ZoomInfo (NASDAQ:ZI) Misses Q2 Revenue Estimates, Stock Drops 17%

Anthony Lee /
2023/07/31 4:17 pm EDT

Sales intelligence platform ZoomInfo fell short of analysts' expectations in Q2 FY2023, with revenue up 15.5% year on year to $308.6 million. Next quarter's outlook also missed expectations with revenue guided to $310.5 million at the midpoint, or 4.7% below analysts' estimates. ZoomInfo made a GAAP profit of $38.1 million, improving from its profit of $15.9 million in the same quarter last year.

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ZoomInfo (ZI) Q2 FY2023 Highlights:

  • Revenue: $308.6 million vs analyst estimates of $311.1 million (0.8% miss)
  • EPS (non-GAAP): $0.26 vs analyst estimates of $0.23 (12.4% beat)
  • Revenue guidance for Q3 2023 is $310.5 million at the midpoint, below analyst estimates of $325.8 million
  • The company dropped revenue guidance for the full year from $1.28 billion to $1.23 billion at the midpoint, a 3.91% decrease
  • Free cash flow of $110.4 million, similar to the previous quarter
  • Gross Margin (GAAP): 89.1%, up from 87% in the same quarter last year

“In Q2 we delivered another quarter of revenue growth, increased profitability, and free cash flow generation,” said Henry Schuck, ZoomInfo Founder and CEO. “Today we help more than 35,000 businesses use the data, insights, and workflows in the ZoomInfo platform to engage with customers and win faster. Businesses in all industries are leveraging our platform as an integral part of their technology stack to modernize how they go to market.”

Founded in 2007 as DiscoveryOrg and renamed after a merger in 2019, ZoomInfo (NASDAQ:ZI) is a software as a service product that provides sales departments with access to a database of prospective clients.

Companies need to be able to interact with and sell to their customers as efficiently as possible. This reality, coupled with the ongoing migration of enterprises to the cloud drives demand for cloud-based customer relationship management (CRM) software that integrate data analytics with sales and marketing functions.

Sales Growth

As you can see below, ZoomInfo's revenue growth has been over the last two years, growing from $174 million in Q2 FY2021 to $308.6 million this quarter.

ZoomInfo Total Revenue

This quarter, ZoomInfo's quarterly revenue was once again up 15.5% year on year. On top of that, its revenue increased $7.9 million quarter on quarter, a strong improvement from the $900 thousand decrease in Q1 2023. This is a sign of acceleration of growth and very nice to see indeed.

Next quarter's guidance suggests that ZoomInfo is expecting revenue to grow 7.96% year on year to $310.5 million, slowing down from the 45.5% year-on-year increase it recorded in the same quarter last year. Ahead of the earnings results announcement, the analysts covering the company were expecting sales to grow 15.5% over the next 12 months.

While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Large Customers Growth

This quarter, ZoomInfo reported 1,893 enterprise customers paying more than $100,000 annually, a decrease of 12 from the previous quarter. We've no doubt shareholders would like to see the company regain its sales momentum.

ZoomInfo customers paying more than $100,000 annually

Key Takeaways from ZoomInfo's Q2 Results

With a market capitalization of $10.4 billion, a $660.3 million cash balance, and positive free cash flow over the last 12 months, we're confident that ZoomInfo has the resources needed to pursue a high-growth business strategy.

This was quite a bad quarter for ZoomInfo. Both revenue and non-GAAP operating profit in the quarter missed. On top of that, next quarter's revenue guidance missed. And probably the worst feature is that full-year revenue guidance was lowered for revenue, non-GAAP operating profit, and unlevered free cash flow. This is always a poor sign for a company's near to medium-term prospects, and there have been questions surrounding the competitive landscape for the company as well as if AI will be a headwind for ZoomInfo. On the other hand, we liked seeing ZoomInfo's improvement in new large contract wins this quarter. Overall, the results were poor, and the stock is down 17% on the results and currently trades at $21 per share.

ZoomInfo may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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The author has no position in any of the stocks mentioned in this report.