Thanks, Josh. Welcome to ZoomInfo's financial results conference call for the first quarter of 2026. With me on the call today are Henry Schuck, Founder and CEO of ZoomInfo, and Graham O'Brien, our Chief Financial Officer. During this call, any forward-looking statements are made pursuant to the safe harbor provisions of U.S. securities laws. Expressions of future goals, including business outlook, expectations for future financial performance, and similar items, including without limitation, expressions using the terminology may, will, expect, anticipate, and believe, and expressions which reflect something other than historical facts, are intended to identify forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors sections of our SEC filings. Actual results may differ materially from any forward-looking statements.
The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the forward-looking statements in the slides posted to the investor relations website at ir.zoominfo.com. All metrics on this call are non-GAAP, unless otherwise noted. A reconciliation can be found in the financial results press release or in the slides posted to our IR website. With that, I'll turn the call over to Henry.
Thank you, Jerry. Welcome everyone. We started 2026 by delivering revenue and adjusted operating income above the high end of our Q1 guidance. Revenue for the first quarter was $310 million, up 1.5% year-over-year, and adjusted operating income margin was 35%, up more than two points year-over-year. Our non-seat-based operations and Data as a Service offerings, one of the most profitable parts of the business and almost exclusively upmarket, again grew more than 20% year-over-year in the quarter and now makes up just under 20% of our business. While we exceeded our guidance in Q1, as macro conditions worsened at the end of the quarter, we experienced a regression in our downmarket and upmarket growth trajectories.
In the closing days of March and into April, we saw a trend of AI and agentic confusion in our customer conversations. What can be built versus bought, what vendor or internal team delivers what, and where the differentiation really lives. This led to a pause in purchasing decisions, and our software customers were particularly affected, as many are facing a confusing purchasing landscape compounded by the threat of their own growth disruption, creating a circular headwind in our space. As a result, we're revising our full year guidance down in conjunction with significant cost reductions that we believe will position us with structurally higher operating margins and create a faster path back to durable growth. This was hard because of the impact on a large number of our teammates, many with long tenures here, who did good work to get us to this point.
Change is necessary and a positive decision for the future of ZoomInfo. We made these changes with an eye on the opportunity for us to expand consumption of our data with the proliferation of AI, an opportunity we believe to be potentially larger than anything we've seen in the first 20 years of operating the business. AI has structurally changed how software is built, bought, and used. LLMs have given go-to-market teams a simpler interface to work with data and build custom revenue workflows without heavy technical support. These interfaces will increase across all of software, and as they do, our traditional seats tied to application model will come under pressure, while at the same time our opportunity to tie into the growth slipstream of go-to-market work that LLMs and coding agents enable expands through our data offerings.
Our strategy is to make ZoomInfo's go-to-market data ubiquitous, available wherever go-to-market work gets done, including ChatGPT, Claude, Perplexity, Microsoft Copilot, Google Gemini, and internally built applications. With an increasingly headless approach to software, these workflows become materially more valuable when powered by our data and insights. Confusion around what AI can do and cannot do, and where our data critically plugs in, is temporary, and combined with pockets of overhang in our seats-based pricing, may create a near-term net headwind in our business. The long-term tailwind, as AI agents and interfaces continue to grow exponentially, is to ensure our high-quality go-to-market data plugs in across those growing surface areas. The promise of that future upside is evident in our operations business and in the value our largest customers continue to assign to their investments with ZoomInfo.
ZoomInfo understands complex Global 2000 account hierarchies, curates proprietary contact data, operates a privacy-first identity graph, enriches 5.5 billion data attributes, and processes 1.05 trillion intent signals each month. Each raw data point needs to be cleansed, normalized, and transformed into go-to-market ready output every day. AI-driven or not, go-to-market organizations need this data infrastructure from ZoomInfo. Capturing this shift requires us to sell and operate differently. Our actions this morning across our employee base restructure ZoomInfo to operate more efficiently, generate stronger cash flow, and reposition our data assets, APIs, and MCPs as a larger, more durable part of the business. Our operations business shows the model we believe the market is moving towards, non-seat-based, data-led, upmarket, high retention, and highly defensible. Our goal is to make more of ZoomInfo transact and grow that way.
