Operator: Thank you. One moment for our next question. Our next question comes from Brad Zelnick with Deutsche Bank. Your line is open.
Brad Zelnick: Cameron, I think through your prepared remarks and a lot of the questions that have already been asked, I feel like I have a pretty good sense of how to bridge from the prior guidance for the full year and the updated guide. But maybe if you could, any help? Because it sounds like a small business, it down ticks. It sounds like there was some green shoot stabilization that you see ahead, perhaps even some upside in enterprise. But when you actually unpacked and came up with the guide, can you give us any help with where to think about where it’s coming from specifically?
Cameron Hyzer: Yes. And certainly during Q1, we saw a continuation of trend in the enterprise and mid-market that was stabilizing. I think that was in some ways expected, but we’re expecting that to stay on trend. The real change in trend was in the small business cohort, and obviously because that was a big cohort of expirations in Q1 and came in at a level that was much worse than we’d seen historically, that obviously impacts just the run rate coming out of Q1. And then obviously we’re adjusting our assumptions going forward. So while it’s a big pool of expirations in Q1 for small businesses, that’s not the only expirations that we have during the course of the year. So as we adjust our assumptions in terms of small businesses going forward, we’re assuming that that pressure continues through the year.
And I think that the combination of the big cohort that underperformed in Q1 as well as the assumption of that going forward certainly reflects a tougher environment than what we had set our guidance under at the beginning of the year.
Brad Zelnick: Thanks for confirming. That’s helpful color. And maybe just for you, Henry, as we think about that segment of the market, it’s obviously got different characteristics, higher churn for every software company that’s selling into the segment. Is there anything that you could do, once we get past the cyclicality and the environment, anything that you can do to help offset what we naturally know about SMBs, whether it’s integrations, go-to-market partnerships? What can you do structurally to really help to ensure that you’re as high a priority for SMBs as you possibly can be and that you’re going to dominate competitively in that segment? Anything structurally that you could do to really improve your chances in that theater? Thanks.
Henry Schuck: Yes. Look, I think, number one, we sell far more from a new business perspective and renew far more from a new business perspective. And I’m pretty sure every competitor combines in the space. And so we’re not losing share here. I think the thing that I think about from a churn perspective is ZoomInfo as a platform has largely been one that you go pull information out of. And our SMB customers are busy. They’re running small businesses. They are tackling a number of initiatives. And a platform that’s not dead simple is hard to extract value out of. And so one of the lenses that we built Copilot with was to make sure that we moved ZoomInfo from a pull platform to a push platform. One that with AI understands the customer base, understands what they’ll care about in ZoomInfo, looks at their CRM data to understand the customers that they sell to, understands their ICP, and then starts delivering them their next best customers without them having to learn a complex system or integrate their software or define who their buyer committee is or choose the intent topics that they’d be most interested in.
The system auto-configures for them and then starts immediately delivering them value around their next best customers. And so we think that significantly improves — actually, we’ve seen that significantly improved utilization and engagement for our customers who are Copilot beta customers. And as that utilization and engagement increases in the SMB, that’s directly correlative with our renewal rate.
Operator: One moment for our next question. Our next question comes from Brent Bracelin with Piper Sandler. Your line is open.
Brent Bracelin: Thank you, Cameron. I get SMB is weak. It’s been weak for a while, getting weaker. It seems like that seems to be a broader industry trend. I wanted to go back to the enterprise business, which did actually grow double digits year-over-year. Can you double-click into the durability, essentially, of that enterprise growth? I can’t imagine seats are expanding much in this environment, and so was it just all mixed shift to DAS? Was it tied to vendor consolidation? Walk me through enterprise ACV growth and the durability of that fix.
