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DATE

Monday, May 11, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

  • Founder and Chief Executive Officer — Henry Schuck
  • Chief Financial Officer — Graham O'Brien
  • Head of Investor Relations — Jerry Sisitsky

TAKEAWAYS

  • Revenue -- $310 million, up 1.5% year over year, surpassing the high end of Q1 guidance.
  • Adjusted Operating Income (AOI) -- $110 million, a 35% margin, increasing more than two points from the prior year.
  • Unlevered Free Cash Flow -- $120 million with $21 million in cash interest paid, representing 109% conversion from adjusted operating income and a 39% margin.
  • Upmarket ACV -- Grew 5% year over year, compared to 6% growth in the previous quarter and 3% in the year-ago period.
  • Downmarket ACV -- Declined 11% year over year, consistent with fourth quarter and prior year declines.
  • Operations and Data as a Service (DaaS) Growth -- Exceeded 20% year over year, now comprising just under 20% of total business.
  • Net Revenue Retention -- 90%, unchanged for three consecutive quarters.
  • Customers With>$100,000 ACV -- Increased by 32 year over year, decreased by 21 sequentially; ACV from this group rose 10% year over year.
  • FY 2026 Revenue Guidance -- Lowered to $1.185 billion–$1.205 billion, a 4% decline at midpoint, reflecting a full-measure revision.
  • FY 2026 AOI Guidance -- $437 million–$447 million, implying a midpoint AOI margin of 37%, up 130 basis points year over year.
  • Restructuring Actions -- Impacting 20% of employees (about 600 roles), including the closure of facilities in Israel, with expected annual run-rate operating expense reduction of $60 million and restructuring costs of $45 million–$60 million, primarily in Q2 and Q3.
  • Platform and Pricing Strategy -- Transition to a hybrid model blending annual platform fees with pre-purchased data credits, targeting a shift from two thirds seat-based ACV to a near 50-50 mix within twelve to eighteen months.
  • Product Integrations and AI Initiatives -- Notable integrations with Salesforce, HubSpot, and launches with ChatGPT, Claude, Copilot, Perplexity, and Google Gemini; data integrations doubled year over year with MCP connections rising organically.
  • Share Repurchases -- 13.1 million shares repurchased at an average price of $6.91 per share, totaling $90 million; over $1 billion in remaining share repurchase authorization.
  • Cash and Debt Position -- $175 million in cash, cash equivalents, and investments; $1.3 billion in gross debt; net leverage ratio of 2.4 times trailing twelve months adjusted EBITDA.
  • Interest Rate Hedging -- $425 million in notional interest rate swaps at a 3.28% fixed rate to reduce SOFR-linked expense volatility.
  • Remaining Performance Obligations (RPO) -- $1.812 billion, with $861 million expected to be recognized over the next twelve months.
  • Q2 2026 Outlook -- Guidance for revenue at $300 million–$303 million, adjusted operating income between $103 million and $106 million, and non-GAAP net income of $0.26–$0.28 per share.
  • Cost Structure Targets -- CFO O'Brien stated, "I expect cost of service to be 13%-14% of revenue, sales and marketing closer to 27% with a path down to 25%, R&D steady around 10% with a path lower, and G&A at 10% with a path lower."
  • Stock-Based Compensation -- $25.5 million in Q1, down 14% year over year, now at 8% of revenue.

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RISKS

  • CEO Schuck noted, "as macro conditions worsened at the end of the quarter, we experienced a regression in our downmarket and upmarket growth trajectory," contributing to revised lower full-year guidance.
  • CFO O'Brien stated, "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."
  • Management cited customer confusion regarding AI and product differentiation, leading to "a pause in purchasing decisions," especially among software customers facing a confusing purchasing landscape compounded by the threat of their own growth disruption.
  • Revised guidance projects a 4% year-over-year revenue decline at midpoint, reflecting near-term headwinds as the company executes against its strategic initiatives.