As part of that evolution, we're leading with data. Beginning in Q3, customers will have the flexibility to convert historical per-seat spend into consumption across ZoomInfo data, insights, applications, and agents. This will be a more formal effort in matching the pricing and value delivery to the best customer behaviors and outcomes. We're expanding where customers can access and pay for ZoomInfo data, including ChatGPT, Claude, Gemini, Copilot, and internally built applications. We are shifting investment from front-end application development toward data, AI-enabled engineering, product-led growth, LLM interfaces, and higher-margin customer segments. I want to briefly explain the durability of our data asset. ZoomInfo's moat is not a single data set.
It is a layered system, proprietary B2B data, contributory network inputs, public and partner-sourced intelligence, real-time business signals, entity resolution, a privacy-first identity graph, governance infrastructure, and activation workflows. At the foundation is ZoomInfo's intelligence layer, billions of data points with more than 140 million company entity records, 580 million+ IP to organization pairing, more than 500 million professional profiles, and data including intent, hierarchy, location, financial information, personnel moves, technology usage, funding details, organizational charts, news, and other commercial signals. The value is not just collecting this data, it is resolving it. Company names change, M&A happens, people change roles, titles vary, subsidiaries roll into parents, and the same person can appear differently across dozens of sources. ZoomInfo resolves that noise into a living, governed, commercially useful graph that customers can activate in their workflows.
The next layer is our signal and context data, identifying who's in market and why. Foundation models are incredible at reasoning, writing, summarizing, and automating, but they do not inherently know which companies are real targets, which contacts are current, which buying signals are fresh, which account hierarchies matter, which technologies are installed, which prospects are in market, or which internal CRM patterns predict conversion. GTM AI becomes useful only when the model is grounded in accurate, permissioned, current, entity-resolved business context. Our signal and context layer is built around our contributory network and proprietary identity graph, both unique, non-publicly available data assets that create real value for go-to-market. The final layer is trust, governance, accuracy, privacy, and compliance. We collect, verify, and publish high-quality, ethically sourced business information with a privacy program built around global privacy laws like the CCPA, PIPEDA, and GDPR.
Our notice and choice program provides notification when professionals' profiles first appear in the platform, offers multiple opt-out methods, honors removal requests, and takes steps to prevent removed profiles from being re-added. Our governance framework aligns with major regulatory regimes. We maintain the industry's most robust set of privacy, security, and compliance certifications. As GTM work becomes increasingly agentic, every AI seller, marketer, rev ops workflow, and customer growth motion will need a trusted intelligence layer that tells it who to target, why now, what changed, and what to do next. Our customers, industry analysts, and partners are validating this. Customers ranked us number one in 142 G2 Spring 2026 reports across sales intelligence, buyer intent data, and lead capture.
Forrester's recent Wave for marketing and sales data providers called ZoomInfo, quote, "Entrenched as the default data provider for B2B sales, setting a technology standard for data collection and identity resolution." In Q1, Salesforce released its prospecting agent with ZoomInfo as the 1st and primary external data provider. Our contact, company, intent, and scoops data powers recommendations across Salesforce's 150,000-plus customer base. HubSpot also shipped its prospecting agent with a native ZoomInfo integration. When the two largest CRM platforms choose ZoomInfo to power AI prospecting agents, it reinforces the durability and relevance of our data asset. We also launched connectors for ChatGPT, Claude, Microsoft Copilot, and Perplexity, and are advancing our Google Gemini integration. Data integrations have doubled year-over-year, and MCP connections are growing organically without dedicated sales or marketing.
We expanded Go-to-Market Studio trials to more than a quarter of existing customers, helping customers build automated workflows triggered by ZoomInfo signals. Going forward, our application layers will serve as engines for data engagement and consumption rather than standalone application seat products. As customers renew in the back half of the year, we're introducing more flexible pricing and packaging built around data access and usage. This reduces reliance on platform fees and per-seat charges, lowers the overhang from seat compression, and better aligns monetization with customer value. We expect most customers to transition at similar price points, with some moving lower and some higher. While this may create a near-term revenue headwind, it gives us a cleaner model and a better opportunity to grow as customers expand their use of ZoomInfo data. Turning to customer wins, in Q1, we signed deals with Sierra, Lyft, and Wyndham Hotels and Resorts.
