GTM

Good day, and thank you for standing by. Welcome to the ZoomInfo First Quarter 2026 financial results conference call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question-and-answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. I would now like to hand the conference over to your speaker today, Jeremiah Sisitsky, Vice President of Investor Relations.

Thanks, Josh. Welcome to ZoomInfo's financial results conference call for the first quarter of 2026. With me on the call today are Henry Schuck, Founder and CEO of ZoomInfo, and Graham O'Brien, our Chief Financial Officer. During this call, any forward-looking statements are made pursuant to the safe harbor provisions of U.S. securities laws. Expressions of future goals, including business outlook, expectations for future financial performance, and similar items, including without limitation, expressions using the terminology may, will, expect, anticipate, and believe, and expressions which reflect something other than historical facts, are intended to identify forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors sections of our SEC filings. Actual results may differ materially from any forward-looking statements.

The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the forward-looking statements in the slides posted to the investor relations website at ir.zoominfo.com. All metrics on this call are non-GAAP, unless otherwise noted. A reconciliation can be found in the financial results press release or in the slides posted to our IR website. With that, I'll turn the call over to Henry.

Thank you, Jerry. Welcome everyone. We started 2026 by delivering revenue and adjusted operating income above the high end of our Q1 guidance. Revenue for the first quarter was $310 million, up 1.5% year-over-year, and adjusted operating income margin was 35%, up more than two points year-over-year. Our non-seat-based operations and Data as a Service offerings, one of the most profitable parts of the business and almost exclusively upmarket, again grew more than 20% year-over-year in the quarter and now makes up just under 20% of our business. While we exceeded our guidance in Q1, as macro conditions worsened at the end of the quarter, we experienced a regression in our downmarket and upmarket growth trajectories.

In the closing days of March and into April, we saw a trend of AI and agentic confusion in our customer conversations. What can be built versus bought, what vendor or internal team delivers what, and where the differentiation really lives. This led to a pause in purchasing decisions, and our software customers were particularly affected, as many are facing a confusing purchasing landscape compounded by the threat of their own growth disruption, creating a circular headwind in our space. As a result, we're revising our full year guidance down in conjunction with significant cost reductions that we believe will position us with structurally higher operating margins and create a faster path back to durable growth. This was hard because of the impact on a large number of our teammates, many with long tenures here, who did good work to get us to this point.

Change is necessary and a positive decision for the future of ZoomInfo. We made these changes with an eye on the opportunity for us to expand consumption of our data with the proliferation of AI, an opportunity we believe to be potentially larger than anything we've seen in the first 20 years of operating the business. AI has structurally changed how software is built, bought, and used. LLMs have given go-to-market teams a simpler interface to work with data and build custom revenue workflows without heavy technical support. These interfaces will increase across all of software, and as they do, our traditional seats tied to application model will come under pressure, while at the same time our opportunity to tie into the growth slipstream of go-to-market work that LLMs and coding agents enable expands through our data offerings.

Our strategy is to make ZoomInfo's go-to-market data ubiquitous, available wherever go-to-market work gets done, including ChatGPT, Claude, Perplexity, Microsoft Copilot, Google Gemini, and internally built applications. With an increasingly headless approach to software, these workflows become materially more valuable when powered by our data and insights. Confusion around what AI can do and cannot do, and where our data critically plugs in, is temporary, and combined with pockets of overhang in our seats-based pricing, may create a near-term net headwind in our business. The long-term tailwind, as AI agents and interfaces continue to grow exponentially, is to ensure our high-quality go-to-market data plugs in across those growing surface areas. The promise of that future upside is evident in our operations business and in the value our largest customers continue to assign to their investments with ZoomInfo.

ZoomInfo understands complex Global 2000 account hierarchies, curates proprietary contact data, operates a privacy-first identity graph, enriches 5.5 billion data attributes, and processes 1.05 trillion intent signals each month. Each raw data point needs to be cleansed, normalized, and transformed into go-to-market ready output every day. AI-driven or not, go-to-market organizations need this data infrastructure from ZoomInfo. Capturing this shift requires us to sell and operate differently. Our actions this morning across our employee base restructure ZoomInfo to operate more efficiently, generate stronger cash flow, and reposition our data assets, APIs, and MCPs as a larger, more durable part of the business. Our operations business shows the model we believe the market is moving towards, non-seat-based, data-led, upmarket, high retention, and highly defensible. Our goal is to make more of ZoomInfo transact and grow that way.

As part of that evolution, we're leading with data. Beginning in Q3, customers will have the flexibility to convert historical per-seat spend into consumption across ZoomInfo data, insights, applications, and agents. This will be a more formal effort in matching the pricing and value delivery to the best customer behaviors and outcomes. We're expanding where customers can access and pay for ZoomInfo data, including ChatGPT, Claude, Gemini, Copilot, and internally built applications. We are shifting investment from front-end application development toward data, AI-enabled engineering, product-led growth, LLM interfaces, and higher-margin customer segments. I want to briefly explain the durability of our data asset. ZoomInfo's moat is not a single data set.

It is a layered system, proprietary B2B data, contributory network inputs, public and partner-sourced intelligence, real-time business signals, entity resolution, a privacy-first identity graph, governance infrastructure, and activation workflows. At the foundation is ZoomInfo's intelligence layer, billions of data points with more than 140 million company entity records, 580 million+ IP to organization pairing, more than 500 million professional profiles, and data including intent, hierarchy, location, financial information, personnel moves, technology usage, funding details, organizational charts, news, and other commercial signals. The value is not just collecting this data, it is resolving it. Company names change, M&A happens, people change roles, titles vary, subsidiaries roll into parents, and the same person can appear differently across dozens of sources. ZoomInfo resolves that noise into a living, governed, commercially useful graph that customers can activate in their workflows.

The next layer is our signal and context data, identifying who's in market and why. Foundation models are incredible at reasoning, writing, summarizing, and automating, but they do not inherently know which companies are real targets, which contacts are current, which buying signals are fresh, which account hierarchies matter, which technologies are installed, which prospects are in market, or which internal CRM patterns predict conversion. GTM AI becomes useful only when the model is grounded in accurate, permissioned, current, entity-resolved business context. Our signal and context layer is built around our contributory network and proprietary identity graph, both unique, non-publicly available data assets that create real value for go-to-market. The final layer is trust, governance, accuracy, privacy, and compliance. We collect, verify, and publish high-quality, ethically sourced business information with a privacy program built around global privacy laws like the CCPA, PIPEDA, and GDPR.

Our notice and choice program provides notification when professionals' profiles first appear in the platform, offers multiple opt-out methods, honors removal requests, and takes steps to prevent removed profiles from being re-added. Our governance framework aligns with major regulatory regimes. We maintain the industry's most robust set of privacy, security, and compliance certifications. As GTM work becomes increasingly agentic, every AI seller, marketer, rev ops workflow, and customer growth motion will need a trusted intelligence layer that tells it who to target, why now, what changed, and what to do next. Our customers, industry analysts, and partners are validating this. Customers ranked us number one in 142 G2 Spring 2026 reports across sales intelligence, buyer intent data, and lead capture.

Forrester's recent Wave for marketing and sales data providers called ZoomInfo, quote, "Entrenched as the default data provider for B2B sales, setting a technology standard for data collection and identity resolution." In Q1, Salesforce released its prospecting agent with ZoomInfo as the 1st and primary external data provider. Our contact, company, intent, and scoops data powers recommendations across Salesforce's 150,000-plus customer base. HubSpot also shipped its prospecting agent with a native ZoomInfo integration. When the two largest CRM platforms choose ZoomInfo to power AI prospecting agents, it reinforces the durability and relevance of our data asset. We also launched connectors for ChatGPT, Claude, Microsoft Copilot, and Perplexity, and are advancing our Google Gemini integration. Data integrations have doubled year-over-year, and MCP connections are growing organically without dedicated sales or marketing.

We expanded Go-to-Market Studio trials to more than a quarter of existing customers, helping customers build automated workflows triggered by ZoomInfo signals. Going forward, our application layers will serve as engines for data engagement and consumption rather than standalone application seat products. As customers renew in the back half of the year, we're introducing more flexible pricing and packaging built around data access and usage. This reduces reliance on platform fees and per-seat charges, lowers the overhang from seat compression, and better aligns monetization with customer value. We expect most customers to transition at similar price points, with some moving lower and some higher. While this may create a near-term revenue headwind, it gives us a cleaner model and a better opportunity to grow as customers expand their use of ZoomInfo data. Turning to customer wins, in Q1, we signed deals with Sierra, Lyft, and Wyndham Hotels and Resorts.

We also closed a strategic win with a unicorn cloud software company serving MSPs, displacing the incumbent and beating more than half a dozen alternatives, including an internally developed AI tool to become its core data and enrichment platform across Go-to-Market Studio and Workspace. An AI-native security and compliance platform also expanded across Studio, Copilot, and DaaS in a multiyear seven-figure TCV transaction to power its go-to-market motion. We continue to be opportunistic with the $1 billion incremental share repurchase authorization announced last quarter. We're confident in our ability to generate strong cash flow and operate the business efficiently while we execute this strategic shift. We remain committed to returning capital to shareholders in the most value-accretive way possible while ensuring we maintain long-term flexibility. With that, I'll turn the call over to Graham.

Thanks, Henry. Q1 GAAP revenue was $310 million, up 1.5% year-over-year, adjusted operating income was $110 million, a margin of 35%, with both revenue and AOI coming in above the high end of the guidance ranges we provided. Unlevered free cash flow was $120 million, with $21 million in interest paid in cash during the quarter. In a seasonally slower quarter, upmarket ACV grew 5% year-over-year, a step down from 6% year-over-year growth in the fourth quarter, an improvement from 3% upmarket ACV growth in the year-ago period. Downmarket ACV declined 11% year-over-year in Q1 as compared to a decline of 10% in the fourth quarter and in the year-ago period.

Upmarket is now 75% of our business. Customers with greater than $100,000 in ACV increased by 32 year-over-year, while decreasing 21 sequentially, and ACV from that cohort increased 10% year-over-year. As Henry highlighted, Operations had another strong quarter, with ACV growth greater than 20% year-over-year. Net revenue retention was 90% in Q1, the third quarter in a row of 90% net revenue retention. Overall, it was a solid quarter. We saw a shift in buyer behavior exiting the quarter and into Q2. Gross retention held in well overall. Customers in our software vertical experienced elevated rates of down-sell and churn relative to the improving trends we had seen in 2025.

