ZoomInfo Technologies (ZI) Q4 2024 Earnings Call Transcript todayheadline

ZoomInfo Technologies (ZI -1.14%)
Q4 2024 Earnings Call
Feb 25, 2025, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the ZoomInfo fourth quarter and full year 2024 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.

[Operator instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Jerry Sisitsky, vice president of investor relations. Please go ahead.

Jerry Sisitsky — Investor Relations

Thanks, Lauren. Welcome to ZoomInfo’s financial results conference call for the fourth quarter and full year 2024. With me on the call today are Henry Schuck, founder and CEO of ZoomInfo; and Graham O’Brien, our interim CFO. 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 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.

With that, I’ll turn the call over to Henry.

Henry Schuck — Founder and Chief Executive Officer

Thank you, Jerry, and welcome, everyone. ZoomInfo is making meaningful progress, and I believe we are better positioned today than ever before. In Q2, we took a number of steps to set up the company for long-term growth and success. In Q3, we stabilized the business.

And in Q4, we drove growth across all of our key operating metrics, which resulted in better-than-expected financial results achieved faster than we had anticipated. As a result, GAAP revenue for the fourth quarter was $309 million and adjusted operating income was $116 million, a margin of 37%, both above the high end of guidance. The results in Q4 represent the culmination of changes to sales, product, and other operations that we enacted over the past two years. Our execution caught up to our innovation, leading to happier and more engaged customers.

With our data and platform, our customers are winning in two key ways. They are winning with Copilot by leveraging the best go-to-market data, AI applications, and agents throughout their go-to-market teams. Copilot again exceeded expectations and now has over $150 million in ACV. And our customers are winning with ZoomInfo Operations, the data foundation that enriches and strengthens their internal systems and powers their systems of record, data warehouses, and AI initiatives.

Operations is the fastest-growing area of our business, driving accelerating growth and in Q4 was up 27% year over year. With the continued success and momentum of our data and operations solutions, we are well on our way to becoming the de facto provider of data and AI in the enterprise. We think of our market in two ways: upmarket and down-market. And this is a framework that we will be using to talk about the business consistently moving forward.

Upmarket includes our enterprise and mid-market businesses, where we are resourcing against the large and growing opportunity of companies with greater than 100 employees. For our upmarket customer base, we continue to add more reps and develop more data sets, features, and functionality for the platform. We have also expanded our trial motion flexibility, rebalanced account loads, and doubled down on services to delight the customer and drive their success. Upmarket is more than two-thirds of our business, grew 2% in 2024 and is on a path to growing mid-single digits, and has significantly higher margins than down-market, primarily due to the difference in customer lifetime value.

We expect our continued shift upmarket to drive profitability improvement as well. We define down-market as businesses with fewer than 100 employees. In this cohort, we are disqualifying more risky small business, requiring upfront prepayment and onboarding customers efficiently through a digital-first approach. Down-market comprises less than one-third of our business, declined 9% in 2024, and shows signs of stabilizing to a smaller and healthier portion of the business.

We expect to report on this upmarket/down-market split going forward while sharing relative size and growth rates. But I think it is important to reiterate that more than two-thirds of our business is upmarket and strong and growing. Our investments upmarket continue paying off, and we see opportunities to drive upside to our upmarket growth while we are aggressively managing the contribution of the lower end of the market. The lower end of the market is going to continue to decrease as a percentage of the business.

And while it will be smaller, it will be healthier, and we will discount its contribution to guidance so that we can minimize the potential impact of this transition. And we’re already seeing our investments upmarket paying off. We see it in our $100,000 customers, our $1 million-plus customers, and in net revenue retention. We now have 1,867 customers with more than $100,000 in ACV, a sequential increase of 58 customers and a year-over-year increase of 47 customers.

We also drove sequential and year-over-year growth in both the ACV and the number of customers in our $1 million cohort. And net revenue retention increased to 87% in the fourth quarter, the first sequential increase in NRR since Q1 of 2022. Improving our customers’ perception of us and staying aligned with our customers’ go-to-market needs has been a key focus for us this year. As part of that effort, we recently conducted a brand survey of more than 400 marketing and sales leaders.

