10-Q: ZoomInfo Returns to Profitability Amid Strategic Shifts

ZoomInfo Technologies Inc. reported a return to net income in Q2 2025, driven by reduced operating expenses and strategic focus on higher-value customers.

Summary

• Revenue for the three months ended June 30, 2025, increased by 5% to $306.7 million, compared to $291.5 million in the prior year period.
• Net income for Q2 2025 was $24.0 million, a significant improvement from a net loss of $24.4 million in Q2 2024.
• Operating income for Q2 2025 was $53.7 million, up from an operating loss of $20.0 million in Q2 2024.
• For the six months ended June 30, 2025, revenue grew 2% to $612.4 million, with net income of $50.8 million compared to a net loss of $9.3 million in the same period last year.
• Operating expenses decreased by 23% in Q2 2025 and 16% in H1 2025, primarily due to the absence of significant lease impairment, abandonment charges, and incremental bad debt expense incurred in the comparative prior year period.
• The company implemented a reduction in force of approximately 6% of employees in Q2 2025, incurring $4.2 million in restructuring charges.
• Net revenue retention rate improved to 89% as of June 30, 2025, up from 85% in the prior year.
• Customers with over $100,000 in Annual Contract Value (ACV) increased to 1,884 as of June 30, 2025, from 1,797 in the prior year.
• The company repurchased $146.3 million of common stock in Q2 2025 and $241.3 million in H1 2025 under its Share Repurchase Program, with $396.2 million remaining authorized.
• A $100.0 million draw from the First Lien Revolving Credit Facility was made in May 2025 to fund the Share Repurchase Program.

Sentiment

Score: 7

Explanation: The company demonstrated a strong recovery in profitability, moving from net losses to net income, primarily due to the absence of significant one-time charges from the prior year. Revenue growth, while modest, is positive, and the improvement in net revenue retention and focus on higher-value customers are strategic positives. The active share repurchase program is also a favorable sign. However, ongoing legal proceedings and a substantial debt load introduce some uncertainty, preventing a higher score.

Positives

• Achieved net income of $24.0 million in Q2 2025 and $50.8 million in H1 2025, reversing net losses from the prior year periods.
• Operating income significantly improved to $53.7 million in Q2 2025 and $104.0 million in H1 2025, demonstrating enhanced operational efficiency.
• Operating expenses decreased substantially by 23% in Q2 2025 and 16% in H1 2025, largely due to the non-recurrence of significant one-time charges from the prior year.
• Net revenue retention rate increased to 89% as of June 30, 2025, indicating improved customer retention and expansion.
• The number of customers with over $100,000 in ACV grew to 1,884, reflecting success in attracting and growing higher-value clients.
• An active share repurchase program demonstrates commitment to returning capital to shareholders and potentially boosting shareholder value.
• Recognized a Tax Receivable Agreement (TRA) measurement gain of $14.6 million in Q2 2025 and $13.4 million in H1 2025.

Negatives

• Revenue growth remains modest at 5% for Q2 2025 and 2% for H1 2025.
• Cost of revenue increased by 8% in both Q2 and H1 2025, driven by higher hosting fees and depreciation.
• Gross margin slightly decreased for the six months ended June 30, 2025, to 84% from 85% in the prior year.
• Net cash provided by operating activities decreased to $228.1 million in H1 2025 from $242.2 million in H1 2024.
• Shift from net cash provided by investing activities to net cash used in investing activities in H1 2025, primarily due to increased capital expenditures and investment purchases.
• The company carries a substantial amount of debt, totaling $1,325.9 million as of June 30, 2025.
• Ongoing legal proceedings, including multiple class action lawsuits related to data privacy and securities, pose potential financial and reputational risks.