As we moved through March, we saw more customer confusion in the marketplace around what AI can and cannot do and increased macroeconomic uncertainty. With the improving trends we had seen in 2025 starting to moderate, it became clear that our growth progression was no longer on schedule and that now is the right moment to be proactive and accelerate the timeline of our strategic initiatives. We believe we can further rightsize the downmarket business, shift to a better-suited pricing model for our customers while reducing the potential overhang from further seat compression. As we consolidate global operations while largely protecting profitability in the process. Despite the near-term revenue impact, we can return to healthier growth levels sooner than a status quo approach would deliver.

As a result, we are now guiding to FY 2026 revenue in the range of $1.185 billion-$1.205 billion. This is a proactive and prudent measure in a period of significant transition. While our initial guidance for the year did not embed upside for new product initiatives, it also did not anticipate the environment getting worse. Our updated guidance adds some incremental top-line conservatism to account for a fluctuating macroeconomic environment, as well as the potential for near-term headwinds as we execute against our strategic initiatives. We make this adjustment to our full year guidance, which we believe will help set up a new foundation over the next 12-18 months that we can ultimately begin to grow from, while at the same time committing to improved profitability outcomes.

We are now guiding to full-year AOI of $437 million-$447 million, and an AOI margin of 37% at the midpoint of guidance, up 130 basis points year-over-year and an improvement of 30 basis points as compared to our prior full-year guidance. As we look to operate more efficiently with a long-term focus on data and consumption, the changes announced today impact 20% of our employees or 600 team members, including closing our facilities in Israel. Israel has been an important part of our organization. While these were all difficult decisions, they reflect our commitment to operating the business in the most efficient and strategically focused way possible.

Some of the roles impacted will be hired in other regions, and some of these roles will not be replaced as we operate with a leaner, more focused organization. Across every team at ZoomInfo, we're doing more with less. With over 85% of employees actively using our internal AI operating system, AI-bolstered work is now the rule, not the exception. Whether it's shipping more code per engineer, multiples more, with fewer bugs in R&D, building custom apps in finance that replace manual processes and external spend, or building intelligent campaigns on demand in sales and marketing, AI is unlocking productivity at an unprecedented pace. As I noted last quarter, seat-based pricing contribution mix peaked in 2022, and we have progressively decreased that contribution every year since then. We expect to accelerate this transition further.

Approximately one-third of our ACV is not tied to seats, and our goal is to shift that closer to 50/50 in the next 18-24 months. We plan to roll out a hybrid pricing model later in Q3 that pairs a low annual platform fee with pre-purchase credits rather than our traditional seat-based packages. The consumption portion will be similar to how we account for ZoomInfo Operations and DaaS, selling packages of data credits to customers that will be consumed over time across any platform and counted as ACV. This is the next step in the evolution away from seat-based pricing as we build on the positive momentum from the expansion of enterprise license agreements across our largest customers. There are two long-term benefits here related to net revenue retention.

Less down-sell pressure coming from seat compression, while at the same time data consumption trends increase over time, generating upsell opportunity leading to improved NRR outcomes. This shift to consumption introduces some variability in revenue recognition, driven by the timing of credit consumption relative to credit allowances. This dynamic is reflected in our revised revenue guidance. As part of this evolution, we are eliminating more down-market sales resources, shifting down-market almost exclusively to product-led growth, enabling us to further accelerate the shift up market while we expand our focus on data. A result of these actions, we expect restructuring costs of $45 million-$60 million, the majority of which are cash costs and expected to be incurred in Q2 and Q3 2026.

We expect to reduce annual run rate operating expenses by approximately $60 million with the actions, including restructuring the entirety of our Israeli operations, largely complete by Q1 of 2027. The majority of transitionary compensation costs from notification date through the completion of the discontinuation of operations in Israel will be added back for purposes of calculating our non-GAAP metrics. As we absorb these restructuring costs, our cash position and our underlying cash generation remain strong. Turning to cash in the period, GAAP operating cash flow was $115 million in Q1. Unlevered free cash flow for the quarter was $120 million, 109% conversion from adjusted operating income, and representing a margin of 39%.

GAAP stock-based compensation expense was $25.5 million, down 14% year-over-year, and representing 8% of revenue. As a percentage of revenue, adjusted expenses combined with stock-based compensation improved 5 points year-over-year, reflecting a significant improvement to the quality of our earnings. We continue to prioritize performance-based compensation for cash and equity compensation with achieving rigorous free cash flow objectives. In Q1, we repurchased 13.1 million shares of common stock at an average price of $6.91 for an aggregate $90 million. Inclusive of the repurchase authorization announced in February, we had more than $1 billion in remaining repurchase capacity at the end of the quarter.

Weighted average diluted shares outstanding for the quarter used in calculating non-GAAP diluted earnings per share was 318 million, and the non-GAAP share count exiting the quarter was 310 million. We ended the quarter with $175 million in cash equivalents, and investments, and we carried $1.3 billion in gross debt. As a result, our net leverage ratio is both 2.4x trailing twelve-months adjusted EBITDA and 2.4x trailing twelve-months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements, as compared to 2.5x and 2.3x in the year-ago period. The $650 million in senior notes mature in 2029, and $581 million first lien term loan matures in 2030.

We are comfortable with our current maturity profile, and we have sufficient liquidity and cash generation to manage our obligations as they come due. During the quarter, we entered into interest rate swap to fix a portion of our variable rate debt. We executed $425 million of notional interest rate swaps at a blended fixed rate of 3.28%, reducing our exposure to SOFR volatility while providing greater visibility into interest expense and free cash flow. Following the close of the quarter, we amended our revolving credit facility to increase total commitments from $250 million-$276 million, with U.S. Bank joining the lender group through an incremental commitment of $26 million. No additional borrowings were made in connection with the amendment.

The upsizing expands and diversifies the lending group while providing additional liquidity capacity. With respect to liabilities and future performance obligations, unearned revenue at the end of the quarter was $479 million, and remaining performance obligations or RPO were $1.18 billion, of which $861 million are expected to be recognized in the next 12 months. Shifting to guidance for Q2, we expect GAAP revenue in the range of $300 million-$303 million. Adjusted operating income in the range of $103 million-$106 million. Non-GAAP net income in the range of $0.26-$0.28 per share.

For the full year 2026, we now expect GAAP revenue in the range of $1.185 billion-$1.205 billion, representing a 4% year-over-year decline at the midpoint of guidance. An adjusted operating income in the range of $437 million-$447 million, representing a 37% margin at the midpoint of guidance, up 130 basis points year-over-year. We expect non-GAAP net income in the range of $1.10-$1.12 per share, consistent with our prior guidance based on 315 million weighted average diluted shares outstanding. We expect unlevered free cash flow in the range of $400 million-$420 million.

I would expect a non-GAAP tax rate of closer to 10% in 2026 and cash interest expense in the range of $60 million-$62 million. We believe the actions and initiatives announced today will set us up to run rates at least $1.25 of adjusted levered free cash flow per share as we enter 2027 across a range of revenue growth and share repurchase scenarios. Now I will turn it over to the operator to open the call for questions.

Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions. Our first question comes from Mark Murphy with JPMorgan. You may proceed.

Thank you very much. Henry, I'm wondering how big of a spread do you see in the demand patterns out there if you compare the software vertical up against traditional industries that might not have as much of a terminal value discussion occurring at the moment? I have a quick follow-up.

Yeah, I can take that one, Mark. You know, we saw about, you know, almost two years of sequential improvement to retention in software, and that was flat in Q1, and that's a big data point as we, you know, consider that in the outlook in the guidance revision. When I look at other verticals that are, you know, potentially not having the terminal question, I look at finance, insurance, real estate, manufacturing, telecom. We had really solid quarters there where we continue to see really promising growth possibility.

Okay. It's a very software-centric kind of situation, it sounds like. I'm curious as well, just how much of the AI confusion you're seeing would you relate to the takeoff of Claude Code during the month of March? I think that's when you saw, you know, a bit of a shift, and that seemed to be the period of liftoff for Claude Code. Just as a corollary, any thought on how long the that period of AI confusion might last?

Yeah. I think the big shift here is, even in our most sophisticated software clients, what we're seeing them shift away from is a seat license in ZoomInfo and shift to significantly more consumption of our data inside of Claude with our MCPs through our APIs. We have a number of examples of AI native companies who have shifted from seats but are spending meaningfully more with us through consumption of our data in their internal applications that they've built, through our MCPs, through our APIs, through bulk credit consumption. We have a lot of confidence that there's this moment where companies are confused about what they actually need to be able to build their own internal applications, to build their own revenue workflows, where the most sophisticated AI native companies are leveraging our data throughout that entire workflow.

Companies that are doing sort of quick AI projects have not made that realization yet. We are positioning the company from a pricing and packaging perspective to take advantage of that situation so that when we talk to a customer who tells us, "I don't need seats anymore because I've built my own application," that we can be really flexible and say, "Look, your own application is gonna need contact information, it's gonna need company information, it's gonna need hierarchy information, it's gonna need signal information, and we can be really flexible on your transition over to that as you build your own internal application.

Understood. Thank you very much.

Thank you. Our next question comes from Taylor McGinnis with UBS. You may proceed.

Hi. Thanks so much for taking my questions. First one would just be on, when we look at the customers with greater than a 100K deal sizes that fell quarter-over-quarter, I know you mentioned earlier that you're seeing, you know, customers pause in light of this, but could you comment on, you know, some of these larger customer dynamics with that KPI and then also too with CRPO declining quarter-over-quarter? Maybe you could just comment on, you know, what exactly you're seeing amongst like this larger cohort of customers.

Sure. You know, on the 100K, the activity in the 100K logo was a good microcosm of the quarter for the full business. There are four ways logos can enter or exit that cohort. You can buy in new from zero, you can enter via upsell, you can downsell out, you can churn altogether. When we look at Q1 this year versus Q1 last year, our performance improved or held flat across three of these entry and exit points. We sold in more new logos. We had significantly fewer downsell out, and we had about the same that churned altogether, which is a pretty low number. The upsell in is where we saw the significant decrease year over year, and that's representative of the challenges we saw around incremental purchases near the end of the quarter.