Cameron Hyzer: Certainly, you mentioned DAS as being a good fit there. DAS is like a largely an enterprise product, or at least enterprise in the higher end of mid-market. That is a place where we are seeing real traction and also it’s becoming a more and more material mix of the business. And certainly, I think to Henry’s point before our customers looking to optimize their spend, DAS is a big part of that. DAS is people building tools to make their sales teams more efficient and building those tools based on high-quality data insights about the customers that they’re going after. And so I do think that this is a lot of enterprises that are either investing in AI or investing in automation and recognize that they need high-quality data as an input into those projects in order to make them successful.
So that’s certainly part of it. The other part of it, frankly, is that in the enterprise, we’re still fairly underpenetrated in terms of the total seats available. So I don’t think that there are a lot of enterprises that are piling on the number of seats. In fact, you see a lot of companies still laying people off. But in a place where we are helping to make teams more effective and efficient, when they’re getting rid of people in certain places, we’re still looking for other pockets within those enterprises in order to drive additional value and, frankly, drive additional efficiency for those teams.
Brent Bracelin: Helpful color there. And then, Henry, for you, I want to go back to this sales optimization narrative. It is a very different environment. We’ve had this kind of overhang on the business relative to tech layoffs and software layoffs for two years now. I get Copilot could be a huge next-level productivity uplift, but why won’t we, a year from now, be in the same environment where Copilot indirectly drives more efficiency above what you can monetize? Or is there a plan to move more away from seat-based pricing, move towards platform fees, drive higher DAS attach rates, and monetize Copilot on top of DAS? Just try to think through these changing environments and sentiments that you’re seeing out there. It’s just not clear to me if Copilot actually can provide an uplift or not.
Henry Schuck: I think one really interesting thing that I’ve seen across the upper end of the mid-market in the enterprise is that when you show them Copilot, you start hearing things like, oh, we’ve been trying to build out of here for the last five years. Oh, that would be exactly what we would need to build. Oh, we’ve been talking about wanting to build something like this. And so we have a real opportunity to deliver what every upper mid-market and enterprise business would throw dozens of developers at for years to try to accomplish. And so I think we can monetize the value that we’re driving, both in terms of productivity uplift, but also from the avoidance of having to build that type of software internally and probably build it pretty poorly.
Operator: One moment for our next question. Our next question comes from Brian Peterson with Raymond James. Your line is open.
Johnathan McCary: Hi, this is Johnathan McCary for Brian. Thanks for taking the question. So how would you characterize the demand environment in the non-software verticals? I know you guys have kind of spoken to that previously. Maybe more specifically, does the NDR trend there sort of mirror what we’re seeing in the broader business, or is there more strength in the new side, or how would you characterize that in the non-software verticals?
Cameron Hyzer: And certainly as we look at the last 12 months, software and technology have been under significant pressure. You see them down on an absolute dollar basis year-over-year and at a net retention level that’s well below the overall net retention that we have. Obviously, that means that those non-software businesses, non-technology businesses have grown more significantly. Most of the segments within that are growing kind of mid-teens, or in some cases even more than that, if you look at retail or transportation and logistics. And obviously just the math would tell you that the net retention for those businesses is also well above the overall company average as well. So I think that we’ve gone through a year ending at the end of March here where software businesses, our software customers have been digesting a lot of the, call it replatforming or operating model changes that they’ve put throughout 2022 and the beginning of 2023.
Our subscription model is now digesting all of that. And so I do think that there’s the opportunity, particularly among those larger and mid-market software companies to stabilize a little bit more. But the rest of the business is effectively better because they didn’t have the same dynamics, particularly around driving more profitability that you see in software businesses that have decelerated in a significant amount.
Operator: One moment for our next question. Our next question comes from Tyler Radke with Citi. Your line is open.
Tyler Radke: Cameron, as I look at the guidance for the full year, obviously it’s come down a little bit, but it still implies that sequential growth has to pick up in the second half of the year. Can you just remind us what’s driving that sequential acceleration? And I guess on the SMB environment, how have you seen the first month or so trend in the second quarter relative to what you saw in Q1?
