ZoomInfo Soars in Q3 2024: Strong Financials, Improved Net Retention Rates, and Enterprise Growth
ZoomInfo, a leading go-to-market intelligence platform, has reported impressive financial results for the third quarter of 2024. The company's GAAP revenue reached $304 million, with adjusted operating income standing at $112 million, a margin of 37%. This performance exceeds the high end of their previously provided guidance.
In a call to investors on November 12, Henry Schuck, Founder and CEO of ZoomInfo, highlighted the stabilization and improvement in net retention rates. He emphasized that the company has implemented new initiatives to position itself for long-term success, executing on these plans in Q3. The deployment of a new business risk model has successfully reduced volatility around future write-offs.
One key area of focus was ZoomInfo Copilot, which performed better than expected. Net retention rates stabilized at 85% for the third consecutive quarter, and the company accelerated its shift upmarket by delivering strong enterprise growth and growing both its $100,000 and million-dollar-plus customer cohorts sequentially.
The results were driven in part by a significant increase in upfront prepayments from new business opportunities. Over 55% of these transactions were completed with prepayments, up from 33% in Q2. This strategy has allowed ZoomInfo to disqualify more risky small businesses than ever before, which will remain a headwind to the optics of growth in the coming quarters.
Additionally, the company reported strong enterprise growth and sequential ACV (annual contract value) increases. Revenue from customers with $100,000+ in annual contracts now makes up 44% of ZoomInfo's ACV, while enterprise ACV grew by 1% sequentially, representing approximately 41% of the business.
The company's focus on efficiency and growth is evident in its commitment to growing levered free cash flow per share. Unlevered free cash flow for Q3 was $111 million, up 17% year-over-year, with 24 million shares retired during the quarter. Since March last year, ZoomInfo has retired a total of 68 million shares, approximately 17% of its total shares outstanding.
When combining strong cash generation with ongoing share count reduction, the company expects to achieve at least $1 in levered free cash flow per share this year and plans to grow this number meaningfully in 2025. With a focus on compounding growth and increasing shareholder value, ZoomInfo appears well-positioned for continued success in the quarters ahead.