On CRPO, you know, it's up 3% year-over-year in a slower Q1. I don't think that that outcome was really outside of our range of expectations.

Great. Thanks. Then maybe, you know, going back to the pricing model change that you guys commented earlier, I think the comment was that you expect customers to renew under the new model at a similar deal size as compared to the old model. Can you just give us, you know, some proof points if you've had, you know, customers that have made, you know, that transition already under Operations, you know, as in what you've seen there, that's giving you guys, you know, that comfort, in this kinda net neutral positioning as we move to the new model?

Yeah. We tested this with a number of our customers, and what we're seeing is two things. Some customers, it's pretty similar price points as they shipped away from seats. You're gonna see some customers shift up, you'll see some customers shift down, and it's largely based on how much they're consuming our data. For down-market users, we're gonna eliminate the access friction by moving away from term platform fees and seat floors, tying price much closer to value. Larger customers should expect simpler pricing and a less siloed product experience where their credits are purchased and then consumed really anywhere, inside of ZoomInfo applications or outside of ZoomInfo applications. We're seeing some up, some down, and we think it ends sort of net positively.

Great. Thank you so much.

Thank you. Our next question comes from Lucas Sarasola with Morgan Stanley. You may proceed.

Hey, guys. Thanks for taking my question. I'm on for Sanjit Singh. With software demand exiting March and April, especially in software, should we think about Q2 as the growth trough? What needs to improve for you guys to get comfortable with the back half of the year?

Yeah, you know, I look at it through some of the, maybe some of the leading indicators. Certainly, we've guided Q2 revenue to be down year-over-year. I think what we're really focused on is setting an expectation level that's going to allow us to accelerate these strategic initiatives in the back half of the year. As we do shift more towards consumption, as we do right-size our down-market business to be more PLG or essentially almost exclusively PLG-focused, that we, you know, we do go through a few quarters there where we do flip negative before getting back to, you know, more opportunity for positive year-over-year growth in the back half of 2027.

I think the other thing that is worth pinning here is the bulk of the cut is deliberate, and it's down-market oriented. We're doing that and accelerating the transition here because we're clearly seeing the opportunity for consumption across a number of surface areas in our business more clearly. Our customers who are on Go-to-Market Studio are consuming significantly more than their counterparts not on Studio. Our customers in our MCP application that were really released over the last eight weeks are meaningful consumers of our data through the LLM platforms that our MCPs are plugged into. I think the big milestones are we need to put more of our customers into these high consumption interfaces, and that's our strategic focus right now.

Got it. Just one more, if I may. Thinking about profitability as inference costs keep going up, how should we think about, you know, as you guys scale the business and customers continue to consume, how the profitability picture will look in the coming years?

Look, when I look at the pro forma view of the business exiting this year, I think that when we return to growth, we'll, on a more consistent basis, we're going to have an opportunity to do so as a 40% margin company instead of a 35% margin company. When I break that down, I expect cost of service is still probably 13%-14% of revenue, but sales and marketing is closer to 27% with a path down to 25%. R&D is steady around 10% with a path lower, and G&A at 10% with a path lower. The business will be primed to deliver 40% margins with that return to growth, and the initiatives we announced today were a big part of that.

Thanks, guys.

Thank you. Our next question comes from Brad Zelnick with Deutsche Bank. You may proceed.

Great. Thanks so much for taking the question. I guess my question, how much does the updated guidance, Graham, reflect the hesitation in downsell that you saw in Q1 continuing throughout the remainder of the year versus the impact of moving to consumption style deals? Can you remind us the rev rec on those consumption deals?

Yeah, you know, as we proactively change how the business is structured and how we price and deliver, we're accounting for all of that. We're accounting for the down-market restructuring, the shift towards or away from seats in the pricing model. My guidance philosophy is shifting as part of that too, and that we need to rely more on future assumptions around the evolving pricing model and less on past performance to inform our models. We've embedded conservative assumptions around the macro, the software vertical, and the shift in pricing model away from seats. It's safe to say that our guidance for Q2 and the rest of the year takes a more cautious approach than it did in Q1. Our updated guidance fully accounts for the existing conditions and the planned timing of our strategic initiatives.

You should think about this as a full measure revision. This is very much a proactive plan that we have a lot of confidence will deliver us to a place of more durable, efficient growth sooner than the status quo. On the, on the revenue accounting implications of this shift, look, first, customers are pulling us in this direction. We're already a big part of the way there, but there will be new revenue accounting dynamics that come along with it. I don't expect ACV scope to change, but customers on more variable consumption-focused plans will still roll up into that ACV number. From a technical perspective, with pre-committed consumption, we'll need to make an assumption around breakage and then predict and monitor customer usage patterns to match the satisfaction of performers' obligation.

What that means is that could introduce some quarter-to-quarter noise in revenue recognition, which again, we've accounted for in the updated guidance.

That's very comprehensive answer. Thank you for that, Graham. Maybe just one follow-up for you, Henry. I feel like, you know, from the very beginnings of covering ZoomInfo since the IPO, the one thing that hasn't changed is the quality of your data asset, and that really stands out above all else that's out there on the market. Can you just once again, for us, I know you said a lot about it, but it wouldn't hurt to hear you know, to what do they say? Repetition doesn't ruin the prayer. Would love to hear more about why, given how unique and comprehensive your data asset is, that you're not able to perhaps better weather this moment and whatever you can tell us to just really bring that point home would really be helpful. Thank you.

Yeah. I think the biggest thing for us today is that our data asset has historically been trapped underneath a SaaS application, which obviously for the first 18, 19 years of our operating history, was exactly where our customers wanted to consume it. Really over the last 12 months, customers have been more inclined to want our data asset to be flexible and available throughout a number of other interfaces. We've always had an API, it was mainly deployed at really high sophisticated, highest end of our strategic customers. That could have been done with a lot of hand-holding. In today's world, the agent Claude needs to just understand our API documentation and plug it in seamlessly without ever having to talk to a human.

We've spent really the last 18 months rebuilding the data infrastructure that delivers that data anywhere that a customer wants it. If you wanted intent data, you know, a year ago, you would have had to get that intent data through the SaaS interface inside of Copilot or SalesOS. Today, you can get it in an API, you could get it through the MCPs. It's really just the flexibility of making that data much more available to our customers wherever they wanna work, which has changed where they wanna work, has changed, you know, obviously much more significantly than the necessity for our data and the accuracy of our data.

Really helpful. Thank you so much, guys.

Thank you. Our next question comes from Alex Zukin with Wolfe Research. You may proceed.

Hey, guys. Thanks for taking the question. I guess maybe in the spirit of channeling my inner Brad, I'm gonna ask a couple of similar questions, but it feels like on the call you're walking through maybe a couple of different issues simultaneously, longer sales cycles, particularly in software, an acceleration in your push to transform and get out of the lower end of the market, as well as accelerate the shift to consumption from seat. If you're guiding to exit the year at kind of a -8% growth and saying you're gonna return to growth in fiscal 2027, like how much of the headwind from which of those parts is embedded in that guide?

Where do you feel like there's maybe a little less risk because it's you guys pushing versus pulling?

Yeah. I think you've got it right in that we're, you know, we're looking at the software vertical and some of the softness there coming out of the quarter. The downmarket right-sizing, like that's probably the largest part of the guidance re-revision this year, is that we can pretty scientifically say we take out X resources downmarket, and that creates Y of a ACV headwind this year. I think the biggest question that we're modeling is the pricing transformation. You know, as we kind of accelerate that this year, that will become the larger part of the story next year. As we model that, you know, there might be instances where there are lower entry points, and the question that we're modeling is: when do we get the upside, whether it's intra-contract from upsell opportunity or at renewal from mitigated downsell pressure.

I'd also add, Alex, you know, you've heard us talk over the last two years about our push to go up-market, and the retention characteristics and the growth characteristics in our up-market customer base are significantly better than our down-market customer base, which is diluting the up-market performance. We think this is a moment to rip the Band-Aid and really lean into that motion. You look at our operations business, which is now just under 20% of our overall ACV, that business is growing 20% year-over-year. It's the highest profitability part of our business, it directly correlates to customers needing more and more of our data as they continue to build internal AI applications and need to get their data foundation right.

This feels like the moment to lean into that in a more aggressive way than we have historically. On the guidance, we're being super conservative with it because we recognize there are a number of moving pieces to the rest of the year.

Got it. Maybe to the, Henry, to the point that you made earlier about, you know, some of your motions, particularly on kinda unleashing the data asset. It was particularly striking that at the same time as you're calling out, you know, kinda some headwinds in broader software and AI anxiety, two of your most iconic wins, I think that you cited in the quarter, were with Sierra and another AI unicorn. Maybe can you just help us understand how are I assume those two companies aren't, you know, massively expanding seat count. How are those two iconic wins specifically leveraging some of that, you know, kinda leading-edge functionality that you're talking about, and what do those either expands or lands look like relative to previous cohorts?

You know, I think the big difference that we're seeing is customers, those AI native customers, are building their own internal revenue workflows. You know, in software, you have a very opinionated interface that you provide your customers, and it's opinionated because you have product managers who deeply understand the domain, and they try to build a flexible enough interface or a generic interface that customers across a broad spectrum of types and revenue workflows can get value out of. The AI natives are building their own revenue workflows. They're building their own interfaces. They're bringing in their own first-party data. They're building in their own unique workflows.

Every company's go-to-market workflow is a little bit different than the next company's, but every company's go-to-market workflow requires data on companies, requires data on contacts, requires hierarchy and subsidiary mapping so that you could do territory segmentation and planning. These companies are coming in, and they're saying, "We have a revenue workflow. We built it. We've built a prospecting workflow, but we need data to plug into that." These deals are much heavier on the data consumption side, and much lighter on the seats.

Thank you.

as a big opportunity, an opportunity to embrace AI and really swing for a massive opportunity here. We think we're uniquely positioned to capture that. You know, if we were a traditional SaaS business, seats are not transferable into an LLM. It's very difficult to expand the surface area of where your product gets monetized. We are underlying a light SaaS interface is our data asset, which is the most important part of our business. We're gonna make that really available to anybody, anywhere a go-to-market workflow runs. We're uniquely positioned to be able to do that.

Thank you. Our next question comes from Raimo Lenschow with Barclays. You may proceed.