SUMMARY

ZoomInfo Technologies (GTM 5.33%) reported revenue and AOI above prior guidance, but announced a significant downward revision to 2026 full-year revenue due to deteriorating macro conditions and buyer hesitation tied to AI-related uncertainty, especially in the software sector. Management is executing a transformation to a hybrid pricing model favoring data-led consumption and reducing reliance on seat-based licensing, aiming to reach a fifty-fifty mix between seat-based and non-seat-based ACV within eighteen months. The organization is implementing major restructuring, including a 20% workforce reduction and the closure of its Israeli offices, to streamline costs and focus R&D spend on back-end data infrastructure and AI enablement. The company highlighted new large customer wins and deepened product integrations with major platforms, as well as continuing strong cash generation and extensive share repurchases. Strategic guidance now anticipates a period of negative revenue growth through 2026, with a margin improvement path to 40% achievable upon return to consistent growth, mostly beginning in the back half of 2027.

  • CFO O'Brien detailed, "about a little more than a quarter" of the revenue guidance reduction stems from downmarket restructuring, with further impacts from software vertical caution and pricing model shifts.
  • Management shared that Copilot increased its mix of total ACV and that pricing is shifting from seats-based to prepackaged credits.
  • Engineering resources are being reallocated—with half of role reductions in R&D and most remaining cuts in downmarket sales and marketing—to accelerate the transition to high-margin, data-focused offerings.
  • In response to investor questions, Schuck said, "We are positioning the company from a pricing and packaging perspective to take advantage of that situation," emphasizing alignment with evolving customer needs for flexible data access.
  • Integrations with Salesforce and HubSpot as primary external data providers, and multiple new LLM platform connectors, underscore the company's strategic move away from exclusively SaaS-centric delivery models.

INDUSTRY GLOSSARY

  • ACV (Annual Contract Value): The annualized value attributed to each customer contract, a critical recurring revenue measure.
  • MCP (Model Connectivity Platform): Internal ZoomInfo Technologies designation for its connectors enabling data integration with AI and LLM interfaces.
  • DaaS (Data as a Service): Cloud-based delivery model for data provisioning, often sold in consumption-based packages rather than per-user licensing.
  • PLG (Product-Led Growth): A go-to-market strategy where product usage and self-service drive customer acquisition and expansion.
  • NRR (Net Revenue Retention): A cohort-based metric measuring renewal and expansion net of downsell and churn over a defined period.
  • RPO (Remaining Performance Obligations): The total contracted future revenue yet to be recognized, including both billed and unbilled commitments.

Full Conference Call Transcript

Jerry Sisitsky: Thanks, Josh. Welcome to ZoomInfo Technologies Inc.'s financial results conference call for the first quarter 2026. With me on the call today are Henry Schuck, Founder and CEO of ZoomInfo Technologies Inc., 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 irzunato.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 will now turn the call over to Henry.

Henry Schuck: Thank you, Jerry, and 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. 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 make 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 trajectory. 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 are revising our full-year guidance down in conjunction with significant cost reductions that we believe will position us with structurally higher operating margin 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 Technologies Inc.

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 have seen in the first twenty 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 offering. Our strategy is to make ZoomInfo Technologies Inc.'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 workloads 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 seat-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 Technologies Inc.

ZoomInfo Technologies Inc. understands complex Global 2000 account hierarchies, curates proprietary contact data, 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 Technologies Inc. Capturing this shift requires us to sell and operate differently. Our actions this morning across our employee base restructured ZoomInfo Technologies Inc. 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 toward—non-seat-based, data-led, upmarket, high retention, and highly defensible. Our goal is to make more of ZoomInfo Technologies Inc. transact and grow that way. As part of that evolution, we are leading with data. Beginning in Q3, customers will have the flexibility to convert historical per-seat spend into consumption across ZoomInfo Technologies Inc. data, insights, application, and agents. Many customers use the platform in this way today, so this will be a more formal effort in matching the pricing and value delivery to the best customer behaviors and outcomes.

We are expanding where customers can access and pay for ZoomInfo Technologies Inc. data, including ChatGPT, Claude, Gemini, Copilot, and internally built applications. And 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 Technologies Inc.'s moat is not a single dataset. 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 Technologies Inc.'s intelligence layer—billions of data points with more than 140 million company entity records, 580 million-plus IP-to-organization pairings, 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 Technologies Inc. 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 is 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 and we maintain the industry's most robust set of privacy, security, and compliance certifications. As GTM work becomes increasingly agentic, every AI seller, marketer, RevOps 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 Technologies Inc., 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 Technologies Inc. as the first and primary external data provider. Our Contact, Company, Intent, and Scoops data power recommendations across Salesforce's 150 thousand-plus customer base. HubSpot also shipped its prospecting agent with a native ZoomInfo Technologies Inc. integration.