We also closed a strategic win with a unicorn cloud software company serving MSPs, displacing the incumbent and beating more than half a dozen alternatives, including an internally developed AI tool to become its core data and enrichment platform across Go-to-Market Studio and Workspace. An AI-native security and compliance platform also expanded across Studio, Copilot, and DaaS in a multiyear seven-figure TCV transaction to power its go-to-market motion. We continue to be opportunistic with the $1 billion incremental share repurchase authorization announced last quarter. We're confident in our ability to generate strong cash flow and operate the business efficiently while we execute this strategic shift. We remain committed to returning capital to shareholders in the most value-accretive way possible while ensuring we maintain long-term flexibility. With that, I'll turn the call over to Graham.
Thanks, Henry. Q1 GAAP revenue was $310 million, up 1.5% year-over-year, adjusted operating income was $110 million, a margin of 35%, with both revenue and AOI coming in above the high end of the guidance ranges we provided. Unlevered free cash flow was $120 million, with $21 million in interest paid in cash during the quarter. In a seasonally slower quarter, upmarket ACV grew 5% year-over-year, a step down from 6% year-over-year growth in the fourth quarter, an improvement from 3% upmarket ACV growth in the year-ago period. Downmarket ACV declined 11% year-over-year in Q1 as compared to a decline of 10% in the fourth quarter and in the year-ago period.
Upmarket is now 75% of our business. Customers with greater than $100,000 in ACV increased by 32 year-over-year, while decreasing 21 sequentially, and ACV from that cohort increased 10% year-over-year. As Henry highlighted, Operations had another strong quarter, with ACV growth greater than 20% year-over-year. Net revenue retention was 90% in Q1, the third quarter in a row of 90% net revenue retention. Overall, it was a solid quarter. We saw a shift in buyer behavior exiting the quarter and into Q2. Gross retention held in well overall. Customers in our software vertical experienced elevated rates of down-sell and churn relative to the improving trends we had seen in 2025.
As we moved through March, we saw more customer confusion in the marketplace around what AI can and cannot do and increased macroeconomic uncertainty. With the improving trends we had seen in 2025 starting to moderate, it became clear that our growth progression was no longer on schedule and that now is the right moment to be proactive and accelerate the timeline of our strategic initiatives. We believe we can further rightsize the downmarket business, shift to a better-suited pricing model for our customers while reducing the potential overhang from further seat compression. As we consolidate global operations while largely protecting profitability in the process. Despite the near-term revenue impact, we can return to healthier growth levels sooner than a status quo approach would deliver.
As a result, we are now guiding to FY 2026 revenue in the range of $1.185 billion-$1.205 billion. This is a proactive and prudent measure in a period of significant transition. While our initial guidance for the year did not embed upside for new product initiatives, it also did not anticipate the environment getting worse. Our updated guidance adds some incremental top-line conservatism to account for a fluctuating macroeconomic environment, as well as the potential for near-term headwinds as we execute against our strategic initiatives. We make this adjustment to our full year guidance, which we believe will help set up a new foundation over the next 12-18 months that we can ultimately begin to grow from, while at the same time committing to improved profitability outcomes.
We are now guiding to full-year AOI of $437 million-$447 million, and an AOI margin of 37% at the midpoint of guidance, up 130 basis points year-over-year and an improvement of 30 basis points as compared to our prior full-year guidance. As we look to operate more efficiently with a long-term focus on data and consumption, the changes announced today impact 20% of our employees or 600 team members, including closing our facilities in Israel. Israel has been an important part of our organization. While these were all difficult decisions, they reflect our commitment to operating the business in the most efficient and strategically focused way possible.