Hey, thank you. Quick question. What you see at the moment in software, is that the software companies are reducing their sales capacity, or is it that they are actively building the front end like the AI guys are doing? The question then becomes like, will it eventually then spill to other industries when they realize how the world is evolving? I have one follow-up for Graham.

I think it's a little bit of both, but I think at this point, we are happy to see it spill over into other industries because we think the bigger upside opportunity here is consumption of our data where every go-to-market workflow runs. So, yeah, we see it in software today, and we're, you know, leaning in to capture that opportunity with much more flexible pricing and the ability to transfer seat prices into consumption of our data. If this goes on into insurance and, you know, financial services or other segments, our APIs and MCPs and ability for our customers to use our data as the reference data architecture for all their go-to-market workflows Gets better and better and better every quarter, and it's about adapting our pricing and packaging models to meet the customers where they are. Where, you know, in software and sophisticated customers, they're leaning into building their own things, and we're gonna show up with consumption that they need for that. I don't view this expanding beyond software as a negative. It is what we're preparing the company for.

Yeah. Perfect. Yeah. Makes total sense. I mean, that's, you always have the very strong data set from the very beginning since we first met you. Graham, if you think about guidance, like how much is that, is guidance implying that, you know, software is moving versus other guys are moving? Is that do you think about this in stages? Like this year is more software and it's part of the guidance, and then next year something else? Are you going to like this year, the whole model gets flipped to consumption anyway, and so whatever other industries are doing, it doesn't matter then. Thank you.

Yeah. I think there's certainly a vertical specific assumption around software. Look, we still see good performance in our up-market business and our operations business. The revision to revenue and the cost out is focused on our down-market business where our margin profile is the worst. The development of uncertainty on multiple fronts is the primary reason behind the guidance revision, and we wanna minimize the risk of another negative revision.

Okay. Perfect. Makes sense. Good luck.

Thank you. Our next question comes from Allan M. Verkhovski with BTIG. You may proceed.

Hey there. Thanks for taking the question. You have a number of large up-market customers that spend millions on an annual basis with you. I think the reason for the shift to consumption makes sense. What kind of feedback and signals have you gotten that these larger customers are willing to spend the same amount, if not more, through a consumption model? I've got a quick follow-up.

Yeah. When you look at the customers that spend the most with us annually, a lot of those are Operations customers. Our Operations business is our fastest-growing business at scale, growing over 20% year-over-year. We've seen, you know, not only a, you know, lack of reluctance, but increasing demand from those customers that are not on a seat-based model, that are largely data access customers. What we've seen is not only do they have better gross retention outcomes, they have significantly better net retention outcomes. Where they, you know, come in at an entry point and then essentially buy more and more and expand their investment with ZoomInfo over time.

Got it. Graham, of your up-market ACV growth of 5% this quarter, what is the up-market software and non-software ACV growing? Within the 100K plus ACV customer cohort, can you share the number of customers that decline there? What % of them are software companies?

Up-market within, you know, the software portion of up-market, software overall was, you know, down a little bit sequentially in Q1. That is what is kind of creating the drag, both down-market and to some extent at the lower end of up-market. Within, within the 100K logo cohort, there are not as many logos period, but even software logos that are down-selling out of that. It really was a phenomenon of having less that were upselling into the quarter. We had better net from zero new sales into the cohort. We had significantly better down-sell on, or I guess lack of down-sell out of the cohort. Similar churn out as well.

It's really a kind of pause around incremental purchases that we saw at the end of Q3, and that was largely focused in software.

Thank you.

Thank you. Our next question comes from Brent Bracelin with Piper Sandler. You may proceed.

Hey guys. Thanks for taking the question here. Given the shift to more flexible pricing and packaging in the back half to better align with, to better align monetization with customer value, as we think about the guidance and as that kind of flows through the model, given the commentary around how some customers may end up paying more, some may end up paying less, can you just give us the building blocks for how we should think about this guidance in the back half? If I could sneak in a second one. With the closing of the Israel R&D center, can you just help us think about ZoomInfo's ability to balance investing for an AI era with kind of a lower R&D base?

Does this change any of your R&D priorities for the remainder of 2026? Thank you.

Yeah. You know, on kind of the composition of the guidance, when I look at the reduction and kind of breaking that down into the building blocks, about a quarter of that, a little bit more is coming from the down-market restructuring, where we're taking the least efficient down-market sales resources out and therefore in some cases foregoing or bringing in that inefficient down-market ACV at lower price points through a PLG motion. A little bit less than a quarter is coming from more cautious assumptions around software. A little less than a quarter is coming from the pricing ins and outs and the revenue recognition variability with the shift towards consumption. The rest is just a layer of incremental conservatism.

Yeah, look, I think the upside versus downside conversation as we, as we shift the model here is really gonna come down to timing and opportunity in the customer base. In Q3 and Q4, we're gonna learn more about what those net new customer sales look like and what the customer base migration looks like. In some cases, there'll be a balance of lower entry points that unlock upside of renewal or even intercontract, and it's just gonna be a timing equation with respect to that.

On the engineering side, there are two things. One, our engineers, with the help of coding agents, are delivering significantly multiple times more software into our platform than they ever have historically. We are seeing velocity boost. I mentioned all of the MCPs and integrations that we did over the last eight weeks. Just one of those would have taken us eight weeks, best case, a year ago. We're seeing real engineering efficiency coming from our leveraging of AI internally at ZoomInfo. I think the second thing is there are a number of roles that we won't have as much necessity for. We don't need as many front-end developers as we did before. We're able to build a front end in a really simple way.

Where a lot of focus historically was on the front end, more of the focus is now on the data infrastructure, the back end, and the flexibility of that data to get plugged into a number of places. It's not as necessary for us to have as many front-end application developers as we've had historically.

Thank you. Appreciate the granular detail on the guide.

Thank you. Our next question comes from Siti Panigrahi with Mizuho. You may proceed.

Just to follow up to that earlier question is, I mean, 600 jobs roles that you reduced, what's the mix of that in different functions, go-to-market versus R&D or any other back office functions?

Sure. It's mostly going to be R&D. You can think about it as like about half R&D, the rest of it is mostly going to be down-market sales and marketing resources. You could think about it as probably 90% R&D and down-market sales and marketing. There's some G&A that makes up another 10% or so of the roles.

Okay. NRR has been flat at 90% now for the last three quarters. As you are looking into further this deliberate shift away from this seat-based pricing and also some kinda churn you're expecting in software, what's the floor on NRR in 2026? Does it have to bounce back as you're thinking about growth to re-accelerate?

Yeah. I think the bounce back after, you know, potentially some near-term headwind here would certainly be the most important thing to, you know, as part of that return to growth. With some of the, you know, with the proactive shift in the pricing model, there may be some regression in overall net revenue retention, and that's certainly reflected in the guidance. I think we feel really confident about offsetting that quickly thereafter with upside from the shift towards the consumption model.

Thank you.

Thank you. Our next question comes from David Hynes with Canaccord Genuity. You may proceed.

Hey. Thank you, guys. Henry, we've talked a lot about more flexible pricing. I think that makes a ton of sense. Do you also have to get more aggressive in lower prices to re-accelerate demand?

I think that what we're thinking, DJ, is not creating artificial barriers to get in and leverage our data, particularly in the down market, where we have an opportunity to bring a customer on for lower prices, but align that customer to value through consumption of our data, either in our platform or in an LLM. We wanna make it really easy to transact with us. One of the core assumptions of this shift is that our PLG motion drive drives more opportunity down market by removing platform fees, seat minimum, and aligning towards consumption, which we think is better aligned to what the customer is looking for.

Yeah. Okay. Then Graham, a follow-up for you. Just based on how you're forecasting the business today, when do you expect to see a return to positive quarterly sequential revenue growth?

I'd say we expect growth to be sustainably positive by the second half of 2027 at the latest, with healthier underpinnings and nearly called unconstrained upside to our consumption TAM.

Yep. Okay. Very clear. Thanks.

Thank you. Our next question comes from Parker Lane with Stifel. You may proceed.

Hey, guys. Thanks for taking the question. I believe you said it was the third quarter that you'll introduce the platform fee with prepackaged credits. Just to be clear, for customers that have upgraded in 1Q and 2Q or will have a renewal that extends beyond the second half of the year, are you gonna be negotiating under this new pricing structure and maybe trying to shift them to a new model ahead of time, or is it only gonna happen at renewal? Second, do you anticipate less willingness to engage in similar durations? Do you think people will compress their duration at all in response to how fast things are moving out there?

Yeah, look, I think we're gonna have an opportunity to work with our customers to shift them into this pricing model regardless of renewal dates. It's not gonna be a forced shift, but in Q3 from a new business perspective, we'll be leading with this for the first time. Then with the customer base, we're gonna meet the customer kind of where the value is, and there's gonna be opportunities to shift them to this more variable pricing and away from kind of the more fixed model, and we see a lot of upside for the customer and for us in doing so.

Got it. Thank you.

I'm sorry, what was the second question, Parker?

It was on duration, if you see any less willingness to engage in similar durations, particularly those that have been multi-year.

You know, we haven't seen that with the operations business where you know, that has significantly longer duration than some of our other products. I would expect that we won't see a headwind on that front.

Got it. Appreciate it.

Thank you. Our next question comes from Jackson Ader with KeyBank. You may proceed.

Great. Hello, this is Nathan Ross on for Jackson Ader. Thank you for taking our questions. Regarding the Studio and Workspace, what's been the initial customer feedback on these tools thus far, specifically for Workspace since it's newer, and how do you expect these tools to attach to contracts going forward? Thank you.

Yeah. Initial, you know, we did a much more heavy push this quarter on GTM Studio. We introduced it to about a quarter of our customers who are now in trials of Studio. They're hands-on trials with their account managers and solution consultants. They're consuming data within Studio. Then we're moving a lot of those customers to paid customers of Studio. We feel really good about the feedback we're hearing there. There are use cases that weren't accomplishable inside of legacy ZoomInfo platform that they now are able to do inside of Studio that they wouldn't have been able to do before. We've layered AI inside of Studio, and all of that is really designed to drive consumption.

We expect Studio to be a meaningful driver of consumption of our data, through that platform. That's really where we're focused. You know, that's a similar model where instead of a platform fee, you're paying for consumption to come into Studio, and your upfront fees translate into consumption data and AI credits. It's been really positive feedback. It's really early still, but we feel really good about the feedback that we're hearing there. We continue to invest meaningful R&D dollars behind that platform as well.