When the two largest CRM platforms choose ZoomInfo Technologies Inc. to power AI prospecting agents, it reinforces the durability and relevance of our data asset. We also launched connectors for ChatGPT, Claude, 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 Technologies Inc. signals. Going forward, our application layers will serve as engines for data engagement and consumption, rather than standalone application-fee products.

As customers renew in the back half of the year, we are 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 Technologies Inc. data. Turning to customer wins, in Q1, we signed deals with Sierra, Lyft, and Wyndham Hotels & 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 are 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 will now turn the call over to Graham.

Graham O'Brien: Thanks, Henry. Q1 GAAP revenue was $310 million, up 1.5% year over year, and 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 but an improvement from 3% upmarket day Phoebe 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, but we saw a shift in buyer behavior exiting the quarter and into Q2. Gross retention held in well overall, but customers in our software vertical experienced elevated rates of downsell 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 right-size 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 impacts, we can return to healthier growth levels sooner than the status quo approach would deliver. As a result, we are now guiding to FY 2026 revenue in the range of $1.185 billion to $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 from 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 from 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 twelve to eighteen 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 to $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, and 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 Technologies Inc., we are 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 is 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 fifty-fifty in the next eighteen to twenty-four 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 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 downsell 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 downmarket sales resources, shifting downmarket almost exclusively to product-led growth, enabling us to further accelerate the shift upmarket while we expand our focus on data.

As a result of these actions, we expect restructuring costs of $45 million to $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 2027. Additionally, 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. Even 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 five 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, cash equivalents, and investments, and we carried $1.3 billion in gross debt. As a result, our net leverage ratio is both 2.4 times trailing twelve months adjusted EBITDA and 2.4 times trailing twelve months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements, as compared to 2.5 and 2.3 times in the year-ago period.

The $650 million in senior notes mature in 2029 and the $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 swaps 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 to $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 $1.812 billion, of which $861 million are expected to be recognized in the next twelve months. Shifting to guidance for Q2, we expect GAAP revenue in the range of $300 million to $303 million, adjusted operating income in the range of $103 million to $106 million, and non-GAAP net income in the range of $0.26 to $0.28 per share.

And for the full year 2026, we now expect GAAP revenue in the range of $1.185 billion to $1.205 billion, representing a 4% year-over-year decline at the midpoint of guidance, and adjusted operating income in the range of $437 million to $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 to $1.12 per share, consistent with our prior guidance, based on 315 million weighted average diluted shares outstanding. And we expect unlevered free cash flow in the range of $400 million to $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 to $62 million. We believe the actions and initiatives announced today will set us up to run-rate 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.

Operator: Thank you. To ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. One moment for questions.

Operator: And our first question comes from Mark Murphy with JPMorgan. You may proceed.

Mark Murphy: Thank you very much. Henry, I am wondering how big of a spread 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? Then I have a quick follow-up. I am curious as well how much of the AI confusion you are seeing would relate to the takeoff of Claude Code during the month of March. I think that is when you saw a bit of a shift, and that seemed to be the period of liftoff for Claude Code. As a corollary, any thought on how long that period of AI confusion might last?

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

On AI confusion, the big shift here is that even in our most sophisticated software clients, what we are seeing them shift away from is a seat license in ZoomInfo Technologies Inc. and shift to significantly more consumption of our data inside of Claude with our MCPs and through our APIs. We have a number of examples of AI-native companies that have shifted from seats but are spending meaningfully more with us through consumption of our data in their internal applications, through our APIs, and through bulk credit consumption.

We have a lot of confidence that there is this moment where companies are confused about what they actually need to build their own internal applications and revenue work, where the most sophisticated AI-native companies are leveraging our data throughout that entire workflow. Companies that are doing 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 do not need seats anymore because I have built my own application,” we can be flexible and say, your application is going to need contact information, company information, hierarchy information, and signal information, and we can be flexible on your transition as you build your own internal application.

Operator: Our next question comes from Taylor McGinnis with UBS. You may proceed.