The survey found that 99% of respondents said their perception of ZoomInfo has improved or stayed the same in the last six months, with the majority of those saying it improved. During the quarter, we closed transactions with CoStar, Athenahealth, CareerBuilder, Heidrick & Struggles, Cox Media, Getty Images, Highgate Hotels, and the AICPA. We partnered with Lumen Technologies, a global telecommunications company to equip 1,000 of their sales and customer support reps with Copilot to improve retention and upsell. Copilot is being deployed to drive sales productivity, combat competitive pressures, and drive revenue growth.

The company also plans to leverage ZoomInfo Labs, our white glove services arm to prioritize leads within their marketing team and deliver them directly to sellers within Copilot. We partnered with a leading digital marketing company to completely transform the way they go to market. As they transition from product-led growth to sales-led growth and move more upmarket, we are providing them with the complete ZoomInfo go-to-market intelligence platform. From our marketing solution and call recording and transcription to enriching data and using Copilot, we are helping them execute account-based marketing strategies for new logo acquisition and driving cross-sell and upsell as they expand upmarket.

We also used our newly released trial motion for Copilot to grow a 100-seat proof of concept at one of the largest job search engines more than tenfold. Our successful trial allowed us to prove that we could deliver more connects, build more pipeline, and drive better conversion for their reps. One of the key drivers of this quarter’s success started two years ago when we embarked on a journey to up-level our product organization with AI and platform leaders who have dramatically accelerated our pace of innovation. From listening to thousands of client calls and meeting with hundreds of customers, it is clear that go-to-market leaders are all looking for success across four key areas.

They want to grow new logos, expand their customer base, improve rep productivity, and leverage AI so that they do not fall behind. To deliver on that for our clients, we start with the highest quality B2B data in the world. In Q4, we created new data products that get our customers in front of prospects precisely when they’re in-market for their products and services. We enhanced our intent solution by introducing persona-level website identification, allowing sellers to pinpoint high-intent buyers within specific roles.

Expanding beyond account-level indicators to person-level data has led to a 15% lift in action rates. Our Copilot interface allowed us to activate this data innovation directly into the workflows of tens of thousands of users. In the quarter, we generated proprietary signals and accelerated deals for more than two-thirds of active opportunities for our upmarket customers. Those customers would have missed out on two-thirds of the deals in their pipeline without ZoomInfo.

We continued our pace of innovation by expanding our Copilot AI agents that automate core parts of a seller’s workflow. By synthesizing live buyer interactions, our agents create dynamic, always up-to-date account plans that capture relevant signals the moment they surface. These AI agents automatically identify deal risks and recommend ways to expand buying groups. All of this runs on our enterprise-grade AI governance and customization framework already deployed within some of the largest go-to-market organizations in the world, ensuring they can adapt these capabilities to highly complex and specialized sales motions.

We’re also expanding key use cases beyond sales development representatives and other top-of-the-funnel prospecting use cases. We’re now gaining traction among account executives, account managers, and customer success managers, a user base more than three times larger than SDR. Account executives and account management teams are adopting Copilot for automated account planning, account expansion, and deal acceleration. We have seen strong product market fit with Copilot activating the first cohorts of AEs and AMs at utilization levels comparable to our core SDR user base.

I’m confident we’ll continue to automate and move an increasing share of mission-critical go-to-market workflows onto the ZoomInfo platform. I would also like to take a moment to thank Ali Dasdan, our former chief technology officer, who is transitioning engineering leadership to our senior VP of engineering, Philip Popovic. Ali played an important role in helping us build enterprise processes and infrastructure here, and we wish him all the best in his next endeavors. We’re excited about Philip’s expanded role and are confident that he will continue to accelerate our pace of innovation and serve as a strong partner to our customers and his internal counterparts throughout the company.

I also want to thank Patrick McCarter, who after nearly eight years of partnership and board directorship is moving on from the ZoomInfo board. Patrick is someone that I respect deeply and who has been at the table for every strategic decision over nearly a decade. His knowledge, engagement, and experience will be missed, and we wish him the best as well. I’m also excited about the recent additions of Katie Rooney and Rob Giulio to our board of directors.

