ZoomInfo's (NASDAQ:ZI) Posts Q1 Sales In Line With Estimates But Contract Wins Slow Down

Kayode Omotosho /
2023/05/01 4:15 pm EDT

Sales intelligence platform ZoomInfo reported results in line with analyst expectations in Q1 FY2023 quarter, with revenue up 24.4% year on year to $300.7 million. The company expects that next quarter's revenue would be around $311 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. ZoomInfo made a GAAP profit of $44.5 million, improving on its profit of $6.2 million, in the same quarter last year.

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ZoomInfo (ZI) Q1 FY2023 Highlights:

  • Revenue: $300.7 million vs analyst estimates of $300.4 million (small beat)
  • EPS (non-GAAP): $0.24 vs analyst estimates of $0.22 (9.75% beat)
  • Revenue guidance for Q2 2023 is $311 million at the midpoint, roughly in line with what analysts were expecting
  • The company reconfirmed revenue guidance for the full year, at $1.28 billion at the midpoint
  • Free cash flow of $102.2 million, down 10.1% from previous quarter
  • Gross Margin (GAAP): 88.4%, up from 86.5% same quarter last year

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 impressive over the last two years, growing from quarterly revenue of $153.3 million in Q1 FY2021, to $300.7 million.

ZoomInfo Total Revenue

This quarter, ZoomInfo's quarterly revenue was once again up a very solid 24.4% year on year. But the revenue actually decreased by $900 thousand in Q1, compared to $14 million increase in Q4 2022. We'd like to see revenue increase each quarter, but a one-off fluctuation is usually not concerning and the management is guiding for growth to rebound in the next quarter.

Guidance for the next quarter indicates ZoomInfo is expecting revenue to grow 16.4% year on year to $311 million, slowing down from the 53.5% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 15% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Large Customers Growth

You can see below that at the end of the quarter ZoomInfo reported 1,905 enterprise customers paying more than $100,000 annually, a decrease of 21 on last quarter. We have 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 Q1 Results

With a market capitalization of $8.85 billion ZoomInfo is among smaller companies, but its more than $615.8 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

ZoomInfo delivered solid revenue growth this quarter. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see the slowdown in new contract wins. Overall, this quarter's results were not the best we've seen from ZoomInfo. The company is down 1.47% on the results and currently trades at $21.4 per share.

ZoomInfo may have had a mixed quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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