Taylor McGinnis: When we look at the customers with greater than $100,000 deal sizes that fell quarter over quarter, I know you mentioned earlier that you are seeing customers pause in light of this. Could you comment on some of these larger customer dynamics with that KPI? And with CRPO declining quarter over quarter, what exactly are you seeing among this larger cohort of customers?

Graham O'Brien: On the $100,000 cohort, the activity there 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, or 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-outs, 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 is representative of the challenges we saw around incremental purchases near the end of the quarter. On CRPO, it was up 3% year over year in a slower Q1, and that outcome was within our range of expectations.

Taylor McGinnis: Going back to the pricing model change, you said you expect customers to renew under the new model at a similar deal size compared to the old model. Can you give proof points if you have had customers that have made that transition already under Operations and what you have seen that gives you comfort in this net-neutral positioning as we move to the new model?

Henry Schuck: We tested this with a number of customers, and we are seeing two things. Some customers are at pretty similar price points as they shift away from seats—you are going to see some customers shift up and some shift down, largely based on how much they are consuming our data. For downmarket users, we are going to eliminate the access friction—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 anywhere inside of ZoomInfo Technologies Inc. applications or outside of ZoomInfo Technologies Inc. applications. We are seeing some up, some down, and we think it ends net positively.

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

Lucas: 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 to get comfortable with the back half of the year? And thinking about profitability as inference costs keep going up, as you scale the business and customers continue to consume, how will the profitability picture look in the coming years?

Henry Schuck: We have guided Q2 revenue to be down year over year, and we are setting an expectation level that allows us to accelerate our strategic initiatives in the back half. As we shift more towards consumption and right-size our downmarket business to be almost exclusively PLG-focused, we will go through a few quarters where we are negative before getting back to more opportunity for positive year-over-year growth in the back half of 2027. The bulk of the cuts are deliberate and downmarket-oriented.

We clearly see the opportunity for consumption across a number of surface areas—customers on Go-To-Market Studio are consuming significantly more than their counterparts not on Studio, and customers using our MCP application that we released over the last eight weeks are meaningful consumers of our data through the LLM platforms that our MCPs are plugged into. The big milestones are to put more of our customers into these high-consumption interfaces, and that is our strategic focus now.

Graham O'Brien: Looking at a pro forma view of the business exiting this year, when we return to growth on a more consistent basis, we will have an opportunity to do so as a 40% margin company instead of a 35% margin company. I expect cost of service to be 13% to 14% of revenue, sales and marketing closer to 27% with a path down to 25%, R&D 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 are a big part of that.

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

Brad Zelnick: How much does the updated guidance reflect the hesitation and downsell that you saw in Q1 continuing throughout the remainder of the year versus the impact of moving to consumption-style deals? And can you remind us of the revenue recognition on those consumption deals? And for Henry, given the quality of your data asset, why are you not able to better weather this moment, and anything you can tell us to bring that point home would be helpful.

Graham O'Brien: As we proactively change how the business is structured and how we price and deliver, we are accounting for all of that: the downmarket restructuring, the shift away from seats in the pricing model. My guidance philosophy is shifting as part of that—we need to rely more on future assumptions around the evolving pricing model and less on past performance. We have embedded conservative assumptions around the macro, the software vertical, and the shift in pricing away from seats. It is safe to say 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 existing conditions and the planned timing of our strategic initiatives.

You should think about this as a full-measure revision—this is a proactive plan we have a lot of confidence will deliver us to more durable, efficient growth sooner than the status quo. On revenue accounting, customers are pulling us in this direction and we are already a big part of the way there, but there will be new dynamics. I do not expect ACV scope to change—customers on more variable, consumption-focused plans will still roll up into that ACV number. With pre-committed consumption, we will make an assumption around breakage and then predict and monitor customer usage patterns to match the satisfaction of performance obligations.

That could introduce some quarter-to-quarter noise in revenue recognition, which we have accounted for in the updated guidance.