Katie has decades of experience in finance, operations, strategy, and corporate development. She was recently named CFO at Maven, the world’s largest virtual health platform for women and families. Rob is currently chief customer officer at Canva and previously was chief customer officer at HubSpot and chief marketing officer at DocuSign. At HubSpot, he oversaw the flywheel organization, the marketing, sales, services, and revenue operations team.

Rob also spent 11 years in senior marketing and sales leadership roles at Adobe. We are incredibly excited about the fresh perspective and long history of successful operating experience we add to the boardroom with these additions. In closing, we have always had a history of disciplined financial and operational execution. And now more than ever, our innovation engine is creating a tailwind on top of our data moat.

We have taken the necessary steps to drive improved operating performance and set the company on a path to growth while driving industry-leading profitability, expanding free cash flow per share, and defining the future of go-to-market with innovative solutions that drive customer delight. We have a large untapped addressable market, a strong innovation, and data moat, and we are winning the opportunity to be the go-to-market data and AI partner for upmarket customers. With that, I’ll turn the call over to Graham.

Graham O’Brien — Vice President, Financial Planning and Analysis

Thanks, Henry. In Q4, we delivered $309 million in revenue and adjusted operating income of $116 million, a margin of 37%. Our investments moving upmarket are yielding results as we delivered meaningfully better-than-expected performance, resulting in sequential revenue growth of 1.8%. The business risk model deployed in Q2 is working as intended, resulting in improving write-off and collection trends.

With the new risk model in place and the additional operational improvements we’ve implemented, we are able to onboard better-quality customers, continue our move upmarket, and focus more on delivering customer success and value, which resulted in a two-point sequential improvement in net revenue retention, ending the year at 87%. With more and more companies realizing they need a strong data foundation to take advantage of AI, we saw demand for our operations as business increased again. As a result, in the fourth quarter, our operations business increased 27% year over year, five points higher than last quarter. Taken together with our success driving Copilot, advanced functionality increased to 44% of the overall business, up more than 10 points since the start of the year.

As of today, Copilot is more than $150 million in ACV, and we continue to see similar uplift levels on a per-seat basis in Q4 as we have historically. The majority of Copilot ACV is coming from new to the franchise customers, though with our recently released functionality that allows existing customers to trial Copilot on a team-by-team or user-by-user basis, we expect to drive a larger volume of migrations over the course of 2025 and 2026. Turning to share repurchases. For the full year, we retired 46.8 million shares at an average cost of $12, representing more than 12% of total shares outstanding.

And as of year-end, there were 342 million shares outstanding. In Q1, the board approved an additional $500 million share repurchase authorization on top of the $138 million remaining in existing authorizations entering 2025. We look at repurchases as a meaningful way to drive shareholder value, and we will continue to opportunistically take advantage of dislocations in share price balanced with our cash generation and cash on hand. Operating cash flow was $109 million in Q4 and unlevered free cash flow for the quarter was $94 million, a margin of 30%.

We also remain committed to driving shareholder value by growing levered free cash flow per share. To that end, unlevered free cash flow for 2024 was $447 million, a margin of 37%, and cash interest for 2024 was $44 million. We delivered significantly more than $1 in levered free cash flow per share for the full year based on 377 million diluted weighted average shares outstanding, and we expect to grow that meaningfully over the long term. We ended the year with $140 million in cash and cash equivalents, and we carried $1.24 billion in gross debt.

Our net leverage ratio is 2.4 times trailing 12 months adjusted EBITDA and 2.2 times trailing 12 months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements. With respect to liabilities and future performance obligations, unearned revenue at the end of the year was $478 million, and remaining performance obligations, or RPO, were $1.16 billion, of which $850 million are expected to be delivered in the next 12 months. Before I jump into guidance, let me share some additional context. Q1 2025 has two fewer days than Q4 2024 and one fewer day than Q1 2024, which should be considered when comparing sequential and year-over-year revenue growth and AOI margins.

Also, Q1 margins are impacted by payroll tax and other benefit resets. Additionally, 2024 is not a good proxy for 2025 seasonality due to the operational improvements we introduced in Q2 2024 and the change in accounting estimates in that same period. In 2025, we expect adjusted operating income and AOI margins to increase sequentially as we move through the year. Q4 2024 was more weighted to upmarket customers, and we expect Q1 2025 to have a seasonally lower mix of upmarket expirations.

