ZoomInfo Technologies Inc

Previous wording

References in this Annual Report on Form 10-K to “ZoomInfo Technologies Inc.” refer to ZoomInfo Technologies Inc. and not to any of its subsidiaries unless the context indicates otherwise. References in this Form 10-K to “ZoomInfo”, the “Company”, “we”, “us”, and “our” refer (1) prior to the consummation of the Reorganization Transactions, to ZoomInfo OpCo and its consolidated subsidiaries, (2) after the consummation of the Reorganization Transactions and prior to the consummation of the Holding Company Reorganization, to ZoomInfo Intermediate Inc. (formerly known as ZoomInfo Technologies Inc.) and its consolidated subsidiaries, and (3) after the consummation of the Holding Company Reorganization, to ZoomInfo Technologies Inc. (formerly known as ZoomInfo NewCo Inc.) and its consolidated subsidiaries unless the context indicates otherwise. Numerical figures included in this Annual Report on Form 10-K are subject to immaterial rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.

Current wording

Numerical figures included in this Annual Report on Form 10-K are subject to immaterial rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.

Previous wording

ZoomInfo is a global leader in modern go-to-market software, data, and intelligence for sales, marketing, operations, and recruiting teams. RevOS – our modern, cloud-based operating system for revenue professionals – delivers comprehensive and high-quality intelligence and analytics to provide sales, marketing, operations, and recruiting professionals accurate information and insights on the organizations and professionals they target. This enables our customers to shorten sales cycles and increase win rates by empowering sellers, marketers, and recruiters to deliver the right message to the right person at the right time in the right way.

Current wording

ZoomInfo is a global leader in modern go-to-market software, data, and intelligence for sales, marketing, operations, and recruiting teams. Our go-to-market intelligence platform empowers businesses with AI-ready insights, trusted data, and advanced automation providing sales, marketing, operations, and recruiting professionals accurate information and insights on the organizations and professionals they target. This enables our customers to shorten sales cycles and increase win rates by empowering sellers, marketers, and recruiters to efficiently deliver the right message to the right person at the right time in the right way.

Previous wording

ZoomInfo defines the modern go-to-market technology stack across three distinct layers that build upon each other:

Current wording

ZoomInfo is the modern go-to-market intelligence platform, consisting of three distinct layers that build upon each other:

Previous wording

•Our Intelligence Layer is the foundation of our data-driven strategy. Our best-in-class data, curated through first- and third-party sources, includes billions of data points about companies and contacts, such as intent, hierarchy, location, technographic, and financial information.

Current wording

•Our Intelligence Layer is the foundation of our data-driven strategy. Our best-in-class data, curated through first- and third-party sources, includes billions of data points about companies and contacts, such as intent, hierarchy, location, and financial information.

Previous wording

•Our Orchestration Layer integrates and enriches our data sources. At this stage, our products assign and route data, leads, and insights to the appropriate people. This creates a dataset that is continuously updated and can be used to power automated business workflows. Our services connect with major CRM providers.

Current wording

•Our Orchestration Layer integrates and enriches our data sources. At this stage, our products assign and route data, leads, and insights to the appropriate people. This creates a dataset that is continuously updated and can be used to power automated business workflows. Our services connect with major CRM system providers enabling sales operations professionals to access a suite of products, services, and solutions to ingest, match, enrich, and connect data feeds into multiple systems.

Previous wording

•Our Engagement Layer allows sales, marketing, operations, and recruiting professionals to put data-driven insights into action to identify and communicate with prospects and customers. In SalesOS, frontline teams, managers, and leaders use Engage for multi-touch and multi-channel sales engagement, as well as Chorus for call and web meeting recording, transcription, insight generation, and coaching. In MarketingOS, marketers drive awareness, lead generation, and deal acceleration campaigns through account-based marketing, advertising, and website conversion optimization solutions, along with ZoomInfo Chat for intelligent website experiences through live conversation and chatbots. In TalentOS, recruiters and talent acquisition professionals access a database that helps them efficiently find candidates. Recruiters can filter and reach more good-fit candidates, use pipeline management tools to collaborate and organize the hiring process, and automate the candidate outreach process. In OperationsOS, our sales operations customers use a suite of products, services, and solutions to ingest, match, enrich, and connect data feeds into multiple systems.

Current wording

•Our Engagement Layer allows sales, marketing, operations, and recruiting professionals to put data-driven insights into action to identify and communicate with prospects and customers. Go-to-market professionals use our engagement layer for multi-touch and multi-channel sales engagement, web meeting recording, transcription, insight generation, and coaching. Marketers drive awareness, lead generation, and deal acceleration campaigns through account-based marketing, advertising, and onsite conversion optimization solutions including chat functionality. Recruiters and talent acquisition professionals can locate and reach more better suited candidates, use pipeline management tools to collaborate and organize the hiring process, and automate aspects of the candidate outreach process by more efficiently finding and engaging candidates.

