Summary
ZoomInfo's third quarter revenue fell 3.3% year over year to $303.6 million, extending a soft stretch for the top line. Gross profit was $256.3 million, down 4.7%, and gross margin slipped 1.3 percentage points to 84.4%. GAAP operating income dropped 31.1% to $43.5 million, and operating margin fell 5.8 percentage points to 14.3%. Net income came in at $23.8 million, down 21.2%, with diluted EPS of $0.07, down $0.01.
Management tied the revenue decline to elevated write-off levels from operational changes made in the second quarter of 2024, when the company deployed a new business risk model that requires upfront prepayment from prospects at the greatest risk of non-payment. For the nine months ended September 30, 2024, revenue was $905.2 million, down 1.9%, and the company said a change in accounting estimate of collectibility reduced nine-month revenue by $15.3 million. Nine-month operating income was $66.5 million, down 64.8%, and nine-month net income was $14.5 million, down 87.1%. Lease impairment and abandonment charges, lease restructuring activity, and Class Action costs drove most of that gap. The Waltham, Massachusetts lease restructuring alone required a $59.1 million payment in July 2024.
Cash generation thinned in the quarter. Operating cash flow was $18.2 million, down 77.5% from the prior-year quarter, while nine-month operating cash flow was $260.4 million, down 14.9%. Capital expenditures rose to $17.6 million in the quarter, up 252%, and to $41.5 million for the nine months, up 135.8%, on new facilities and heavier capitalization of development work. Unlevered free cash flow, a non-GAAP measure, was $110.7 million in the quarter, up 17%. Deferred revenue was $419.2 million, up 4.0% year over year, while remaining performance obligations were $1.05 billion, down 0.8%.
Net revenue retention was 85% as of September 30, 2024, which the company described as stable for the third consecutive quarter. ZoomInfo ended the quarter with 1,809 customers holding $100,000 or more in annual contract value, an increase of 12 from the prior quarter. The company kept buying back stock. It repurchased 24,478,696 shares during the quarter for roughly $242.1 million at an average price of $9.89, about 7% of total shares outstanding. An accelerated share repurchase added 12,431,216 shares for $125.0 million at an average price of $10.06. Since the buyback began in March of last year, the company has repurchased approximately 17% of its outstanding shares.
Guidance points to more of the same. For the fourth quarter of 2024, ZoomInfo guided non-GAAP adjusted operating income to $103 million to $105 million and non-GAAP adjusted net income per share to $0.22 to $0.23. For the full year 2024, it guided non-GAAP adjusted operating income to $416 million to $418 million, non-GAAP adjusted net income per share to $0.92 to $0.93, and non-GAAP unlevered free cash flow to $420 million to $430 million. Weighted average shares outstanding are expected to be 362 million in the fourth quarter and 378 million for the full year.
The risk list is familiar but heavy. Macroeconomic conditions remain a stated drag on the business and on net revenue retention. Cost of service is expected to stay consistent or rise modestly as a percentage of revenue because of rising AI consumption costs and customer onboarding expenses tied to Copilot migrations. Restructuring charges could keep swinging reported results, since new leases may trigger impairment on space the company does not intend to occupy. The tax receivable agreement liability and deferred tax assets remain large enough that small changes in tax law or state apportionment can move the provision for income taxes materially. Total net leverage to Adjusted EBITDA stood at 2.3x as of September 30, 2024.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $303.6M | $291.5M | +4.2% | $313.8M | -3.3% |
| Gross profit | $256.3M | $245.6M | +4.4% | $269.0M | -4.7% |
| Gross margin | 84.4% | 84.3% | +0.2 pp | 85.7% | -1.3 pp |
| Research & development | $47.7M | $48.3M | -1.2% | $47.3M | +0.8% |
| Sales & marketing | $99.1M | $100.5M | -1.4% | $102.3M | -3.1% |
| General & administrative | $60.6M | $111.3M | -45.6% | $45.8M | +32.3% |
| Total operating expenses | $212.8M | $265.6M | -19.9% | $205.9M | +3.4% |
| Operating income (loss) | $43.5M | -$20.0M | +317.5% | $63.1M | -31.1% |
| Operating margin | 14.3% | -6.9% | +21.2 pp | 20.1% | -5.8 pp |
| Net income (loss) | $23.8M | -$24.4M | +197.5% | $30.2M | -21.2% |
| Net margin | 7.8% | -8.4% | +16.2 pp | 9.6% | -1.8 pp |
| Diluted EPS | $0.07 | -$0.07 | +$0.14 | $0.08 | -$0.01 |
Risks
Adverse macroeconomic conditions are pressuring net revenue retention, which was 85% as of September 30, 2024, and management expects near-term retention to remain impacted. Revenue decreased 3.3% in the quarter and 1.9% year to date, and remaining performance obligations decreased 0.8% year over year.
The Q2 2024 deployment of a new business risk model requiring upfront prepayment from higher-risk prospects and a shift toward customers more likely to pay, renew, and grow led to elevated write-off levels. Revenue decreased 3.3% in the quarter and 1.9% year to date, and the change in accounting estimate reduced nine-month revenue by $15.3 million.
The July 2024 Waltham lease restructuring required a $59.1 million payment and drove lease impairment and abandonment charges. General and administrative expenses increased 89% year to date, operating income decreased 64.8% year to date, and net income decreased 87.1% year to date.
Cost of service is expected to remain consistent or modestly increase as a percentage of revenue due to rising AI consumption costs and customer onboarding expenses from migrating existing customers to Copilot and acquiring new Copilot customers. Gross margin decreased 1.3 percentage points in the quarter.
Operating cash flow decreased 77.5% in the quarter and capital expenditures increased 252.0% in the quarter. The company also used $596.8 million in financing activities year to date, including a $125.0 million accelerated share repurchase, leaving $147.7 million of cash and cash equivalents as of September 30, 2024.
The company had a $2,794.9 million liability related to projected TRA obligations as of September 30, 2024, and made $31.6 million of TRA payments year to date. Changes in tax law or state apportionment could cause substantial TRA remeasurements, with a $9.9 million TRA remeasurement loss year to date.
The company incurred $30.0 million of litigation settlement charges year to date related to the Class Actions, contributing to the 89% year-to-date increase in general and administrative expenses.
The company has $1,239.6 million of total contractual debt maturities and a 2.3x total net leverage ratio to Adjusted EBITDA as of September 30, 2024. The first lien credit agreement contains restrictive covenants that limit dividends, stock repurchases, acquisitions, and asset sales, and failure to comply could accelerate substantially all debt.
SaaS KPIs
All quarters →Adjusted Operating Income Margin
Unlevered Free Cash Flow
Net Revenue Retention
Customers with $100,000 or greater in annual contract value
Summary, forecast, risks and KPIs are extracted from ZoomInfo Technologies Inc.'s SEC filings for Q3 FY2024 (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.