We are discounting down-market contributions to our guidance. However, we are on a path back to durable growth faster than expected, and we are optimistic about our momentum heading into 2025. With that, let me turn to guidance for Q1. We expect GAAP revenue in the range of $294 million to $297 million.

We expect adjusted operating income in the range of $96 million to $99 million and non-GAAP net income in the range of $0.22 to $0.23 per share. For the full year 2025, we expect to deliver GAAP revenue in the range of $1.185 billion to $1.205 billion, representing negative 1.6% annual growth at the midpoint of guidance and adjusted operating income in the range of $426 million to $436 million, representing a 36% margin at the midpoint of guidance. We expect non-GAAP net income in the range of $0.95 to $0.97 per share based on 362 million weighted average diluted shares outstanding. And we expect unlevered free cash flow in the range of $420 million to $440 million.

And for modeling purposes, for the year, we would expect capex in the range of 5% of revenue and the non-GAAP tax rate to be approximately 13%. Now, I will turn it over to the operator to open the call for questions.

Questions & Answers:

Operator

Thank you. At this time, we will conduct the question-and-answer session. [Operator instructions] Please stand by while we compile the Q&A roster. Our first question comes from the line of Alex Zukin with Wolfe Research.

Your line is now open.

Alex Zukin — Analyst

Hey, guys, congrats on a solid quarter. I guess maybe just, Henry, first one for you. Just a sense for trends in both the SMB and the enterprise as we kind of exit the year and the pipelines that you’re seeing, maybe tech sales hiring? And also, maybe just from a financial perspective, how we should think about the growth rates of the two segments embedded in the guide differently for the coming year?

Henry Schuck — Founder and Chief Executive Officer

I’ll let Graham take the second part. I think the first part is we’re seeing strength in the upmarket, particularly as we go in and sell our operations and Copilot products into the upmarket. In the SMB, we saw stabilization in the SMB, and that group in the down-market. That group of customers is becoming a healthier but smaller portion of our business.

And we are discounting its contribution to our growth and our guidance going forward. We expect that we — that where can be upside, it will be in our execution in the upmarket, where we’re seeing good demand, great product market fit within Copilot and our operations business. And I’ll pass it over to Graham for the second part of that.

Graham O’Brien — Vice President, Financial Planning and Analysis

Sure. The growth trajectories that we are modeling for 2025 and the guidance, I think we mentioned earlier in the call, upmarket mid-single-digit growth. We’re on the path of that. And then down-market, we were down 9% in 2024.

So, we did see signs of stabilization there in Q3 and Q4. We’re discounting that stabilization. We’re expecting that 9% to be a little bit worse in 2025. And while we still believe down-market is a quality business, we’re just not going to rely on growth in the down-market to hit our targets.

We’re discounting the down-market contribution to our guidance, reallocating the resources upmarket, which provides us the flexibility to accelerate our shift upmarket.

Henry Schuck — Founder and Chief Executive Officer

I should just add that we think there’s an opportunity here for us to become the de facto partner for enterprise data and AI in the upmarket with our customers and on go-to-market team. And that’s why we’re resourcing there.

Alex Zukin — Analyst

And Henry, maybe on that, I mean, with everybody talking about AI agents, particularly on the go-to-market side, I think you guys talked about how it led to increase in close rates for you. Maybe just give us your perspective on kind of the state of the world right now, and how key role you play in that ecosystem increasingly as we see here.

Henry Schuck — Founder and Chief Executive Officer

Yes. I think the key thing about AI agents and building AI for go-to-market is it’s very different than when you build AI for support or services, where if you’re building an AI agent for support, all of the data that you need for the AI to understand lives inside your knowledge base, it lives inside the customer support tickets that you already have. It’s all first-party data and you only need first-party data to build a great AI agent for customer support. That is completely different when you’re trying to build an AI agent for go-to-market teams.

That relies first on third-party data. It needs your first-party data. But in order for a go-to-market AI agent to be successful, it needs data, it needs accurate data on companies. It needs accurate data on contacts.