Previous wording

We generate substantially all of our revenue from sales of subscriptions to our platform. Subscriptions include the use of our platform and access to customer support. Subscriptions generally range from one to three years in length. Over 45% of customer contracts (based on annualized value) are multi-year agreements. We typically bill our customers at the beginning of each annual, semi-annual, or quarterly period and recognize revenue ratably over the term of the subscription period.

Current wording

We generate substantially all of our revenue from sales of subscriptions to our platform. Subscriptions include the use of our platform and access to customer support. Subscriptions generally range from one to three years in length. Over 49% of customer contracts (based on annualized value) are multi-year agreements. We typically bill our customers at the beginning of each annual, semi-annual, or quarterly period and recognize revenue ratably over the term of the subscription period.

Previous wording

We sell access to our platform to both new and existing customers. We price our subscriptions based on the functionality, users, and records under management that are included in our contracts. Our paid products are SalesOS, MarketingOS, OperationsOS, and TalentOS (with add-on options for some products). Additionally, customers can gain free access to ZoomInfo through ZoomInfo Lite (formerly Community Edition).

Current wording

We sell access to our platform to both new and existing customers. We price our subscriptions based on the functionality, users, and records under management that are included in our contracts. Our core paid products are ZoomInfo Copilot, ZoomInfo Sales, ZoomInfo Marketing, ZoomInfo Operations, and ZoomInfo Talent (with add-on options for some products), and we have a free community edition, ZoomInfo Lite.

Previous wording

Our software, insights, and data enable over 35,000 companies to go-to-market more effectively and efficiently. Our customers are primarily businesses that sell to other businesses and operate in almost every industry vertical. They range from the largest global enterprises, to mid-market companies, down to small businesses. The top 5 industries that we serve, as measured by ACV, on December 31, 2023 are software, which comprised 33% of ACV (compared to 39% a year prior), non-IT business services, which comprised 18% of ACV (compared to 16% a year prior), IT services, which comprised 10% of ACV (compared to 10% a year prior), financial, insurance & real estate, which comprised 8% of ACV (compared to 7% a year prior), and manufacturing, which comprised 5% of ACV (compared to 5% a year prior). Our Net Revenue Retention rate as of December 31, 2023 was 87%.

Current wording

Our software, insights, and data enable over 35,000 companies to go-to-market more effectively and efficiently. Our customers are primarily businesses that sell to other businesses and operate in almost every industry vertical. They range from the largest global enterprises, to mid-market companies, down to small businesses. The top five industries that we serve, as measured by ACV, on December 31, 2024 are software, which comprised 32% of ACV (compared to 33% a year prior), non-IT business services, which comprised 20% of ACV (compared to 18% a year prior), IT business services, which comprised 8% of ACV (compared to 10% a year prior), financial, insurance & real estate, which comprised 8% of ACV (compared to 8% a year prior), and manufacturing, which comprised 6% of ACV (compared to 5% a year prior).

Previous wording

For the year ended December 31, 2023, no single customer contributed more than 1% of revenue. Revenues derived from customers and partners located outside the United States, as determined based on the address provided by our customers and partners, accounted for approximately 13%, 12%, and 11% of total revenue for the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023, 1,820 customers contracted for more than $100,000 in ACV for ZoomInfo services.

Current wording

For the year ended December 31, 2024, no single customer contributed more than 10% of revenue. Revenues derived from customers and partners located outside the United States, as determined based on the address provided by our customers and partners, accounted for approximately 12%, 13%, and 12% of total revenue for the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024, 1,867 customers contracted for more than $100,000 in ACV for ZoomInfo services.

Previous wording

We have experienced rapid organic growth, supplemented by additional growth from acquisitions. We generated revenue of $1,239.5 million for the year ended December 31, 2023, as compared to revenue for the year ended December 31, 2022 of $1,098.0 million, and GAAP income from operations of $259.5 million for the year ended December 31, 2023, as compared to GAAP income from operations of $175.8 million for the year ended December 31, 2022. GAAP operating income margin was 21% for the year ended December 31, 2023, as compared to 16% in 2022. GAAP net income for the year ended December 31, 2023 was $107.3 million, as compared to GAAP net income of $63.2 million for the year ended December 31, 2022. In addition to our consolidated U.S. GAAP financial measures, we review various non-GAAP financial measures, including Adjusted Operating Income, Adjusted Operating Income Margin, and Adjusted Net Income. See “Non-GAAP Financial Measures” below. Our Adjusted Operating Income was $498.6 million for the year ended December 31, 2023, as compared to $447.8 million for the year ended December 31, 2022. Our Adjusted Operating Income Margin was 40% for the year ended December 31, 2023, as compared to 41% in 2022. Adjusted net income was $413.1 million for the year ended December 31, 2023, as compared to $363.5 million for the year ended December 31, 2022. See “Non-GAAP Financial Measures” below for definitions.