Great. Super helpful. Then one more from me. As you guys transition to more of a consumption model going forward, how do you help customers get comfortable with the variable pricing who are originally used to seat-based fixed pricing? Thank you.

Generally, we'll work with the customers to kind of establish guardrails around the sizing of the initial purchase. We still expect this to be, for the most part, recommitted consumption spend, so they're paying for a level of credits upfront, and when they've gone through those credits, we can sell them more. We're, you know, really sensitive to making sure that the customers feel comfortable with that initial purchase and, you know, certainly comfortable with the value that we're ascribing to it.

Awesome. Thanks so much, guys.

Thank you. Our next question comes from Tyler Radke with Citi. You may proceed.

Thanks for taking the question. Just to double-click on the timing of all these changes. I think you talked about a 12-18 month sort of period of transition. Can you just remind us, are you essentially expecting all customers to be kind of migrated over to this new consumption plan by, you know, the second quarter of 2028? Is that the quarter where we see ACV growth trough, and then revenue kind of follows after that? Just walk us through the mechanics of that and anything we should keep in mind in terms of revenue recognition.

Yeah. I think if we're thinking about kind of the order of operations here, we plan to be leading the new business motion with this hybrid non-seat-based model by the end of Q3 this year, as well as kicking off kind of a more formal transition for customers who want to move to this and who we believe will benefit from this. As we get, I think what we said is in 12-18 months, we'd like to be closer to 50/50 from a seat-based ACV versus non-seat-based ACV perspective. Right now, we're two-thirds seats and about a third non-seats. I think, you know, shifting 15-17 points there over the next 12-18 months is our plan. We don't think that that is the kind of clock on when we get back to growth.

I think we're, you know, really confident in getting back to revenue growth on an annual basis by the back half of 2027, and that would probably be a quarter or so after we're back to a ACV growth trajectory.

Got it. How do you think about long-term GAAP operating margins, free cash flow margins under this new model? You know, obviously in the past, you guys have stepped up share purchases, you know, in periods where the stock is dislocated. How do you just think about all those pieces given the announcements today?

I think the biggest thing is that we are committed to protecting and growing cash flow per share in any set of conditions.

Thank you. Our next question comes from Brian Peterson with Raymond James. You may proceed.

Hey, guys. Thanks for taking the question. Graham, you mentioned that the operations business has longer duration. I'd love to maybe understand, you know, anything that you can share about that business in terms of end market exposure, sales cycles, you know, how much comes in kind of net new versus cross-sell as that becomes a more important part of the business. Thanks, guys.

Sure. you know, it's still a lot of the growth in the operations business does come from existing customers, whether they're ZoomInfo customers that are cross-selling into operations or existing operations customers that are expanding their operations spend. That's where the lion's share of it comes from. The net retention and the gross retention in the operations business is better than any other business within ZoomInfo. You know what that means is we still have a good amount of logo white space, whether they're existing ZoomInfo logos or not, so acquire as operations customers.

Graham, is there any sense for how much of that is tech or software related? You know, any help on end market mix?

It's pretty diverse. It's less, you know, software heavy than our kind of core offerings. It's very heavily weighted to large enterprises across a diverse set of verticals.

Great. Thanks, guys.

Thank you. Our next question comes from Austin Cole with Citizens. You may proceed.

Great. Thanks for taking the question here. I don't think there's been a lot of discussion about Copilot. I think last quarter was over 20% of total ACV. I'm just wondering if there's any update you can provide with respect to that metric or just how those renewals trended in the quarter or kind of if the shift is just transforming your overall vision for Copilot.

I think the pricing model will certainly play into how we package and sell Copilot here, but Q1 was another really solid quarter for Copilot. It continues to increase as a mix of the total business, and I think it was actually one of the brighter spots for us in the quarter. What will change in the future is how we price Copilot, and you should expect that it's priced, you know, more from a prepackaged credit perspective than historically where we sold it on a seat basis.

Great. Maybe just as a quick follow-up here. The AI confusion and some of the macro that you discussed earlier in the call, is there anything you can share with respect to maybe how that's just trended so far kind of in April and early May and whether those trends have continued or how those have changed more recently?

Yeah. It's pretty similar to what we saw at the end of the quarter. It's not necessarily getting worse. I think we're still in that pause phase.

Okay. Thanks.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the ZoomInfo fourth quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jerry Sisitsky, VP of Investor Relations. Please go ahead.

Thanks, Daniel. Welcome to ZoomInfo's financial results conference call for the fourth quarter and full year 2025. With me on the call today are Henry Schuck, Founder and CEO of ZoomInfo, and Graham O'Brien, our Chief Financial Officer. During this call, any forward-looking statements are made pursuant to the safe harbor provisions of U.S. Securities laws. Expressions of future goals, including business outlook, expectations for future financial performance, and similar items, including, without limitation, expressions using the terminology may, will, expect, anticipate, and believe, and expressions which reflect something other than historical facts are intended to identify forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk section of our SEC filings. Actual results may differ materially from any forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the forward-looking statements in the slides posted to our Investor Relations website at ir.zoominfo.com. All metrics on this call are non-GAAP, unless otherwise noted. A reconciliation can be found in the financial results press release or in the slides posted to our IR website. And with that, I'll turn the call over to Henry.

Thank you, Jerry, and welcome, everyone. We ended the year strong with record quarterly revenue and results that beat the top end of our guidance. In the fourth quarter, we delivered revenue of $319 million, up 3% year over year, and adjusted operating income of $123 million, representing a margin of 38%, once again returning to rule of 40 performance. In 2025, we delivered $1.25 billion in revenue with an AOI margin of 36%, and we grew free cash flow per share by more than 10% for the year. We also returned more than $400 million in capital to shareholders through share repurchases, all while investing in the business to drive innovation and build the GTM intelligence platform of the future. Our upmarket strategy is working. Upmarket again grew 6% in our seasonally largest upmarket quarter, triple the upmarket growth rate from a year ago. We now have 1,921 customers, with more than $100,000 in ACV, the seventh consecutive quarter of adding logos to this cohort, and $100,000 customers now represent more than 50% of total company ACV. We also have a record number of million-dollar-plus customers. And in the quarter, we delivered a double-digit increase in logos year over year, accompanied by an even larger increase to the ACV within that million-dollar customer cohort. More than half of our total ACV is now on long-term contracts, and that mix increased five points in 2025 alone. Customers are increasingly making long-term investments with ZoomInfo, as they realize the clearly differentiated value of our platform. The migration to Copilot continues as planned, and as Copilot scales, we are pleased to see continued strong uplift as we renew customers at higher rates on the Copilot platform. Over 20% of our total ACV is coming from Copilot after it more than doubled in 2025. Success in our operations business continues to be driven by demand for actionable high-quality data, a key foundation to power AI use cases. Operations again grew more than 20% year over year in the quarter. Our comprehensive data universe is the data advantage that organizations need to bring agents and workflows to life. ACV from operations is now nearly a fifth of our total ACV. 2025 was a year of fast-paced innovation as we rebuilt our product and engineering motions to be AI-first and leverage AI and LLMs to improve our data quality and build out the broader ZoomInfo platform. Our data moat has always been the foundation. Over a decade of innovation and expanding patent portfolio, and technology for aggregating and unifying B2B data that is nearly impossible to replicate. AI development tools have lowered the cost of building software, but they don't erode our advantage at the data layer. They accelerate what we can build on top of it. We are more than a horizontal software company. And AI has been an accelerant, expanding the use cases we power and the workflows where ZoomInfo shows up. Historically, our data powered specific prospecting and enrichment workflows with AI expanding that surface area into two clear directions. First, demand for entirely new categories of data. We launched nine vertical datasets this year. Franchise ownership, restaurant operations, commercial fleet intelligence, addressing specialized markets that generic B2B data never served. Second, new go-to-market use cases. Customers are using our data to power AI agents, build audiences programmatically, and run end-to-end campaigns that didn't exist two years ago. Operations, our data-as-a-service platform, grew more than 20% year over year, as we invested in data quality alongside that growth, adding over 10 million contacts and expanding coverage across six European markets. Because our customers' AI agents and workflows are only as good as the data powering them. That expanding surface area is why we built GTM Studio. An orchestration layer where revenue operations teams unify CRM data, warehouse data, and ZoomInfo intelligence in one workspace to build audiences enriched with AI agents, and activate directly into downstream systems. We've seen strong traction, particularly from companies using AI tools like Claude and ChatGPT alongside our platform. No other vendor in go-to-market controls both the data layer and the application layer with end-to-end orchestration and execution. That's our structural advantage. But orchestration without execution is incomplete. Revenue teams still operate across six or more separate tools: CRM, contact databases, conversation intelligence, research platforms, AI assistance, and spreadsheets. That fragmentation wastes the intelligence we deliver. Most sellers today have no AI-native interface. GTM Workspace is our answer. A fully AI-native command center where sellers get full GTM context with natural language AI synthesizing CRM data, signals, and conversation history. Customers can go from idea to campaign to execution to ROI measurement in one system. Over 20% of our total ACV is now on our first AI platform Copilot after it more than doubled in 2025, and as we expand Workspace to existing Copilot customers, we're seeing strong renewal uplift and opportunity to consolidate tool budgets. This is an enterprise-grade workspace that deploys in weeks, not months. And we've made ZoomInfo available where go-to-market work happens. Beyond our own application, we integrated our data directly into Cloud through MCP server technology, allowing our customers to use AI agents for audience building, meeting prep, and email drafting all powered by our data. We deepened integrations with Salesforce, HubSpot, and Microsoft Dynamics. Whether customers access our intelligence through our application, through an AI agent, or through something they built themselves, the data flows to where work happens. Positioning ZoomInfo as the only platform that delivers intelligence, orchestration, and execution for modern go-to-market teams. As you consider the product innovation that has taken place in 2025, I would also emphasize that we deliberately took our time to get it right, and we worked closely with customers to refine these products. We have not and will not optimize for any single quarter's results, but rather for the multi-decade opportunity we see in front of us. We are now ready to go on the offense with these new products commercially available in 2026, and those efforts are underway now with extraordinarily encouraging early signals. Including with monday.com's enterprise demand generation team, who used GTM Studio to unify data across internal and external sources. Helping them build sophisticated audiences with enriched signals and activating them directly in their marketing campaigns. Reducing campaign build time, and enabling them to launch more targeted initiatives each quarter. They have described GTM Studio as a game changer. During the quarter, we closed upmarket opportunities with Hilton Hotels, Edward Jones, a leading financial services firm with more than 20,000 financial advisers, Kaseya, a fast-growing IT management and cybersecurity software provider for MSPs, and Ronstadt, a global provider of staffing, recruitment, and workforce solutions. We won a competitive RFP to transform a Fortune 500 company's contact data management across their $20 billion business after we analyzed 25 million contacts and demonstrated best-in-class contact management, including identifying new buying committee members to support their pivot to service-based solutions. The consultant they hired concluded that no other competitor came even close, proving ZoomInfo is the right strategic partner for go-to-market business transformation. We migrated a $30 billion global IT company to Copilot by consolidating fragmented contracts across teams and subsidiaries into a single enterprise agreement with global data access and developer capabilities. These customer success examples and thousands more continue to illustrate why we are a critical piece of the go-to-market tech stack for some of the largest and most successful companies in the world. We are data and software used in concert. Whether you're working in Claude, using a bespoke five-coded app, or using a battle-tested, scalable, and secure piece of enterprise software, every instance whenever go-to-market is happening at scale, our data will continue to be critical to powering users and agents. No amount of AI makes that need for data go away, and only enhances the value that we create for these companies. AI multiplies the surface areas where go-to-market work happens and gives us new opportunities to monetize our go-to-market context graph and go-to-market data. Turning to capital allocation, I would first reiterate our commitment to using the majority of the cash we generate to repurchase ZoomInfo shares for as long as that is the best and highest return use of our free cash flow. Given the unprecedented negative sentiment of public markets toward anything software-related, we believe our share price is completely disconnected from economic reality. As such, today, we announced an additional $1 billion authorization for share repurchases, representing roughly 50% of our market capitalization. We have already retired nearly one quarter of our shares since the start of 2023, and we intend to opportunistically deploy this additional $1 billion while continuing to double down on execution. We have been presented with a generational opportunity to create value. While we can't control market forces, we do control our execution and our capital allocation. Our strong free cash flow generation and efficient operating model enable us to uniquely take advantage of the prevailing negativity. Equipped with our best products and our best leadership team ever, in 2026, we will rev our distribution engine and bring the go-to-market AI platform to all go-to-market professionals. We are confident in our path ahead and in our ability to sustainably deliver revenue growth and industry-leading profitability. We will continue to grow free cash flow per share while defining the future of go-to-market with solutions that help our customers win in increasingly competitive markets. With that, I'll turn the call over to Graham.