Those data points are constantly changing. And then it needs to be surrounded with a tremendous amount of signal data, who’s growing, who’s shrinking, who’s hiring, who’s laying people off, who’s researching certain solutions in the market, who’s on your website. These signals are critical, and they don’t live anywhere inside of your first-party data. So, when we think about the success of go-to-market B2B AI agents, our data asset that we’ve built is a necessary component to that.

I think that’s why we’re seeing more uptake on our operations business. That’s why we’re seeing customers come to us with their first-party data and say, this is not enough for us to build AI and go to market with AI and go-to-market. We need this to be married to and surrounded by third-party data for us to be successful. So, I think we are a keen input into any go-to-market AI agent build.

Alex Zukin — Analyst

Very clear. Congrats, guys.

Operator

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

Elizabeth Porter — Analyst

Great. Thank you so much. First, I wanted to ask on the Copilot ACV. I think you mentioned a lot about new customer side and the focus to transitioning the installed base over is going to come more in fiscal ’25 and ’26.

So, I was wondering if you could just help us understand kind of that path to migration. Will these be more pushed upgrades at renewal or opt-in in upgrades? Just anything to help us get a sense for how quickly the installed base can start moving over to the new platform. Thanks.

Henry Schuck — Founder and Chief Executive Officer

We are in the midst of migrating our customers over to Copilot. We are doing it off-cycle. So, outside of a renewal date. We’re also doing it at renewal time.

We’re still seeing a strong double-digit growth on migration when we move those customers over. We want to drive pricing discipline on our teams as they migrate over to Copilot. We released this quarter our customer impact report that shows that our customers, particularly when they’re in copilot are getting a tremendous ROI and value out of the solution. And we’re happy to stand behind a pilot.

And so, in one of the examples that I talked about, we took a 100-person pilot to over-1,000-person deployment at one of the largest job search engines in the world. And we’re comfortable letting our customers try copilot, see the value, and then monetizing that value and ROI, either as part of a renewal or as part of an off-cycle upsell. We are going at it in both ways, but we want to maintain pricing discipline for the value that we’re delivering our customers with Copilot.

Elizabeth Porter — Analyst

Got it. And then just as a follow-up, I wanted to touch on the NRR improvement. Really encouraging to see that tick up to 87% from 85% over the last couple of quarters. Could you just unpack some of the drivers from the growth retention side versus the expansion side and how we could think about that playing out in calendar ’25 as we start to get the benefit from migrations and lapping the new business risk model? Thank you.

Graham O’Brien — Vice President, Financial Planning and Analysis

Sure. Yeah. I’ll talk about some of the inputs to the retention improvement. Just as a reminder, we had retention was stable at 85% for the last three quarters.

We saw the two-point sequential improvement in Q4. That was our first sequential improvement since Q1 of 2022. Our growth retention has held in pretty well over that period. I’ll put this up into kind of upmarket and down-market statement.

Upmarket, churn is about the same, but we’ve had a significant improvement in shifting back into an upsell opportunity instead of kind of more of a defensive downsell opportunity. And then in the down-market, we saw retention step down, certainly during the first two quarters in 2024. We saw that stabilize in Q3 and Q4. But beyond that, it’s really been a mitigating downsell, lots more opportunity to upsell upmarket.

Elizabeth Porter — Analyst

Got it. Thank you.

Operator

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

Unknown speaker — Citi — Analyst

Hi. Thanks for the question. This is Ashely on for Tyler. I just wanted to ask about the uptick in 1000 customer count.

Could you provide a little bit more color on what drove the uptick and maybe comment on the mix of new lens versus expansion? And do you expect this pace of addition to be sustained going forward?

Henry Schuck — Founder and Chief Executive Officer

Yeah, I can cover that one. So, really, there’s four ways that the logo count in that cohort can change. We can go out and acquire new customers at a price point above $100,000. We can upsell customers spending below $100,000, up above $100,000.

And then to lose customers, we can — customers that are spending $100,000 downsell or full churn. We don’t — even in those years, plus where we saw a sequential decrease in that cohort, it usually wasn’t a full-on churn. So, what we’re really seeing is improvement in the other three areas. We’ve got opportunity to upsell and much more success upselling existing customers up and above $100,000.