Henry Schuck: The biggest thing for us today is that our data asset has historically been trapped underneath a SaaS application, which, for the first eighteen or nineteen years of our operating history, was exactly where customers wanted to consume it. Over the last twelve months, customers have been more inclined to want our data asset to be flexible and available through other interfaces. We have always had an API, but it was mainly deployed at the highest end of our strategic customers, often with a lot of handholding. 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 have spent the last eighteen months rebuilding the data infrastructure that delivers data anywhere a customer wants it. If you wanted intent data a year ago, you would have had to get that through the SaaS interface inside of Copilot or SalesOS. Today, you can get it via API or through MCPs. It is really the flexibility of making that data much more available to our customers wherever they want to work, which has changed much more significantly than the necessity and accuracy of our data.

Operator: Our next question comes from Alex Zukin with Wolfe Research. You may proceed.

Alex Zukin: You are walking through a couple of different issues simultaneously—longer sales cycles, particularly in software; an acceleration to get out of the lower end of the market; and accelerating the shift to consumption from seats. If you are guiding to exit the year at negative 8% growth and saying you will return to growth in fiscal 2027, how much of the headwind from which of those parts is embedded in that guide, and where do you feel like there is risk because it is you pushing versus pulling?

And on unleashing the data asset, you cited wins with Sierra and another AI unicorn—how are those leveraging the functionality you are talking about, and what do those deals look like relative to previous cohorts?

Graham O'Brien: You have it right. We are looking at software vertical softness, the downmarket rightsizing—which is probably the largest part of the guidance revision this year, since we can pretty scientifically say we take out X resources downmarket and that creates Y of an ACV headwind—and the pricing transformation. As we accelerate that this year, pricing becomes a larger part of the story next year. We model that there might be instances of lower entry points; the question is when we get the upside—either intra-contract from upsell opportunity or at renewal from mitigated downsell pressure.

Henry Schuck: Those AI-native customers are building their own internal revenue workflows and interfaces, bringing in their own first-party data, and building unique workflows. Every company’s go-to-market workflow is a little different, but they all require data on companies and contacts, hierarchy and subsidiary mapping for territory segmentation and planning. These deals are much heavier on data consumption and much lighter on seats. We see that as a big opportunity to embrace AI and swing for a massive opportunity. If we were a traditional SaaS business, seats are not transferable into an LLM, and it is difficult to expand the surface area where your product gets monetized.

Underlying a light SaaS interface is our data asset, which is the most important part of our business, and we will make that available anywhere go-to-market work runs.

Operator: Our next question comes from Raimo Lenschow with Barclays. You may proceed.

Raimo Lenschow: What you see at the moment in software—are software companies reducing their field capacity, or are they actively building the front end like the AI guys are doing? Will it spill to other industries when they realize how the world is evolving? And for Graham, how much is guidance implying that software is moving versus other industries?

Henry Schuck: It is a little bit of both. At this point, we would be happy to see it spill over into other industries because the bigger upside opportunity is consumption of our data wherever go-to-market workflows run. We see it in software today and we are leaning in with flexible pricing and the ability to transfer seat prices into data consumption. If this expands into insurance, financial services, or other segments, our APIs and MCPs, and our ability to be a reference data architecture for go-to-market workflows, get better every quarter. It is about adapting our pricing and packaging to meet customers where they are—sophisticated customers are building their own things, and we will show up with the consumption they need.

Graham O'Brien: There is certainly a vertical-specific assumption around software. We still see good performance in our upmarket business and our Operations business. The revision to revenue and the cost-out is focused on our downmarket 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 want to minimize the risk of another negative revision.

Operator: Our next question comes from Allan Verkhovski with BTIG. You may proceed.

Allan Verkhovski: You have a number of large upmarket customers that spend millions on an annual basis, and 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? And of your upmarket ACV growth of 5% this quarter, what are the upmarket software and non-software growing, and within the $100,000-plus ACV customer cohort, can you share the number of customers that declined there and what percentage of them are software companies?

Graham O'Brien: When you look at the customers that spend the most with us annually, many are Operations customers. Our Operations business is our fastest growing at scale, growing over 20% year over year. We have seen increasing demand from those customers that are not on a seat-based model and are largely data access customers. They have better gross retention outcomes and significantly better net retention outcomes, where they come in at an entry point and then buy more and expand their investment with ZoomInfo Technologies Inc. over time. Within upmarket, software overall was down a little bit sequentially in Q1, and that is creating the drag both downmarket and to some extent at the lower end of upmarket.