Thanks, Henry. Q4 GAAP revenue was $319 million, up 3% year over year, and adjusted operating income was $123 million, a margin of 38%, both above the guidance ranges we provided and, again, above rule of 40 company performance. For the full year, GAAP revenue was $1.25 billion, up 3% year over year. Adjusted operating income was $446 million, a margin of 36%, and adjusted unlevered free cash flow was $455 million. All above the guidance ranges we provided at the beginning of the year and above our updated guidance as we beat and raised throughout the year. Through a combination of revenue growth, disciplined profitability management, and consistent share repurchases, we also delivered on our goal of meaningful growth in free cash flow per share. Growing adjusted levered free cash flow per share from $1.07 in 2024 to $1.20 in 2025, representing 12% growth. At current valuation levels, we are in the range of a 20% free cash flow yield. Further supporting our belief in the opportunity to unlock enormous latent value considering the operating trends of the business. Q3 was a strong upmarket growth quarter for us, and we were pleased to see the momentum continue into Q4. We grew upmarket by 6% year over year in the fourth quarter, tripling the growth rate year over year in our seasonally largest upmarket quarter. We have successfully shifted four points of business upmarket over the past year, and we exit 2025 with 74% of our business now upmarket. These upmarket customers buy more of the platform and renew at higher rates, driving better growth and profitability outcomes. We now expect to reach 80% upmarket mix exiting 2027, several years ahead of our initial timeline. ACV from the $100,000 customer cohort grew double digits and now represents more than 50% of total company ACV. And we now have the most million-dollar-plus customers in ZoomInfo history. We are also successfully diversifying our business model beyond seat-based pricing as we look to align price with the value we deliver to customers. Seat-based pricing contribution mix peaked in 2022, and we have progressively decreased that contribution every year since then. AI activities, ELAs, data, and platform access continue to contribute to increasing the mix of non-fee-based revenues, which we expect over time will lead to more durable growth. Net revenue retention was 90% in the quarter, with similar levels of contribution from upmarket and downmarket as in Q3. Turning to cash, GAAP operating cash flow was $143 million in Q4, up 30% year over year and seasonally stronger than anticipated. Unlevered free cash flow for the quarter was $135 million, 110% conversion from adjusted operating income and representing a margin of 42%. Q4 was stronger than expected due to timing of customer payments, and as a result, we would expect conversion to moderate in Q1. We have accounted for that Q4 overperformance in our 2026 unlevered free cash flow guidance. Stock-based compensation expense declined below 10% of revenue for the year, with improvements coming through a combination of revenue growth and an absolute decline in stock-based compensation expense. We believe this is an important consideration comparing the quality of our earnings relative to software benchmarks. Additionally, we continue to aggressively shift our equity compensation to performance-based plans, further aligning executive compensation with shareholder value creation. When looking at our gross share dilution, which is low in absolute terms, keep in mind that much of that dilution will only occur if we achieve rigorous growth and free cash flow objectives. We only want our team to win when shareholders do. In Q4, we repurchased 7.7 million shares of common stock at an average price of $10.26 for an aggregate $79 million. For the full year, we repurchased 40.5 million shares at an average price of $10.06, representing 12% of total shares outstanding, or an aggregate $407 million. Weighted average diluted shares outstanding for the quarter used in calculating non-GAAP diluted earnings per share was 327 million, and the non-GAAP share count exiting the year was 324 million. Over the past two years, we have returned nearly $1 billion to shareholders through repurchases. With the additional $1 billion authorization announced today, at the current stock price, we now have board authorization to repurchase more than 50% of the company's outstanding shares. As Henry indicated, we reiterate our commitment to using the majority of the cash we generate to repurchase ZoomInfo shares for as long as that is the best and highest return use of our free cash flow. And at these price levels, and with a healthier upmarket customer base and a promising suite of new innovative AI products that we're just now bringing to market, our conviction is as high as ever. We ended the quarter with $180 million in cash, cash equivalents, and investments, and we carried $1.3 billion in gross debt. As a result, our net leverage ratio is 2.4 times trailing twelve months adjusted EBITDA, consistent with the year-ago period. And 2.4 times trailing twelve months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements, as compared to 2.2x in the year-ago period. The interest rate swap contract used to manage our exposure to interest rate movements related to our first lien term loan matured on January 30, 2026. Interest expense for the first lien term loan bears a variable interest rate based on SOFR, and as a result, we expect the interest expense on our outstanding debt to increase. We have also continued to restructure and rightsize our real estate footprint. And during the year, we recorded impairment charges as we reduced the carrying value associated with our Vancouver, Washington, and Renanah, Israel offices. We expect restructuring cash flows in 2026 related to funding tenant improvements for the excess space that we have sublet. With respect to liabilities and future performance obligations, unearned revenue at the end of the quarter was $478 million. Remaining performance obligations, or RPO, were $1.25 billion, of which $887 million are expected to be recognized in the next twelve months. Calculated billings were flat for the year, while current calculated bookings were up mid-single digits for the year. There is inherent volatility in both of those metrics, and I would continue to caution you from extrapolating too much from the trajectory of either. When considering balance sheet reserve entries, billing terms and policies, early renewal volume, and the impact of lower write-off on reserve rates, billings and current bookings growth rates more closely mirror each other in the positive low single-digit range, which is a better proxy for our current growth rate. In summary, we delivered strong Q4 results, carrying the momentum we had coming out of Q3 through to the end of the year. And we enter 2026 excited about the incremental tailwinds ahead. Transitioning to guidance, for Q1, we expect GAAP revenue in the range of $306 million to $309 million, adjusted operating income in the range of $105 to $108 million, and non-GAAP net income in the range of 25 to 27 cents per share. For the full year 2026, we expect GAAP revenue in the range of $1.247 to $1.267 billion, representing positive 1% annual growth for the year at the midpoint of guidance, and adjusted operating income in the range of $456 million to $466 million, representing a 37% margin at the midpoint of guidance. We expect non-GAAP net income in the range of $1.10 to $1.20 per share based on 325 million weighted average diluted shares outstanding, and we expect unlevered free cash flow in the range of $435 to $465 million. From a modeling perspective, items that I would call out as you think about 2026, we are more confident in the foundation of the business, and our guidance reflects that. Q1 2026 has two fewer days than Q4 2025, which should be considered when comparing sequential trends. And similar to 2025, I expect our AOI margin to decline sequentially in Q1 from Q4 and steadily build throughout the year as Q1 margins are impacted by payroll taxes and other benefit resets. Also, I would expect a non-GAAP tax rate of 12% in 2026, cash interest expense in the range of $60 million to $65 million, and CapEx as a percentage of revenue closer to 5%. In closing, we remain committed to properly managing expectations, delivering revenue growth, margin expansion, and aggressive share repurchases in 2026, which support our expectation of continued free cash flow per share growth. Now I will turn it over to the operator to open the call for questions.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone. To withdraw your question, please press star 11 again. In the interest of time, we ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster. Our first question comes from Mark Murphy with JPMorgan. Your line is open.

Thank you very much. Henry, how are you assessing the health of the broader software industry currently? Just given all the concerns out there about AI disruption and because it is still a pretty material end market for you, do you see any signals that would either confirm or deny the concept that the fundamentals might be shifting around for some of those larger, preexisting software players that have been around a long time? Then I have a quick follow-up.

Yeah. I mean, I think that, obviously, this is peak negativity in software businesses. But I think that our customers, when we're talking to them, their perspective about growth hasn't changed. They are still focused on growth, and they want to grow in an efficient way. And they're looking for new and innovative strategies to drive top-line growth in their go-to-market organizations. But that hasn't changed at all.