We are losing way more — way fewer customers down below that $100,000 cohort from a downsell. And then we’re being — we’re much more successful going out and actually acquiring upmarket customers at that $100,000 or above level. So, really, it’s customer acquisition, renewed upsell opportunity, and less downsell exposure than we had seen previously.

Unknown speaker — Citi — Analyst

Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Brian Peterson with Raymond James. Your line is now open.

Johnathan McCary — Raymond James — Analyst

Hey, thanks for taking the question. This is Johnathan McCary on for Brian. So, I guess, just getting into the 2025 guide another way, I know you gave some commentary on the interval already here. But what do you have built in the outlook there? How much of that is still reliant on mid-market as the primary swing factor for NRR versus potential upside for migrations?

Henry Schuck — Founder and Chief Executive Officer

Yeah. No, the way we’re thinking about upmarket growth is that we’re going to — we’re on a path back to mid-single-digit growth. And as a reminder, mid-market is our enterprise plus our mid-market segment. Last year, we had talked about mid-market kind of being a drag on growth, specifically with the software vertical that experienced a couple of years of downsell pressure.

So, I think the framework within the upmarket is that we are accelerating our enterprise opportunity and that we’re kind of on the upswing after in mid-market after we had headwinds there for a couple of years.

Johnathan McCary — Raymond James — Analyst

Got it. And then on the Copilot uptake, it’s good to hear the new commentary on the ACV there. What are you seeing in terms of penetration with new lands as you’ve said that’s mostly new customers. How close is that to 100% attach rates when you land a new deal?

Henry Schuck — Founder and Chief Executive Officer

Yeah, I can take that one, too. The vast majority of our new customer ACV is on Copilot. So, I think early on, we went up to about 90%. I think that’s the right number that it’s about 90%-plus of ACV that is new to franchise is coming on Copilot.

Johnathan McCary — Raymond James — Analyst

Thanks.

Operator

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

Jack McShane — Stifel Financial Corp. — Analyst

Yeah. Good afternoon, guys. You’ve got Jack McShane on for Parker. I’d be curious to hear your guys’ thoughts on DeepSeek’s potential impact to your business.

It was reported that you guys are leveraging the R1 model within Copilot. So, I’d be curious to hear how that may change things either on the cost side of the equation or maybe some potential performance improvements as a result.

Henry Schuck — Founder and Chief Executive Officer

Yeah. First, it wasn’t reported that we were using it inside of Copilot. We have tested DeepSeek internally. And I think that what we’re most excited about with DeepSeek and the ecosystem is its potential to drive price down across other LLM providers.

We have always had a model internally at ZoomInfo, where we use the model with the highest efficacy and the lowest price, and we’re constantly testing different models for outcomes. What we expect DeepSeek to do in this ecosystem is continue to drive down prices with the model providers. And what we’ve seen to date is an exponential decrease in cost across the models that we’re using across Copilots, but DeepSeek is not a production LLM that we’re using.

Jack McShane — Stifel Financial Corp. — Analyst

Got it. Understood. And then one more quick one. I’d be curious to hear the characteristics of the $100,000 cohort.

And when I’m kind of parsing upsell versus maybe you see growth. How does that $100,000-plus cohort kind of compared to the rest of your guys’ customers?

Henry Schuck — Founder and Chief Executive Officer

Yeah, good question. It’s heavily upmarket as you would imagine. And when we talk about vectors to take existing customers and expand them into that cohort. We’ve got feed opportunities, not just in our kind of more traditional space, but we’ve got expansion opportunities into AE, AM, CSM, RevOps use cases with Copilot.

We’ve got cross-sell additional functionality. So, operations, OS, selling that to Copilot and legacy sales customers. So, we do have feet product, price levers to upsell into the $100,000 cohort.

Jack McShane — Stifel Financial Corp. — Analyst

Understood. Thank you.

Operator

Thank you. Our next question comes from the line of Michael Berg with Wells Fargo. Your line is now open.

