Summary
ZoomInfo reported third quarter revenue of $313.8 million, up 9.1% from the prior-year quarter. Gross profit rose 12.4% to $269.0 million, and gross margin expanded to 85.7%, up 2.5 percentage points. Operating income increased 21.8% to $63.1 million, lifting operating margin to 20.1%, up 2.1 percentage points. Net income climbed 68.7% to $30.2 million, and diluted EPS rose 100.0% to $0.08. On a year-to-date basis, revenue reached $923.1 million, up 15.9%, gross profit was $789.6 million, up 20.1%, operating income was $189.0 million, up 52.8%, net income was $112.8 million, up 182.0%, and diluted EPS was $0.28, up 180.0%. The company continued to grow profitably even as management described a more challenging operating environment.
Cash generation was mixed. Operating cash flow for the quarter was $80.9 million, down 5.6% from the prior-year quarter. Year-to-date operating cash flow was $306.1 million, up 3.1%. Capital expenditures fell to $5.0 million in the quarter, down 35.1%, and to $17.6 million year to date, down 21.8%. Unlevered free cash flow, a non-GAAP measure, was $94.8 million, down 5% from $99.8 million a year earlier. Deferred revenue ended the quarter at $403.1 million, up 5.7% year over year. Remaining performance obligations were $1.06 billion, up 8.0%.
Non-GAAP profitability remained strong. Adjusted operating income was $126.2 million, up 7%. Adjusted operating income margin was 40%, down from 41% a year earlier. Management attributed the margin decline to higher bad debt accruals. Net revenue retention was 104% for the year ended December 31, 2022, and the company had 1,869 customers with $100,000 or greater in annual contract value as of September 30, 2023. ZoomInfo repurchased 8,800,000 shares at an average price of $18.19 for $160.1 million during the quarter, leaving $353.0 million available under its repurchase program. The company also expanded its international data coverage, increasing the number of global companies in its platform by more than 6x over two years and tripling global contacts and mobile phone numbers. It introduced AI features such as Chorus post-meeting briefs, with more than 2.3 million meeting summaries generated to date, and partnered with The Trade Desk to expand digital media buying for MarketingOS customers.
Management provided fourth quarter and full year 2023 guidance. For the fourth quarter of 2023, adjusted operating income guidance is $122 million to $124 million, and full year adjusted operating income guidance is $494 million to $496 million. Adjusted net income per share guidance is $0.24 to $0.25 for the fourth quarter and $0.99 to $1.00 for the full year. Unlevered free cash flow is not guided for the fourth quarter but is guided to $445 million to $455 million for the full year. Weighted average shares outstanding are expected to be 405 million in the fourth quarter and 412 million for the full year. Risks include adverse macroeconomic conditions, which management expects to pressure net retention in the near term, cancellations among existing customers, and higher bad debt accruals. The company also carries a substantial tax receivable agreement liability and has a total net leverage ratio to Adjusted EBITDA of 1.3x, with a consolidated first lien net leverage ratio of 0.1x. Trailing twelve months Adjusted EBITDA was $518.2 million, and Cash EBITDA was $542.0 million.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $313.8M | $308.6M | +1.7% | $287.6M | +9.1% |
| Gross profit | $269.0M | $265.4M | +1.4% | $239.4M | +12.4% |
| Gross margin | 85.7% | 86.0% | -0.3 pp | 83.2% | +2.5 pp |
| Research & development | $47.3M | $52.0M | -9.0% | $54.2M | -12.7% |
| Sales & marketing | $102.3M | $102.6M | -0.3% | $96.4M | +6.1% |
| General & administrative | $45.8M | $41.0M | +11.7% | $31.2M | +46.8% |
| Total operating expenses | $205.9M | $205.8M | +0.0% | $187.6M | +9.8% |
| Operating income (loss) | $63.1M | $59.6M | +5.9% | $51.8M | +21.8% |
| Operating margin | 20.1% | 19.3% | +0.8 pp | 18.0% | +2.1 pp |
| Net income (loss) | $30.2M | $38.1M | -20.7% | $17.9M | +68.7% |
| Net margin | 9.6% | 12.3% | -2.7 pp | 6.2% | +3.4 pp |
| Diluted EPS | $0.08 | $0.09 | -$0.01 | $0.04 | +$0.04 |
| Customers | 1,869 | 1,893 | -1.3% | 1,848 | +1.1% |
Risks
MD&A states the company expects its net revenue retention rate to be adversely impacted in the near term by macroeconomic conditions; the net annual retention rate was 104% for the year ended December 31, 2022. The filing also cites adverse macroeconomic conditions as a factor affecting business and financial condition.
Revenue growth was driven by new customers added over the past 12 months but was partially offset by cancellations among existing customers. Quarterly revenue rose 9.1% to $313.8 million while year-to-date revenue rose 15.9% to $923.1 million, indicating a deceleration in the growth rate.
General and administrative expense excluding equity-based compensation rose 49% to $36.4 million for the quarter and 42% to $98.0 million year to date, primarily due to increased accruals for bad debt. The year-to-date operating cash flow discussion cites a $22.0 million provision for bad debt expense.
Massachusetts enacted legislation on October 4, 2023 requiring corporations to apportion net income using the sales factor only, which the company says may have a significant impact on its deferred tax assets, tax rate, and tax receivable agreement liability. The TRA liability was $2,964.9 million as of September 30, 2023.
Restructuring and transaction-related expense was $5.1 million for the quarter, an increase of 2450% versus $0.2 million in the prior-year quarter, and $9.9 million year to date, an increase of 161%, driven primarily by a June 2023 reduction in force and impairment charges related to the Ra'anana office and other offices.
Total contractual maturity of outstanding indebtedness was $1,245.5 million with a total net leverage ratio to Adjusted EBITDA of 1.3x as of September 30, 2023. The effective interest rate on the first lien debt rose to 8.30% from 7.38% at December 31, 2022, exposing results to variable rate movements.
Operating cash flow declined 5.6% to $80.9 million in the quarter versus the prior-year quarter, even as year-to-date operating cash flow rose 3.1% to $306.1 million. Year-to-date operating cash flow benefited from a $16.8 million decrease in unearned revenue and a $27.6 million decrease in accrued expenses and other liabilities.
SaaS KPIs
All quarters →Adjusted Operating Income Margin
Unlevered Free Cash Flow
Adjusted Operating Income
Adjusted EBITDA
Customers > $100K ACV
Summary, forecast, risks and KPIs are extracted from ZoomInfo Technologies Inc.'s SEC filings for Q3 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.