Current wording

We generated revenue of $1,214.3 million for the year ended December 31, 2024, as compared to revenue for the year ended December 31, 2023 of $1,239.5 million, and GAAP income from operations of $97.4 million for the year ended December 31, 2024, as compared to GAAP income from operations of $259.5 million for the year ended December 31, 2023. GAAP operating income margin was 8% for the year ended December 31, 2024, as compared to 21% in 2023. GAAP net income for the year ended December 31, 2024 was $29.1 million, as compared to GAAP net income of $107.3 million for the year ended December 31, 2023. In addition to our consolidated U.S. GAAP financial measures, we review various non-GAAP financial measures, including Adjusted Operating Income, Adjusted Operating Income Margin, and Adjusted Net Income. See “Non-GAAP Financial Measures” below. Our Adjusted Operating Income was $428.5 million for the year ended December 31, 2024, as compared to $498.6 million for the year ended December 31, 2023. Our Adjusted Operating Income Margin was 35% for the year ended December 31, 2024, as compared to 40% in 2023. Adjusted net income was $363.8 million for the year ended December 31, 2024, as compared to $413.1 million for the year ended December 31, 2023. See “Non-GAAP Financial Measures” below for definitions.

Previous wording

Our business and financial condition have and may continue to be impacted by adverse macroeconomic conditions. See “Risk Factors - Geopolitical Risks” in Part I, Item 1A of this Annual Report on Form 10-K for further discussion of the possible impact of these issues on our business.

Current wording

Our business and financial condition have and may continue to be impacted by adverse macroeconomic conditions. See “Risk Factors - Geopolitical Risks and Macroeconomic Factors” in Part I, Item 1A of this Annual Report on Form 10-K for further discussion of the possible impact of these issues on our business.

Previous wording

In December 2023, we entered into an amendment to our existing First Lien Credit Agreement (the "Sixth Amendment"), pursuant to which the Company completed a repricing of its First Lien Term Loan Facility, which decreased the applicable rate for Base Rate loans by 50 basis points and SOFR based loans by 60 basis points.

Current wording

In June 2024, we entered into an amendment to our existing First Lien Credit Agreement (the "Seventh Amendment"), pursuant to which the Company completed a repricing of its First Lien Term Loan Facility, which decreased the applicable rate for both Base Rate loans and SOFR based loans by 50 basis points.

Previous wording

We are focused on continuing to grow the number of customers that use our platform in the United States and around the world. The majority of revenue growth when comparing the year ended December 31, 2023 to the year ended December 31, 2022 was the result of new customers added over the last 24 months. Our operating results and growth prospects will depend, in part, on our ability to continue to attract new customers. Additionally, acquiring new customers strengthens the power of our contributory networks. We plan to continue to invest in our efficient go-to-market effort to acquire new customers. As of December 31, 2023, 2022 and 2021, we had over 35,000, 30,000, and 25,000 customers, respectively. We define a customer as a company that maintains one or more active paid subscriptions to our platform.

Current wording

We are focused on continuing to grow the number of customers using our platform in the United States and around the world, and efficiently transacting with those customers. Acquiring new customers while optimizing the profile of those customers and the go-to-market channels we use to attract these customers will play a part in determining our operating results and growth prospects in the future. Acquiring new customers also strengthens the power of our contributory networks. We plan to continue to invest in our efficient go-to-market effort to expand our customer base. As of December 31, 2024, 2023 and 2022, we had over 35,000, 35,000, and 30,000 customers, respectively. We define a customer as a company that maintains one or more active paid subscriptions to our platform.

Previous wording

We believe that expanding the value that we provide to our customers and the corresponding revenue generated as a result is an important measure of the health of our business. We monitor net revenue retention to measure that growth. Net revenue retention is a metric that we calculate based on customers of ZoomInfo at the beginning of the twelve-month period, and is calculated as: (a) the total annual contract value ("ACV") for those customers at the end of the end of the twelve-month period, divided by (b) the total ACV for those customers at the beginning of the twelve-month period. Our net annual retention rate was 87% as of December 31, 2023. In the near term, we expect our net retention rate to be impacted by macroeconomic conditions. See section "Recent Developments - Impact of Macroeconomic Conditions." We also measure our success in expanding relationships with existing customers by the number of customers that contract for more than $100,000 in ACV. As of December 31, 2023, we had 1,820 customers with over $100,000 in ACV.