Michael Berg — Analyst

Hey, thanks for taking my question. Michael Berg on for Michael Turrin here. I just want to double-click on the NRR, in particular with regards to the seat dynamic. You talked a lot about upselling ops and Copilot.

How is the seat environment looking? And I guess, in particular, if there’s any difference in the upmarket versus down-market as part of that equation? Thanks.

Henry Schuck — Founder and Chief Executive Officer

Well, I think, first, in the down-market, if you think about a customer that has, call it, 25 employees and five salespeople, we’re going to be 100% penetrated across that seat count. As you move upmarket, we’re much less penetrated. And so, in an enterprise customer with 10,000 employees and 5,000 salespeople, we might be only penetrated across 1,000 of those sales reps. And so, there continues to be a large seat expansion opportunity in the upmarket.

I think the thing that we’re most excited about as it relates to Copilot is our ability to sell outside of personas where we have historically sold. And so, instead of only selling the top-of-the-funnel prospectors, we’ve now expanded into account managers, customer success managers who are using Copilot to get in front of risk turn risk to no signals happening in their accounts to know when the right time is to call in to upsell to know to build an account plan on the fly and to have all of that data at their fingertips that they can be making better decisions. And so, that persona expansion expand how many seats we can sell into. But across the enterprise, it’s very rare that we’re fully penetrated across all of the sales seats that we can sell to.

Michael Berg — Analyst

Helpful. Thank you.

Operator

Thank you. Our next question comes from the line of Brent Bracelin with Piper Sandler. Your line is now open.

Brent Bracelin — Analyst

Thank you. Good afternoon. Henry, I wanted to go back to kind of the $100,000 cohort customer. I think you added net new customers this quarter.

That’s the most we’ve seen in two years. One read outside looking in is that maybe the worst of the churn for those software traditional customers is behind you. Is that a fair characterization? And I say that because a small software company could actually spend well north of $100,000 on the data because there’s such a dependency around landing new customers. So, walk us through that outside looking in thesis.

Is that correct? Or how would you frame the momentum you’re seeing on that new?

Henry Schuck — Founder and Chief Executive Officer

Look, I think that across our $100,000 cohort, the vast majority of customers in that $100,000 cohort are in our upmarket segment. And so, I think where we’ve gotten in trouble in the past is when you take a small customer in a ZIRP environment and they spend $100,000 on ZoomInfo, where that might be the right decision in a ZIRP environment, not the right decision today. And we’ve been really prescriptive about making sure that our customers in a down-market and in the upmarket are getting the right packages for their business. And so, you’re not seeing sort of a small software company spend upwards of $100,000 with ZoomInfo.

You’re seeing the vast, vast majority of our upmarket of the $100,000 cohort in our upmarket business.

Brent Bracelin — Analyst

Helpful color. Last question for me is on pricing. Any delta relative to pricing in upmarket versus pricing in the SMB, just wondering, I know SMB’s pricing has been aggressive for a while. Are you seeing some of the aggressive pricing lead into mid-market, or that’s just not happening?

Henry Schuck — Founder and Chief Executive Officer

I would view them separately. I think in the down-market, we view that as an efficient customer acquisition play. And then upmarket, like I said earlier, we’ve got a few different pricing models. And we have — the nature of our pricing the market hasn’t really changed.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Jackson Ader with KeyBanc Capital Markets. Your line is now open.

Kyle Diehl — KeyBanc Capital Markets — Analyst

Great. Thanks. This is Kyle Diehl on for Jackson Ader. Maybe just two quick ones.

When we think about the competition upmarket, are there any different puts and takes you guys I could call out that you’re seeing further and further upmarket versus even maybe the mid-market and particularly with those Copilot first deals?

Henry Schuck — Founder and Chief Executive Officer

As we move upmarket, what we’re seeing is that our product market fit and our differentiation is meaningfully stronger upmarket than what you see down-market. And so, we’re in an incredible place to compete and win upmarket much differently much differently than down-market. We have great product market fit. We’re resourced properly.