Risks

• Current and potential customers may reduce spending on sales, marketing, recruiting, and other technology due to weaker economic conditions, harming revenue and cash flows.
• Inability to attract new customers, renew existing subscriptions, or expand existing subscriptions could harm revenue growth and profitability.
• Failure to obtain and maintain accurate, comprehensive, or reliable data could reduce demand for products and services.
• Increased competition from other companies, including smaller businesses and larger, better-funded companies shifting their models, could impact market position.
• The rapidly evolving markets, especially with respect to AI and AI-enabled products, make forecasting demand difficult.
• Reliance on integration with third-party systems not controlled by the company poses operational risks.
• Changes in search engine algorithms or other traffic-generating arrangements could negatively affect the business.
• Dependence on executive officers and key employees, with loss or inability to attract/retain them harming the business.
• Failure to maintain, upgrade, or implement adequate operational and financial resources, including IT systems, could hinder business plan execution.
• Inability to successfully integrate acquired businesses, services, databases, and technologies could adversely affect the business.
• Changes in data privacy laws, regulations, or enforcement patterns could impact data gathering and provision, or customer use of products.
• Exposure to litigation for various claims could harm reputation and financial condition.
• Inability to adequately protect or enforce proprietary and intellectual property rights in data or technology.
• Investing in artificial intelligence (AI) capability introduces risks that could adversely impact the business.
• Third parties could use products and services unlawfully or contrary to company values or applicable law.
• Cyber-attacks and security vulnerabilities could result in serious harm to reputation, business, and financial condition.
• Technical problems or disruptions affecting customer access to services could damage reputation and lead to reduced demand and revenues.
• Any decline in demand for subscription platform and data services would negatively impact the business.
• Failure to raise additional capital or generate sufficient cash flows could reduce ability to compete successfully.
• Downturns or upturns in new sales and renewals are not immediately reflected in full within results of operations.
• Anticipated increasing operating expenses in the future may challenge profitability maintenance.
• Substantial debt could adversely affect financial position and ability to raise additional capital.
• Inability to generate sufficient cash to service all indebtedness.
• Interest rate fluctuations may affect results of operations and financial condition.
• Changes in credit and other ratings could adversely impact operations and lower profitability.
• Complex tax issues in multiple jurisdictions and global tax developments may materially impact business, cash flows, and tax liabilities.
• Unanticipated changes in effective tax rate and additional tax liabilities may impact financial results.
• Changes in tax laws or regulations could increase product costs and adversely impact business.
• Adverse effects if required to collect sales or other related taxes in jurisdictions where not historically done so.
• Operations and sales outside the United States expose the company to risks inherent in international operations.
• Global economic uncertainty and catastrophic events, including geopolitical conflicts, may disrupt business and adversely impact future results.

Future Outlook

The company expects its net revenue retention rate to be impacted by macroeconomic conditions in the near term but anticipates it will be influenced by the ability to move upmarket over the long term. It plans to continue investing in sales and marketing capacity for future growth and in research and development to drive incremental customer value, with R&D expenses expected to modestly increase in the short-term before decreasing in the long-term due to efficiencies. Restructuring and transaction-related expenses, including potential impairments, are anticipated to be influenced by future acquisition activity, strategic restructuring, and new lease commencements.

Management Comments

• We believe that the growth and future success of our business depends on many factors, including acquiring new customers and increasing usage of our platform.
• We monitor net revenue retention to measure growth, calculated based on customers at the beginning of the twelve-month period.
• Our efforts have shifted to customers more likely to pay, renew, and grow with us over time, following the deployment of a new business risk model in Q2 2024.
• We anticipate continued investment in cost of service, with cost of service as a percentage of revenue expected to remain consistent or modestly increase, driven by rising AI consumption costs and customer onboarding expenses.
• We anticipate that amortization of acquired technology and other acquired intangibles will increase if we make additional acquisitions in the future.
• We anticipate that sales and marketing expense excluding equity-based compensation and restructuring and transaction-related expenses as a percentage of revenue will fluctuate from period to period depending on the interplay of our growing investments in sales and marketing capacity, the recognition of revenue, and the amortization of deferred commissions costs.
• We believe that our core technologies and ongoing innovation represent a significant competitive advantage for us.
• General and administrative expenses as a percentage of revenue may fluctuate during periods when we incur non-recurring restructuring and transaction-related expenses, such as those associated with acquisitions or impairments, but excluding these, we expect a more stable or declining trend over time.
• Interest expense could be impacted by changes in variable interest rates, the issuance of additional debt, or changes in our interest rate hedging strategies.
• Losses related to debt modification and extinguishment will only occur if we extinguish indebtedness before contractual repayment dates or amend existing financing arrangements.
• The magnitude of Other income, net may increase as we expand operations internationally and add complexity to our operations.
• We believe that our cash flows from operations and existing available cash and cash equivalents, together with our other available external financing sources, will be adequate to fund our operating and capital needs for at least the next 12 months and for the foreseeable future.
• We are currently in compliance with the covenants under the credit agreements governing our secured credit facilities, and we expect to remain in compliance with our covenants.