And then thank you for that. Can you comment on whether any of the major top 10, top 20 kinds of AI-native startups are customers of ZoomInfo? I mean, if you think about the larger ones, OpenAI, Anthropic, Cursor, Perplex, Mistral, and then you kind of fan out from there. Is ZoomInfo participating in the growth of that AI segment of the economy? And if so, is there any way to dimensionalize that?

Yeah. Many of the top 50 AI-native, fastest-growing companies are customers of ZoomInfo. Thank you.

Thank you. Our next question comes from Elizabeth Porter with Morgan Stanley. Your line is open.

Hey, Henry and Graham. This is Lucas on for Elizabeth Porter. Thank you for taking my question. I was hoping you could touch on the path for margins as we get through FY 2026. And the business shifting upmarket where you mentioned margins are a few thousand basis points higher. So and then on the back of that, how can we think about the additional investments needed to penetrate your predominantly upmarket TAM in the future? Thanks.

Yeah. I can cover that. We were pleased to deliver margin improvement in 2025 relative to 2024. Our initial guidance assumes almost another point of margin improvement as we shift the business more and more upmarket. Upmarket business is now 74% of our total ACV. That's up four points in 2025. That's up, I think, about nine points over the last couple of years. As a reminder, that upmarket business, we estimate to have several thousand basis points higher margins than the downmarket business. So we'll continue to especially benefit from the better sales efficiency of that upmarket. When you think about the margin guide holistically, we're baking in a point or two of gross margin pressure there as we roll out some of the newer products of GTM Studio and GTM Workspace where there will be an AI action credit component that we believe all could drive revenue upside. It will also lead to potentially a little pressure on gross margins. So we're really confident in the kind of margin benefit we get from the upmarket business specifically in the sales and marketing line, more than offsetting that gross margin pressure in 2026.

And while we're going to continue to invest in our new products and our new innovative solutions, we're going to do that while continuing to expand margin. Thanks, guys.

Our next question comes from Brad Zelnick with Deutsche Bank. Your line is open.

Great. Thank you so much. So Graham and Henry, a lot of really healthy signals in Q4, both quantitatively and qualitatively new products. Henry, your comments about going on the offensive. You know, great brands, Hilton, Edward Jones, Kaseya. How do we reconcile that all with guidance for decelerating growth? What are your core assumptions for next year, specifically around downmarket? And anything else that frames the way that you're guiding us? Thanks.

Yeah. Brad. Our guidance philosophy continues to be setting targets that we can meet and exceed. In 2025, we outperformed our initial model. We beat by more than that initial model assumed. So while my approach to full year is similar to what it was last year at this time, I think it's fair to assume that our quarterly beats could be smaller. We're a more stable business due to our upmarket mix. I have better visibility into the trajectory of that business, and I'm more comfortable in guiding because of that business. Our guidance conservatively assumes that upmarket growth stays where it is or decelerates and the downmarket gets worse. I'll also note that we've included no revenue contribution from go-to-market studio or the other new products we're bringing to market in 2026 in the revenue guidance. While embedding an assumption on the associated cost of those products in our AOI cash flow and adjusted earnings per share guides.

Very helpful. Thank you.

Thank you. Our next question comes from Alex Zukin with Wolfe Research. Your line is open.

Hey, Thanks for taking the question. Maybe just the first one for me. Henry, you talked about how you're seeing customers connect their AI solutions to the ZoomInfo platform. And I guess I'm just curious, how are you monetizing that connectivity, the broader engagement presumably that you're seeing as those things get kind of orchestrated and plugged in? And how much do you expect kind of that type of engagement or growth to be a tailwind over the next twelve months? And even maybe comment on kind of some how how you're hearing the other horizontal op vendors approach this dynamic?

Yeah. I mean, I think first, if we were just a software vendor, we wouldn't have this opportunity in front of us. I think when I was on a call last week with a large financial services firm, and they're building their own internal app where their financial team can go get answers and insights on any questions about businesses that they're prospecting into or wanting to learn from. And the first thing they asked us was, can we use your MCP server to plug into that? And they can. And so we're currently in the process of implementing our MCP server for them. That's a surface area we would never see before. We would enrich in CRM, or they would use our product in a traditional SaaS application. But now the surface area for where they want our data is expanding. And our technologies are plugging into those surface areas. Our guidance today looking forward through '26 doesn't take into consideration any tailwind from those new products or the expanding surface area where we see our data plugging into. That's a consumption-based model, very similar to our DaaS and operations business. Where when our customers consume that data, they're charged a consumption fee.

Understood. And then, Graham, maybe following up on Brad's question about conservatism. If we look at the guide for the next year, if I look at CRPO coverage, it actually looks I think, identical to this time last year. And you obviously were able to kind of come in above and beyond where you guided originally. Would you call your guidance methodology kind of similar levels of conservatism vis a vis this time last year more conservative, kind of gauge it for us as to how we should expect the progression through the year.

Yeah. You know, the CPRO coverage gives me a good amount of comfort in the guide. There is a little bit of noise in the CPR when you think about early renewal volume and the kind of the quarter-to-quarter trends there. You know, I wouldn't say it's more conservative, and I would but I would also couple that with know, this is our initial guide for 2026, and the way we do this structurally is we'd expect this to be the most conservative guide from a full-year perspective that we do this year.

Perfect. Thank you.

Thank you. Our next question comes from Ryan McWilliams with Wells Fargo. Your line is now open.

Hey, this is Cyrus calling for Ryan. Just two questions quickly. How were SEO trends in the fourth quarter? And how are you guys thinking about the contributions from seat growth and usage revenue as components of the fiscal '26 guide? Thank you.

What was the first part of your question? Our SEO trend in the fourth quarter.

Yeah. Why don't I cover the second part first? On the seat-based versus consumption pricing models. I think, you know, what we, I think, called out in the script this quarter for the first time is that we are you know, we've been successful in diversifying our pricing models over the last few years. We were effectively at the highest contribution from seats back in 2022. We're meaningfully lower than that peak now. And with you know, these kind of next evolution of products that we're rolling out, I would I'm very confident in saying that that mix will continue to go down where we're more and more of our revenue will be coming from consumption, and closer to value-based pricing for our customers.

I would add that with these new products, they with the early cohort of customers who are using our GTM Studio products, who have plugged in our API and our MCP technology into their own applications for enrichment and cleansing of the data, the feedback has been incredibly positive. And we are increasingly confident that that's going to be a positive tailwind for us in 2026. On SEO and AIO, what I'd tell you is first, the negative impact has stepped down modestly. But we haven't seen a return to prior levels. We had a period of time where we were reacting and then now and then finding ways to optimize against what was changing in the search landscape. But we feel really good about our strategy there. And I've already started executing against the strategy to improve the top of the funnel demand that was impacted by the changes on AI and SEO. And we're really optimistic and confident about the playbook that we're running there.

Perfect. Thank you.

Our next question comes from Taylor McGinnis with UBS. Your line is open.

Yeah. Hi. Thanks so much for taking my questions. Maybe, first one, I think you mentioned that underlying, you know, bookings growth. So if you take out some of the noise, is in the low single-digit range. So could you just comment like what the catalyst path is for that growth rate going forward and when we could start to see underlying bookings growth start to improve. And I would imagine, to some degree, that's being weighed down by what you're seeing downmarket. So can you comment on the trends that you're seeing downmarket and how you're thinking about that going into 2026?

Sure. So upmarket growth is at 6% on 74% mix. Downmarket growth is negative 10% for the second quarter in a row on 26% weight. If you weight those, you get about a 2% ACV growth in aggregate figure. In 2026 and moving forward, we will get the benefits of mix. Right? So as that market goes from 74 potentially to 75, 76, we talked about getting to 80% by 2027. The more weight that we have from a growing business should translate into overall accelerating or better growth from that one to 2% range. In the downmarket business, you know, that's where we primarily feel the impact of the AIO challenges there. And as we get further into 2026, when we feel really confident about addressing those and getting a lot of that traffic back, we start to lap pretty negative comparisons that essentially should be a tailwind as we get into the middle of 2026. So I think that we'll have more achievable comparisons downmarket that should help to turn around what is a smaller and, you know, getting to become a healthier business, and that should become less dilutive to overall growth as we progress through 2026.

Perfect. And then, Henry, maybe just one Oh, yeah. Go ahead.

No. Go ahead, Taylor. I'll answer after.

Yeah. I was just gonna ask. So, Henry, when you think about 20% copilot penetration and a lot of the good demand that you're seeing around the data side of the business. Just curious if there's any initiatives in 2026 to unlock the growth potential in those areas further.

Yeah. I think first, one thing that I would add to Graham's commentary there is that there's more and more business from Copilot now in the customer base and in our ACV number, and we continue to see higher net retention rates from those customers who came on to Copilot versus our legacy non-AI solution. So we think that'll continue to be a tailwind for us. You know, we are aggressively moving our customer base onto Copilot and GTM Workspace and getting them access to our new AI tools. Those we believe will continue to be positive tailwinds to our business as well.

Perfect. Thank you guys so much.

Thank you. Our next question comes from Raimo Lenschow with Barclays. Your line is open.

Hey. Thank you. Henry, if you think about, like, at the moment, there's as you said, maximum uncertainty in the space. If you, like from your perspective, like, in terms of the way out, do you think it's gonna be more confident on the copilot and that you kind of actually lot more than you know, just a data provider, or do you think that it's more customers and realize the value of the data that you're providing and the uniqueness of the data? Thank you.

Yeah. I think, you know, a couple of things. One, we think we all feel much better about the stability of the customer base sitting here today than we felt a year ago. We think it's more durable. It's much more upmarket than it was a year ago. And so we start, you know, from a better place with better products and better data. Now when we think about, you know, the future growth of the business, you know, one, people, a lot of our customers still want a workspace for their sellers to operate out of, and they don't have native AI workspaces within their own businesses. And so we're gonna be able to continue to be a provider of the application layer above our data and insights asset. But a core part of that asset today which is very different than it was, you know, a year or two years ago, is our ability to bring first-party data together with third-party data to build that context service and that context graph that they then can work on top of. If I'm just building an account plan or a deck or preparing for a meeting, on just my CRM data, or just, with the data that's in an LLM, I miss a bunch of context about conversations I've had with that customer, about whether they visited my website, about executive changes, and we're able to bring all that first and third-party data together to build that context graph that then our customers build on top of. And so as I think through the future, you'll wanna that that's a meaningful change. And so when you think about our data being provided to our customers, it's not just our third-party data. It's the unification of that first and third-party data that then drives what they build on top of that. And so as we go forward, I do anticipate that more and more of our customers are gonna leverage our data and insights within applications that they build or within applications that they've already bought, and our technology will make it easier and easier for them to do that.

