Summary
ZoomInfo's second quarter revenue was $308.6 million, up 15.5% from $267.1 million in the prior-year quarter. Management attributed the increase mainly to new customers added over the previous 12 months, partly offset by cancellations among existing accounts. Subscriptions account for 99% of revenue, with the rest from recurring usage-based services and other revenue. Profit grew faster than sales. Gross profit rose 20.6% to $265.4 million. Operating income climbed 50.9% to $59.6 million. Net income was $38.1 million, up 139.6% from $15.9 million a year earlier, and diluted earnings per share were $0.09 against $0.04.
Margin expansion was the standout. Gross margin reached 86.0%, up 3.6 percentage points from 82.4%, helped by the completion of amortization on intangibles from a 2019 acquisition and more efficient cloud infrastructure. Operating margin was 19.3% versus 14.8%. On a non-GAAP basis, adjusted operating income was $125.6 million and the adjusted operating income margin was 41%, up from 40% a year earlier. Adjusted net income per diluted share came to $0.26.
Cash generation held steady. Operating cash flow was $116.6 million for the quarter, up 9.8%, and $225.2 million for the six months ended June 30, 2023, up 6.6%. Capital expenditures fell 24.4% to $6.2 million. Unlevered free cash flow, a non-GAAP measure that adjusts operating cash flow for capital spending, cash interest and certain cash payments, was $121.5 million. Deferred revenue was $443.1 million, up 7.6%, and remaining performance obligations were $1.11 billion, up 12.8% from $984.7 million. For the six months, revenue was $609.3 million, up 19.8%, and net income was $82.6 million, up 273.8%. Over 40% of customer contracts, based on annualized value, are multi-year agreements.
Guidance is the weak spot. For the third quarter, the company guided non-GAAP adjusted operating income to $124 million to $126 million and adjusted net income per share to $0.24 to $0.25. Unlevered free cash flow was not guided for the quarter. For the full year 2023, management lowered its revenue outlook and now expects adjusted operating income of $493 million to $498 million, down from the prior range of $523 million to $533 million, and unlevered free cash flow of $445 million to $455 million, down from $507 million to $517 million.
Capital return picked up. ZoomInfo repurchased 2,847,121 shares during the quarter at an average price of $21.99 for $62.6 million, leaving $13.0 million available under the March 2023 authorization, and the board approved a new program of up to $500 million. The customer base topped 35,000, including 1,893 accounts with $100,000 or more in annual contract value. Net revenue retention was 104% for the year ended December 31, 2022, and management expects macroeconomic conditions to weigh on that metric in the near term.
Two cost items deserve attention. Bad debt accruals pushed general and administrative costs higher, and a June 2023 reduction in force drove restructuring and transaction-related expenses. The company also carries a large tax receivable agreement obligation that will require substantial future payments, and it remains exposed to the macroeconomic pressures it flagged in its risk factors. On the product side, ZoomInfo partnered with Databricks to make its data available through the Databricks Marketplace, and it collected a number of industry awards from TrustRadius and G2.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $308.6M | $300.7M | +2.6% | $267.1M | +15.5% |
| Gross profit | $265.4M | $255.2M | +4.0% | $220.1M | +20.6% |
| Gross margin | 86.0% | 84.9% | +1.1 pp | 82.4% | +3.6 pp |
| Research & development | $52.0M | $42.3M | +22.9% | $49.5M | +5.1% |
| Sales & marketing | $102.6M | $103.2M | -0.6% | $95.2M | +7.8% |
| General & administrative | $41.0M | $37.7M | +8.8% | $29.2M | +40.4% |
| Total operating expenses | $205.8M | $188.9M | +8.9% | $180.6M | +14.0% |
| Operating income (loss) | $59.6M | $66.3M | -10.1% | $39.5M | +50.9% |
| Operating margin | 19.3% | 22.1% | -2.7 pp | 14.8% | +4.5 pp |
| Net income (loss) | $38.1M | $44.5M | -14.4% | $15.9M | +139.6% |
| Net margin | 12.3% | 14.8% | -2.5 pp | 6.0% | +6.4 pp |
| Diluted EPS | $0.09 | $0.11 | -$0.02 | $0.04 | +$0.05 |
| Customers | 1,893 | 1,905 | -0.6% | 1,763 | +7.4% |
Risks
MD&A states net annual retention rate was 104% for the year ended December 31, 2022 and that in the near term the company expects its net retention rate to be adversely impacted by macroeconomic conditions. Revenue for the quarter ended June 30, 2023 was up 15.5% versus the prior-year quarter but growth was partially offset by cancellations among existing customers.
As of June 30, 2023, the company had a liability of $2,967.4 million related to projected obligations under the Tax Receivable Agreements. Payments may be substantial and are not conditioned upon continued ownership by the exchanging holders of OpCo Units.
The company incurred restructuring and transaction-related expenses of $4.7 million for the three months ended June 30, 2023, an increase of $3.6 million, or 327%, versus the prior-year quarter, primarily related to a June 2023 reduction in force. This indicates active cost restructuring that may disrupt operations.
General and administrative expense excluding equity-based compensation increased 36% to $31.1 million for the three months ended June 30, 2023, due primarily to increased accruals for bad debt. This suggests rising customer credit risk or collection challenges.
The first lien credit agreement contains restrictive covenants that limit dividends, stock repurchases, debt prepayments, acquisitions, investments, and asset sales. Failure to comply could result in an event of default and acceleration of substantially all debt. As of June 30, 2023, total contractual maturity of outstanding indebtedness was $1,247.0 million and total net leverage ratio to Adjusted EBITDA was 1.1x.
The first lien term debt has a variable interest rate, with an effective interest rate of 7.36% as of June 30, 2023. Interest expense, net was $12.0 million for the quarter ended June 30, 2023, up 3% versus the prior-year quarter, and future demands on capital may be impacted by changes in reference interest rates.
SaaS KPIs
All quarters →Adjusted Operating Income Margin
Unlevered Free Cash Flow
Adjusted Operating Income
Total customers
Adjusted EBITDA
Customers with $100K+ ACV
Summary, forecast, risks and KPIs are extracted from ZoomInfo Technologies Inc.'s SEC filings for Q2 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.