Amid revised revenue expectations and struggling clients, Vancouver-based ZoomInfo’s stock took a hit after the company released its quarterly report on Monday.
ZoomInfo is a software company that integrates its proprietary business data set into its sales, marketing and operations systems.
In the company’s financial statement, ZoomInfo reported $308.6 million in revenue in its second quarter, 16 percent more than in the prior year. The company also reported $59.6 million in operating income, a 51 percent increase from the previous year’s second quarter.
Still, ZoomInfo CEO Henry Schuck said during Monday’s investors call that the company’s customers are reducing spending and facing a “lower growth environment.”
“These cuts have proved substantial and have meaningfully impacted ZoomInfo’s ability to expand our solutions,” he said.
The executive pointed to one client that dropped from 100 sales representatives to 20.
“As we look forward reviewing our customer health, we no longer believe that the budgetary pressures and their corresponding downward pressure on renewals will ease in the near term,” said Schuck.
The company has shifted its expectations for the year, now expecting 12 percent revenue growth in 2023.
“While these results reflect a challenging time for our customers, I expected us to do better,” Schuck said. “The ZoomInfo platform delivers a compelling (return on investment) to our customers, regardless of their growth environment. And we have not done a good enough job to date in demonstrating this value to them.”
Schuck said the company has made changes to its engineering process in the past several quarters with a new chief technology officer.
The company has also shifted its sales focus.
“We’re intentionally growing our customer base among nonsoftware businesses, who are less impacted by the environment,” said Schuck.
Just prior to its latest quarterly report, investment bank RBC Capital downgraded ZoomInfo from its “outperform” rating to “sector perform” over what it said were concerns about competition and generative artificial intelligence.
Contemplating AI
One investor during Monday’s call asked Schuck if the advances in artificial intelligence could create a competitive shift against ZoomInfo, saying companies could begin sourcing their own data without a third party.
Schuck replied that he and many at the company have spent a lot of time contemplating that question. These artificial intelligence systems, Schuck said, are generally sourcing information from the public web. ZoomInfo does that as well, but it’s in addition to the proprietary data that’s collected through other ways.
“What we know from 17 years of operating in this space is that 70 percent accuracy, 80 percent accuracy data just does not do the trick for (business to business) sellers and (business to business) marketers,” said Schuck.
The CEO said ZoomInfo’s data set is proprietary and not publicly available on the internet. Plus, it’s 90 percent to 95 percent accurate.
“That work is necessary for sales and marketing professionals, and it’s where we make a really big difference,” said Schuck.
The company is now looking conservatively at its earnings in the rest of the year, as it continues to see renewals degrade, especially among software and technology companies.
The company’s stock took a sizeable hit Tuesday, the day after its earnings report was released. ZoomInfo trades on the Nasdaq as ZI. It closed Monday at $25.57 per share and closed Tuesday at $18.67 per share. It’s maintained a similar price since then, closing Thursday at $18.65 per share.