Okay. Perfect. Thank you. Very clear. Thank you.

Thank you. Our next question comes from Davis with Canaccord Genuity. Your line is open.

Hey, guys. Thank you for taking the question. Graham, can you talk about realized pricing at renewals during Q4, maybe compared to the last few years? And then Henry, kind of along the same lines, anything you're thinking about from a pricing and or package perspective as we work through 2026 and you roll out these new products? Thank you.

The first cohort Yeah. The renewal outcomes were really positive in Q4 relative to the last few quarters. I think, you know, our customer base is becoming stickier. We're building products that are the customer retention customer retention. And, you know, I specifically have a call out to a pallet call out to a pallet. We talked about this in Talked about this Q3. Customers that were sold customers that were sold on new business came up from renewal and came up with and and came up Those customers performed significantly better significantly better than our legacy And that continuing to support. We're talking about we're talking about mid-single-digit renewal better renewal outcomes relative to our legacy products.

And then DJ, on your question here, like, our first goal is to delight our customers and give them better products than we've ever had, than we've ever given them before. That's been a consistent focus of ours over the last number of years. And so what we actually believe is that they are going to use our data, use our insights, in vastly more ways. And so from a pricing and a packaging perspective, we think that we'll participate or we're gonna participate as they consume more and more of our data, more and more of our insights in more and more places.

Daniel, why don't we go to the next question in the queue, please?

Thank you. Our next question comes from Koji Ikeda with Bank of America. Your line is open.

Yes. Hey, guys. Thanks so much for taking the question. I wanted to ask about net revenue retention at 90%. Flat with the third quarter. I realize this is somewhat of a backward-looking metric, but I was also a bit surprised it didn't expand this quarter given heavy enterprise renewals and the upmarket growing percent? And so maybe walk us through this NRR metric a little bit and how this expands from here. Thank you.

Yeah. When I think about the NRR metric, and split it out upmarket versus downmarket, our upmarket net retention in period is still at 100%. So, you know, we're really focused on the path to getting that to 105%, but that held in really well. And downmarket is still a little bit above where it was in the first half of the year. You know, I'll note that the PUBCO, the net revenue retention, 90%. Did get better. It just it didn't round in the quarter. So I still think we're confident in the path to continuing improving that retention metric.

Thank you. Our next question comes from Parker Lane with Stifel. Your line is open.

Hey, guys. Good afternoon. Graham, one for you. If you look at the uptick in 100,000 plus customers quarter over quarter, very nice. Wondering if you could give us a sense of what percentage of customers landed there in the quarter versus expanded there and what that trend looks like relative to last year's 4Q and some of the recent quarters you've seen?

Yeah. You know, we're still have a really strong and actually improving upmarket motion, which upmarket new business motion, I should say, where we are able to land more and more of these customers, at that 100k or higher price point. It's still small relative to the activity in the customer base. So the you know, our ability to upsell a customer that's spending below 100k to above 100k still gonna be, you know, on a volume basis contributing the most. Other the flip side of that is we're having, you know, a lot more success with customers not downselling out of that 100k cohort, which was, you know, more prevalent in 2023 and 2024. So once customers start spending the 100k, we have a lot they're a lot stickier at that price level. You know, we were really pleased to see the significant logo ad there. But we're even more confident in the kind of, the future ACV growth within that quarter. Think we still have an opportunity to continue to grow the logos and add logos into that cohort. We're just short of our all-time high. Of logos in that cohort. But the real success and I think a lot of the growth in the future gonna be come from taking a customer that's spending 150k and working with them to, you know, get them on a package that is 300k or 500k. In other words, the ACV growth from those customers already spending 100k will contributing the lion's share of ACV growth in that cohort in the future.

Got it. Thanks, Grant.

Thank you. Our next question comes from Tyler Radke with Citi. Your line is open.

Yes. Thanks very much for taking the question. Wanted to just get your sense on how you expect this consumption pricing model to evolve? Like, what are your aspirations for where this could be the percentage of the business? And how do you think about this in terms of an accelerant to the overall growth profile?

Yeah, man. I think you see the beginnings of that with our operations business, is growing over 20% year over year, but it's happening in a much less programmatic way than what than the products that we're releasing today will provide for. And so a customer in our operations business may plug in our APIs for enrichment in a CRM, or they may take a data file that they integrate with Snowflake and that's a much more, you know, manual business motion for us. Than our new products, which plug in seamlessly into, Quad or OpenAI and allow them to take advantage in a much easier way of our data and our insights. And so we think consumption trends should follow, very much what you see in operation.

Great. And then follow-up for Graham. Nice to see the upsized buyback here. How are you thinking about just deploying that just considering I think you have about $150 million of cash? Are you expecting to raise additional debt? Or is this sort of just prioritizing the cash flow that comes in towards buybacks?

Yeah. No. I think we'll probably go into the back half of this quarter with anywhere from $170 million to $200 million of cash on hand. To deploy. I still wanna keep $125 or so million on hand at any given quarter end. We also, you know, continue to generate a lot of free cash flow. It's a really impressive free cash flow profile that we have. So I think our guidance implies $400 million or so of free cash flow available for allocation. And then, you know, if depending on where the share price is, we always have the opportunity to explore other options to go be opportunistic in this market.

Thank you.

Thank you. Our next question comes from Brian Peterson with Raymond James. Your line is open.

Hi, guys. Thank you. This is Jonathan Carey on for Brian. So I wanted to get at the AI debate in maybe a little bit of a different way. So Henry, on the budget process, would you say enterprise customers have changed their thinking such that there's actually a segment, like an AI or innovation budget that ZoomInfo is tapping into that's been segmented out? And if that is the case, then what's your sense for how that incremental budget has been carved out?

Yeah. I mean, I think there's definitely incremental budget for AI initiatives inside of companies, particularly in the enterprise. And, you know, historically, we wouldn't be involved in that budget or in those conversations. And today, we see our pathway into those conversations with our MCP and API technologies. And all of the AI initiatives that are happening at these businesses need high-quality data to work on top of. Particularly when you see, like, a lower quality data when managed by humans. Can be managed in a one-to-one or one-off basis. When lower quality data gets into the hands of agents and starts getting worked out at scale, that becomes a bigger and bigger and bigger problem that you can't unwind yourself from. And so there is an appetite one, for more data, but specifically for more high-quality data to drive those internal AI initiatives. And so that was a budget line item that we historically didn't have access to. And today, we are finding our way into.

Very clear. Thank you.

Thank you. Our next question comes from Surinder Thind with Jefferies. Your line is open.

Thank you. Henry, can you maybe talk about just the current copilot penetration? And I think you had set a three-year target when it was launched to kind of substantially have all of your customers on the new product. Can you talk about actually where we are in that cycle and what that really means for where ACV is today and where it will ultimately get to?

Yeah. I can cover, then Henry can add on if he's got anything else. You know, we're at 20% penetration of the overall customer base. Let's say that we are on schedule, but a little bit ahead of schedule relative to the migration plan that we rolled out back in 2024. So we'll continue to migrate that core customer base to a Copilot experience over the next two years or so. And, you know, we'll continue to be successful in getting uplift as we do that. A lot of our customers are on longer-term contracts. We have opportunities to move them off cycle, but a lot of them do, you know, end up waiting until they come up on a renewal event. And I'll, you know, I'll point back to the migration is going well. Really pleased to see, though, that the renewal outcomes after actually being on Copilot for a year are better than, you know, what we saw from legacy SalesOS. So that's where the real upside starts to kick in as we move more and more customers both from a new business and an existing business perspective onto a Copilot experience.

So I apologize. Just to clarify for my benefit, the ACV is 20% Right now, Copilot is 20% of ACV. But is that also reflective of the base penetration, or is that different from the adopted at this point relative to where how many clients have yet to adopt?

Right. So I guess what I would say is that is 20% of the total ACV of the full company. Not all of that ACV is targeted for migrations. Things like, you know, operations or ZoomInfo marketing solution. Of the base that was on SalesOS 20% is, you know, significantly higher. It's closer to 30% plus, that have been migrated.

Thank you.

Thank you. And our final question comes from Rishi Jaluria with RBC. Your line is open.

Oh, wonderful. Thanks so much for taking my question. I'll keep it at one. But I want to understand, so from a pricing and business model perspective, great to see, kind of the stats on increased mix towards consumption and data, right, to kind of insulate from the seat-based pressures that may or may not occur out there. I mean, I know that's a crystal ball. But I want to maybe understand, you know, at the same time that we're having these conversations and aligning pricing with value, you know, customers love predictability. Right? It's not just on us on Wall Street that, it. So how are you working with your customers to navigate that so there's we don't end in a position down the line, even if it's a few years from now, where customers are, you know, maybe facing sticker shock or paying a lot more than they thought? Maybe just help us understand how you're thinking about that. Thank you.

Yeah. We've built in a lot of transparency into how consumption pricing works across our different consumption-based models. And so customers have visibility into how they're consuming effectively credits and dollars, as they deploy our solutions. They have controllability of that spend. And then, you know, our intention is to work really closely with our customers as they roll these things out so that we can be ahead of any surprises from a consumption and cost perspective with them.

Alright. Helpful. Thank you so much.

Thank you. And we do actually have an additional question from Clark Wright with DA Davidson. Your line is now open.

Hi. Thank you. Henry, this is for you. How do you inflate the data quality advantage you've historically had and the associated pricing power stemming from that asset, especially as we think about AI scraping tools and the continued innovation in that space?

I think the biggest thing that we're seeing there is I mentioned it a minute before, but the quality of data is becoming an increasingly important metric that customers are looking at as they deploy AI agents on top of their data foundations. And so, you know, maybe historically, I would have been okay with 70% accurate data. But today, when I have AI agents operating at scale on top of that data, that creates more and more problems that I can't manage at scale. And so the value of quality data is increasing in our perspective and in our customers' minds. And so we're gonna you know, we have a different seat at the table than we've had historically when it comes to quality.

Got it. Thank you.

Thank you. This concludes today's conference call. Thanks for participating, you may now disconnect.