We have the right products, and that market segment presents the largest growth opportunity for us. When I think about the durable competitive advantage that we have, there are several aspects that combine to form that advantage. The first, the breadth, depth, and accuracy of our data, the velocity of updates to that data are highly value-additive data types like intent data that directly drive revenue outcomes in the upmarket, our industry-leading regulatory and compliance posture is incredibly important. And then our pace of innovation around AI and go-to-market, that’s what’s driving our wins upmarket, and it’s also what’s driving our durable competitive advantage as well.

It’s all of those things coming together.

Kyle Diehl — KeyBanc Capital Markets — Analyst

OK. Great. And then Graham, maybe one for you. I think that you’ve kind of called out a couple of times here at the discounting of down-market for the ’25 in the guide.

What about as we think about ’25, just overall, maybe how the fourth quarter play out from a macro perspective? And kind of what you’re anticipating when you’re putting together the guide from a macro perspective with more attention toward the mid-market and enterprise?

Graham O’Brien — Vice President, Financial Planning and Analysis

Yeah. Good question. I don’t think we saw the macro change in Q4 from where it was prior. And I don’t really think we have an expectation that it gets better or worse in the guide.

Q4 was a really strong quarter for us, and we’re pretty optimistic about carrying that momentum into 2025.

Kyle Diehl — KeyBanc Capital Markets — Analyst

Great. Thank you.

Graham O’Brien — Vice President, Financial Planning and Analysis

Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Rishi Jaluria with RBC Capital Markets. Your line is now open.

Chris Fountain — Analyst

Hi. This is Chris Fountain on for Rishi. I wanted to ask about the down-market disqualification of new business policies that you implemented I believe in the past, you mentioned it was leading to a $2 million-a-month headwind. Has that amount changed from Q3? And are you expecting any changes to that level in 2025?

Henry Schuck — Founder and Chief Executive Officer

That hasn’t changed. We don’t anticipate any changes to that.

Chris Fountain — Analyst

Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Patrick Walravens with Citizens Bank. Your line is now open.

Austin Cole — Citizens Bank — Analyst

Hey there. This is Austin Cole on for Pat Walravens. I just wanted to ask, I guess, related to the upmarket we’ve seen just kind of some continued layoffs out there in the market in Q1. Just given your commentary of being on that path to mid-single digits, can you just give us kind of a sense of the durability of that path and kind of what gives you confidence? And then as a quick follow-up, just what might kind of accelerate that growth kind of even further beyond and strengthening that upmarket to maybe kind of double digits? What are the drivers there? Thank you.

Henry Schuck — Founder and Chief Executive Officer

Look, I think what you’re seeing in our enterprise — in our upmarket growth is slow and steady and focused execution on that segment. We have resourced it for growth. We have driven product innovation for that segment. We have continued to stay focused on that segment from a services perspective.

And so, I don’t view this as one timing or that it all sort of came at once. This has been a steady drumbeat of getting a little bit better and a little bit better and a little bit better in the enterprise. And I think as a result, we’re seeing improvement across all of the metrics in the upmarket, and we think that is momentum that’s going to continue into 2025. I think when you think about how do you accelerate that growth, I think it’s a couple of things.

It’s Copilot, and it’s our operations business. And with Copilot, our sellers are becoming more and more enabled to take Copilot to their customers. They’re more and more confident because they’re using Copilot internally for their own operations. They now have a persona expansion opportunity within their large accounts.

And so, there’s a lot of confidence that we’ll be able to accelerate the growth of both Copilot and operations within the enterprise.

Austin Cole — Citizens Bank — Analyst

Great. Thank you.

Operator

Thank you. I’m showing no further questions at this time. Thank you for your participation in today’s conference. This does conclude the program.

[Operator signoff]

Duration: 0 minutes

Call participants:

Jerry Sisitsky — Investor Relations

Henry Schuck — Founder and Chief Executive Officer

Graham O’Brien — Vice President, Financial Planning and Analysis

Alex Zukin — Analyst

Elizabeth Porter — Analyst

Unknown speaker — Citi — Analyst

Johnathan McCary — Raymond James — Analyst

Jack McShane — Stifel Financial Corp. — Analyst

Michael Berg — Analyst

Brent Bracelin — Analyst

Kyle Diehl — KeyBanc Capital Markets — Analyst

Chris Fountain — Analyst

Austin Cole — Citizens Bank — Analyst

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