have a good night.
Duration: 0 minutes
Call Participants:
Jerry Sisitsky — Investor Relations
Henry Schuck — Founder and Chief Executive Officer
Graham O’Brien — Vice President, Financial Planning and Analysis
Alex Zukin — Analyst
DJ Hynes — Analyst
Brad Zelnick — Analyst
Elizabeth Porter — Analyst
Unknown Speaker — Analyst
Parker Lane — Stifel Financial Corp. — Analyst
Hannah Rudoff — Piper Sandler — Analyst
Koji Ikeda — Analyst
Taylor McGinnis — Analyst
Arti Vula — JPMorgan Chase and Company — Analyst
Jackson Ader — Analyst
Michael Berg — Analyst
Johnathan McCary — Raymond James — Analyst
Tyler Radke — Citi — Analyst
Rishi Jaluria — Analyst
Patrick Walravens — Analyst
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