ZoomInfo (NASDAQ:ZI) Posts Better-Than-Expected Sales In Q3 But Contract Wins Slow Down

Radek Strnad /
2023/10/30 4:13 pm EDT

Sales intelligence platform ZoomInfo reported Q3 FY2023 results beating Wall Street analysts' expectations, with revenue up 9.11% year on year to $313.8 million. The company also expects next quarter's revenue to be around $310.5 million, slightly below analysts' estimates. Turning to EPS, ZoomInfo made a non-GAAP profit of $0.26 per share, improving from its profit of $0.04 per share in the same quarter last year.

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ZoomInfo (ZI) Q3 FY2023 Highlights:

  • Revenue: $313.8 million vs analyst estimates of $310.5 million (1.06% beat)
  • EPS (non-GAAP): $0.26 vs analyst estimates of $0.25 (5.62% beat)
  • Revenue Guidance for Q4 2023 is $310.5 million at the midpoint, roughly in line with what analysts were expecting
  • Free Cash Flow of $75.9 million, down 31.3% from the previous quarter
  • Gross Margin (GAAP): 88.8%, up from 87.5% in the same quarter last year

“In a more challenging operating environment, our team is executing well and delivered Q3 financial results that exceeded guidance,” said Henry Schuck, ZoomInfo Founder and CEO. “We continue to grow profitably and return capital to shareholders while investing in customer success, driving industry-leading data quality, and delivering more AI functionality to customers.”

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.

Sales Software

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 integrates data analytics with sales and marketing functions.

Sales Growth

As you can see below, ZoomInfo's revenue growth has been very strong over the last two years, growing from $197.6 million in Q3 FY2021 to $313.8 million this quarter.

ZoomInfo Total Revenue

ZoomInfo's quarterly revenue was only up 9.11% year on year, which might disappoint some shareholders. Additionally, its growth did slow down compared to last quarter as the company's revenue increased by just $5.2 million in Q3 compared to $7.9 million in Q2 2023. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.

Next quarter's guidance suggests that ZoomInfo is expecting revenue to grow 2.95% year on year to $310.5 million, slowing down from the 35.7% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 4.8% over the next 12 months before the earnings results announcement.

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Large Customers Growth

This quarter, ZoomInfo reported 1,869 enterprise customers paying more than $100,000 annually, a decrease of 24 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 Q3 Results

With a market capitalization of $6.16 billion, ZoomInfo is among smaller companies, but its $567.9 million cash balance and positive free cash flow over the last 12 months give us confidence that it has the resources needed to pursue a high-growth business strategy.

It was encouraging to see ZoomInfo narrowly top analysts' revenue and adjusted operating profit expectations this quarter. That really stood out as a positive in these results. On the other hand, its new large contract wins slowed and both its revenue and adjusted operating profit guidance for next quarter came in slightly below Wall Street's estimates. However, full year guidance for those two line items was slightly above. Overall, the results could have been better, but there were no major surprises good or bad, so the company is on track. The stock is up 1.48% after reporting and currently trades at $15.75 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.