Within the $100,000 cohort, there are not many logos, and not many software logos are downselling out of that; it was really fewer upsells into the cohort. We had better net-from-zero new sales into the cohort, significantly better lack of downsell-out, and similar churn out. It was a pause around incremental purchases at the end of Q1, largely in software.

Operator: Our next question comes from Analyst with Piper Sandler. You may proceed.

Analyst: Given the shift to more flexible pricing and packaging in the back half to better align monetization with customer value, as we think about the guidance and how that flows through the model—some customers may pay more and some less—can you give us the building blocks for how to think about guidance in the back half? And with the closing of the Israel R&D center, can you help us understand ZoomInfo Technologies Inc.’s ability to balance investing for an AI era with a lower R&D base? Does this change any of your R&D priorities for the remainder of 2026?

Graham O'Brien: On the composition of the reduction, about a little more than a quarter is coming from downmarket restructuring—taking the least efficient downmarket sales resources out and, in some cases, foregoing or bringing in that inefficient downmarket ACV at lower price points through a PLG motion. A little less than a quarter is coming from more cautious assumptions around software. A little less than a quarter is coming from pricing ins and outs and revenue recognition variability with the shift toward consumption. The rest is an incremental layer of conservatism. The upside versus downside as we shift the model will come down to timing and opportunity in the customer base.

In Q3 and Q4, we will learn more about net-new customer sales and base migration. In some cases, there will be lower entry points that unlock upside at renewal or even intra-contract; it is a timing equation.

Henry Schuck: On engineering, two things. One, our engineers, with the help of coding agents, are delivering multiples more software into our platform than historically, with real velocity boosts—just one MCP integration would have taken us eight weeks best case a year ago. Two, there are roles we will not need as many of—we do not need as many front-end developers as before. We can build front ends more simply, and the focus shifts to data infrastructure, back end, and flexibility of data to be plugged into many places. It is not as necessary to have as many front-end application developers as historically.

Operator: Our next question comes from Sitikantha Panigrahi with Mizuho. You may proceed.

Sitikantha Panigrahi: Of the 600 roles reduced, what is the mix across functions—go to market versus R&D or other back office functions? And NRR has been flat at 90% for the last three quarters. As you shift away from seat-based pricing and expect some churn in software, what is the floor on NRR in 2026, and does it have to bounce back as you think about growth through the exit?

Graham O'Brien: It is mostly R&D—about half—and the rest is mostly downmarket sales and marketing resources. Roughly 90% is R&D and downmarket sales and marketing, and about 10% is G&A. With the proactive shifts in the pricing model, there may be some regression in overall net revenue retention, and that is reflected in guidance. We feel confident about offsetting that quickly thereafter with upside from the shift toward the consumption model. The bounce back is important as part of the return to growth.

Operator: Our next question comes from Analyst with Canaccord Genuity. You may proceed.

Analyst: You have talked a lot about more flexible pricing, which makes sense. Do you also have to get more aggressive in lower prices to reaccelerate demand? And Graham, based on how you are forecasting the business today, when do you expect to see a return to positive quarterly sequential revenue growth?

Henry Schuck: We do not want artificial barriers to leveraging our data, particularly in downmarket. We have an opportunity to bring a customer on at lower prices but align that customer to value through consumption of our data—either in our platform or in an LLM. We want to make it really easy to transact. A core assumption is that our PLG motion will drive more opportunity downmarket by removing platform fees and seat minimums and aligning toward consumption, which is better aligned to what the customer is looking for.

Graham O'Brien: We expect growth to be sustainably positive by 2027 at the latest, with healthier underpinnings and nearly unconstrained upside to our consumption TAM.

Operator: Our next question comes from Parker Lane with Stifel. You may proceed.

Parker Lane: You said it was the third quarter that you will introduce the platform fee with prepackaged credits. For customers that have upgraded in Q1 and Q2 or will have a renewal that extends beyond the second half, will you negotiate under this new pricing structure and try to shift them ahead of time, or only at renewal? And do you anticipate less willingness to engage in similar durations—do people compress duration in response to how fast things are moving?

Graham O'Brien: We will have an opportunity to work with customers to shift them into this pricing model regardless of renewal date. It is not a forced shift, but in Q3, for new business, we will lead with this for the first time. For the customer base, we will meet customers where the value is and look for opportunities to shift to more variable pricing and away from the more fixed model. We see upside for the customer and for us in doing so. On duration, we have not seen a headwind in the Operations business, which has significantly longer duration than some of our other products, and we do not expect a headwind on that front.