Industry Context

The company operates in the highly competitive go-to-market intelligence and engagement platform sector, serving sales, marketing, operations, and recruiting professionals. Its strategy emphasizes leveraging AI and machine learning for data insights and automation, aligning with broader industry trends towards data-driven and AI-enabled business solutions. The shift towards 'upmarket' customers and the focus on net revenue retention reflect a response to macroeconomic conditions and a drive for more stable, higher-value client relationships, a common strategy among SaaS providers in a tightening economic environment.

Management Changes

Legal Proceedings

• ZoomInfo Publicity Litigation: A putative class action lawsuit filed on September 5, 2024, alleging violation of the Washington Personality Rights Act.
• Datanyze Publicity Litigation: Putative class action lawsuits filed on February 10, 2023 (Illinois) and October 23, 2024 (California, Nevada, Indiana, Alabama) alleging violations of state publicity rights acts. A binding term sheet was entered into on February 12, 2025, to resolve these, with final approval granted on July 23, 2025.
• Quebec Privacy Litigation: A putative class action lawsuit filed on March 17, 2025, alleging violations of the Quebec Civil Code, LPRPSP, and Quebec Charter of Human Rights and Freedoms regarding personal information collection and publication.
• Colorado Consumer Protection Litigation: Putative class action lawsuits filed on April 16, 2025 (against ZoomInfo Technologies LLC) and June 26, 2025 (against Datanyze LLC), alleging violations of Colorado's Prevention of Telemarketing Fraud Act by listing cell phone numbers without consent.
• Securities Litigation: A putative class action lawsuit filed on September 4, 2024, alleging false and/or misleading statements related to business, operations, and prospects, in violation of the Securities Exchange Act of 1934.
• Derivative Shareholder Lawsuits: Two derivative actions filed on December 12, 2024, and February 4, 2025, mirroring the securities case allegations and asserting violations of securities laws and state fiduciary duty laws.

Stakeholder Impact

• Shareholders: Potential positive impact from increased profitability and active share repurchase program, but ongoing legal risks and modest revenue growth introduce uncertainty.
• Employees: Approximately 6% of employees were impacted by a reduction in force in Q2 2025, leading to severance and benefits costs.
• Customers: The company is shifting focus to customers more likely to pay, renew, and grow, and is investing in AI-ready insights and new products (Copilot) to enhance customer value.
• Creditors: The company has a substantial amount of debt, but reports compliance with covenants and expects to remain in compliance, indicating manageable credit risk in the near term.

Next Steps

• Continue to invest in sales and marketing capacity to expand the customer base.
• Continue to invest in research and development to develop new features and functionality, including AI capabilities.
• Monitor and manage the impact of macroeconomic conditions on net revenue retention.
• Evaluate the impact of the recently enacted U.S. H.R. 1 (One Big Beautiful Bill Act) on financial results.
• Continue to execute the Share Repurchase Program, with $396.2 million remaining authorized as of June 30, 2025.

Key Dates

Recommendation

The company demonstrated a significant turnaround in profitability, moving from a net loss to net income, largely by avoiding the substantial one-time charges (lease impairments, bad debt, litigation settlements) that impacted the prior year. While revenue growth remains modest at 5% for the quarter and 2% for the half-year, the improvement in net revenue retention to 89% and the increase in customers with over $100,000 ACV indicate a positive shift towards higher-value clients. The active share repurchase program signals management's confidence and commitment to returning capital to shareholders. However, the company faces multiple ongoing legal proceedings related to data privacy and securities, which introduce uncertainty. The substantial debt load, while currently manageable, also warrants monitoring. The overall picture is one of stabilization and strategic repositioning, but the modest top-line growth and legal overhang suggest a 'Hold' until clearer signs of accelerated organic growth or resolution of legal risks emerge.

Keywords

Go-to-Market Intelligence, B2B Sales, Marketing Automation, SaaS, Data Analytics, AI, Machine Learning, CRM Integration, Sales Intelligence, Recruiting Solutions, Cloud-based Platform