Some of the roles impacted will be hired in other regions, and some of these roles will not be replaced as we operate with a leaner, more focused organization. Across every team at ZoomInfo, we're doing more with less. With over 85% of employees actively using our internal AI operating system, AI-bolstered work is now the rule, not the exception. Whether it's shipping more code per engineer, multiples more, with fewer bugs in R&D, building custom apps in finance that replace manual processes and external spend, or building intelligent campaigns on demand in sales and marketing, AI is unlocking productivity at an unprecedented pace. As I noted last quarter, seat-based pricing contribution mix peaked in 2022, and we have progressively decreased that contribution every year since then. We expect to accelerate this transition further.
Approximately one-third of our ACV is not tied to seats, and our goal is to shift that closer to 50/50 in the next 18-24 months. We plan to roll out a hybrid pricing model later in Q3 that pairs a low annual platform fee with pre-purchase credits rather than our traditional seat-based packages. The consumption portion will be similar to how we account for ZoomInfo Operations and DaaS, selling packages of data credits to customers that will be consumed over time across any platform and counted as ACV. This is the next step in the evolution away from seat-based pricing as we build on the positive momentum from the expansion of enterprise license agreements across our largest customers. There are two long-term benefits here related to net revenue retention.
Less down-sell pressure coming from seat compression, while at the same time data consumption trends increase over time, generating upsell opportunity leading to improved NRR outcomes. This shift to consumption introduces some variability in revenue recognition, driven by the timing of credit consumption relative to credit allowances. This dynamic is reflected in our revised revenue guidance. As part of this evolution, we are eliminating more down-market sales resources, shifting down-market almost exclusively to product-led growth, enabling us to further accelerate the shift up market while we expand our focus on data. A result of these actions, we expect restructuring costs of $45 million-$60 million, the majority of which are cash costs and expected to be incurred in Q2 and Q3 2026.
We expect to reduce annual run rate operating expenses by approximately $60 million with the actions, including restructuring the entirety of our Israeli operations, largely complete by Q1 of 2027. The majority of transitionary compensation costs from notification date through the completion of the discontinuation of operations in Israel will be added back for purposes of calculating our non-GAAP metrics. As we absorb these restructuring costs, our cash position and our underlying cash generation remain strong. Turning to cash in the period, GAAP operating cash flow was $115 million in Q1. Unlevered free cash flow for the quarter was $120 million, 109% conversion from adjusted operating income, and representing a margin of 39%.
GAAP stock-based compensation expense was $25.5 million, down 14% year-over-year, and representing 8% of revenue. As a percentage of revenue, adjusted expenses combined with stock-based compensation improved 5 points year-over-year, reflecting a significant improvement to the quality of our earnings. We continue to prioritize performance-based compensation for cash and equity compensation with achieving rigorous free cash flow objectives. In Q1, we repurchased 13.1 million shares of common stock at an average price of $6.91 for an aggregate $90 million. Inclusive of the repurchase authorization announced in February, we had more than $1 billion in remaining repurchase capacity at the end of the quarter.
Weighted average diluted shares outstanding for the quarter used in calculating non-GAAP diluted earnings per share was 318 million, and the non-GAAP share count exiting the quarter was 310 million. We ended the quarter with $175 million in cash equivalents, and investments, and we carried $1.3 billion in gross debt. As a result, our net leverage ratio is both 2.4x trailing twelve-months adjusted EBITDA and 2.4x trailing twelve-months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements, as compared to 2.5x and 2.3x in the year-ago period. The $650 million in senior notes mature in 2029, and $581 million first lien term loan matures in 2030.
We are comfortable with our current maturity profile, and we have sufficient liquidity and cash generation to manage our obligations as they come due. During the quarter, we entered into interest rate swap to fix a portion of our variable rate debt. We executed $425 million of notional interest rate swaps at a blended fixed rate of 3.28%, reducing our exposure to SOFR volatility while providing greater visibility into interest expense and free cash flow. Following the close of the quarter, we amended our revolving credit facility to increase total commitments from $250 million-$276 million, with U.S. Bank joining the lender group through an incremental commitment of $26 million. No additional borrowings were made in connection with the amendment.