Operator: Our next question comes from Analyst with KeyBanc. You may proceed.

Analyst: Regarding Studio and Workspace, what has been the initial customer feedback on these tools so far, specifically for Workspace since it is newer? How do you expect these tools to attach to contracts going forward? And as you transition to more of a consumption model, how do you help customers get comfortable with variable pricing who were used to seat-based fixed pricing?

Henry Schuck: We did a heavier push this quarter on GTM Studio and introduced it to about a quarter of our customers, who are now in hands-on trials with account managers and solution consultants, consuming data within Studio. We are moving many to paid. Feedback is positive—use cases not accomplishable in legacy platforms are now achievable in Studio, which we have layered AI into, all designed to drive consumption. We expect Studio to be a meaningful driver of data consumption through that platform. The model: instead of a platform fee, you pay for consumption to come into Studio, and upfront fees translate into consumption, data, and AI credits.

It is early but encouraging, and we are continuing to invest meaningful R&D dollars behind that platform.

Graham O'Brien: We will work with customers to establish guardrails around the sizing of the initial purchase. We still expect this to be, for the most part, pre-committed consumption spend, with customers paying for a level of credits upfront. When they have used those credits, we can sell more. We are sensitive to ensuring customers feel comfortable with the initial purchase and the value we ascribe to it.

Operator: Our next question comes from Tyler Radke with Citi. You may proceed.

Tyler Radke: On timing, you talked about a twelve to eighteen month period of transition. Are you expecting all customers to be migrated to the new consumption plan by the second quarter of 2028? Is that the quarter where we see ACV growth trough and then revenue follows? And how do you think about long-term GAAP operating margins and free cash flow margins under this new model? Given prior share repurchases when the stock is dislocated, how do you think about those pieces given today’s announcements?

Graham O'Brien: For order of operations, we plan to be leading the new business motion with the hybrid non-seat-based model by Q3 this year, as well as kicking off the more formal transition for customers who want to move and who we believe will benefit. In twelve to eighteen months, we would like to be closer to fifty-fifty seats-based ACV versus non-seat-based ACV; right now, we are about two thirds seats and about one third non-seats, so shifting 15 to 17 points over the next twelve to eighteen months is our plan.

That is not the clock on when we get back to growth—we are confident in getting back to revenue growth on an annual basis by the back half of 2027, likely a quarter or so after we are back to an ACV growth trajectory.

Henry Schuck: The biggest thing is that we are committed to protecting and growing cash flow per share in any set of conditions.

Operator: Our next question comes from Brian Peterson with Raymond James. You may proceed.

Brian Peterson: Graham, you mentioned that the Operations business has longer duration. Can you share about that business in terms of end-market exposure, sales cycles, and how much comes in net new versus cross-sell as that becomes a more important part of the business? Any sense for how much of that is tech or software related?

Graham O'Brien: A lot of Operations growth comes from existing customers—either ZoomInfo Technologies Inc. customers cross-selling into Operations or existing Operations customers expanding. That is the lion’s share. Net and gross retention in Operations are better than any other business within ZoomInfo Technologies Inc. We still have a good amount of logo whitespace to acquire as Operations customers. It is less software-heavy than our core offerings and very heavily weighted to large enterprises across a diverse set of verticals.

Operator: Our next question comes from Austin Cole with Citizens. You may proceed.

Austin Cole: Last quarter, Copilot was over 20% of total ACV. Is there any update you can provide with respect to that metric or how those renewals trended in the quarter, and does the shift transform your overall vision for Copilot?

Graham O'Brien: Q1 was another solid quarter for Copilot. It continues to increase as a mix of the total business and was one of the brighter spots in the quarter. What will change is how we price Copilot—you should expect it to be priced more from a prepackaged credits perspective than historically where we sold it on a seats basis.

Austin Cole: The AI confusion and some of the macro you discussed earlier—how has that trended so far in April and early May? Have those trends continued or changed more recently?

Graham O'Brien: It is pretty similar to what we saw at the end of the quarter. It is not getting worse, but we are still in that pause phase.

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