Current wording

We believe that expanding the value that we provide to our customers and the corresponding revenue generated as a result is an important measure of the health of our business. We monitor net revenue retention to measure that growth. Net revenue retention is a metric that we calculate based on customers of ZoomInfo at the beginning of the twelve-month period, and is calculated as: (a) the total ACV for those customers at the end of the twelve-month period, divided by (b) the total ACV for those customers at the beginning of the twelve-month period. Our net annual retention rate was 87% and 87% as of December 31, 2024 and 2023, respectively. In the near term, we expect our net retention rate to be impacted by macroeconomic conditions. See the caption above entitled “—Recent Developments — Impact of Macroeconomic Conditions.” Over the long term, we expect our net revenue retention rate to be influenced by our ability to move upmarket, as larger customers have historically exhibited higher net revenue retention. We also measure our success in expanding relationships with existing customers by the number of customers that contract for more than $100,000 in ACV. As of December 31, 2024, 2023 and 2022, our customers with over $100,000 in ACV was 1,867, 1,820, and 1,926, respectively.

Previous wording

As a result of a number of factors, our historical results of operations are not comparable from period to period and may not be comparable to our financial results of operations in future periods. Set forth below is a brief discussion of the key factors impacting the comparability of our results of operations.

Current wording

Our historical results of operations are not comparable from period to period and may not be comparable to our financial results of operations in future periods. Set forth below is a brief discussion of the key factors impacting the comparability of our results of operations.

Previous wording

We seek to grow through both internal development and the acquisition of businesses that broaden and strengthen our platform. Our recent acquisitions include Insent in June 2021, Chorus.ai in July 2021, RingLead in September 2021, and Comparably, Inc. and Dogpatch Advisors, LLC in April 2022. As discussed below under “—Results of Operations,” these acquisitions have been a driver of our revenue, cost of service, operating expense, and interest expense growth. Purchase accounting requires that certain assets acquired and liabilities assumed be recorded at fair value on the acquisition date. Prior to January 2022, revenue from contracts that were impacted by the estimate of fair value of the unearned revenue upon acquisition were recorded based on the fair value until such contract is terminated or renewed, which differed from the receipts received by the acquired company allocated over the service period for the same reporting periods. Effective January 1, 2022, the Company early adopted new accounting guidance which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured in accordance with ASC 606, Revenue from Contracts with Customers, as if the acquirer had originated the contract. Refer to Note 2 - Basis of Presentation and Summary of Significant Accounting Policies to our audited consolidated financial statements included in Part II, Item 8 of this Form 10-K for further discussion.

Current wording

We seek to grow through both internal development and the acquisition of businesses that broaden and strengthen our platform. Our recent acquisitions include Comparably, Inc. and Dogpatch Advisors, LLC in April 2022. These acquisitions have been a driver of our revenue, cost of service, operating expense, and interest expense growth when comparing the results for the years ended December 31, 2023 and 2022.

Previous wording

Cost of service, excluding amortization of acquired technology. Cost of service, excluding amortization of acquired technology, includes direct expenses related to the support and operations of our SaaS services and research teams including salaries, benefits, equity-based compensation, and related expenses, such as employer taxes, allocated overhead for facilities, IT, third-party hosting fees, third-party data costs, and amortization of internally developed capitalized software.

Current wording

Cost of service. Cost of service includes direct expenses related to the support and operations of our services and research teams including salaries, benefits, equity-based compensation, and related expenses, such as employer taxes, allocated overhead for facilities, technology, third-party hosting fees, third-party data costs, and amortization of internally developed capitalized software.

Previous wording

Gross profit is revenue less cost of service, and gross margin is gross profit as a percentage of revenue. Gross profit has been and will continue to be affected by various factors, including leveraging economies of scale, the costs associated with third-party hosting services and third-party data, the level of amortization of acquired technology, and the extent to which we expand our customer support and research organizations. We expect that our gross margin will fluctuate from period to period depending on the interplay of these various factors.

Current wording

Gross profit is revenue less cost of revenue, and gross margin is gross profit as a percentage of revenue. Gross profit has been and will continue to be affected by various factors, including leveraging economies of scale, the costs associated with third-party hosting services and third-party data, the level of amortization of acquired technology, and the extent to which we expand our customer support and research organizations. We expect that our gross margin will fluctuate from period to period depending on the interplay of these various factors.

Previous wording

Our operating expenses consist of sales and marketing, research and development, general and administrative, amortization of other acquired intangibles, and restructuring and transaction-related expenses. The most significant component of our operating expenses is personnel costs, which consists of salaries, bonuses, sales commissions, equity-based compensation, and other employee-related benefits. Operating expenses also include overhead costs for facilities, technology, professional fees, depreciation and amortization expense, and marketing.

Current wording

Our operating expenses consist of sales and marketing, research and development, general and administrative, and amortization of other acquired intangibles. The most significant component of our operating expenses is personnel costs, which consists of salaries, bonuses, sales commissions, equity-based compensation, and other employee-related benefits. Operating expenses also include overhead costs for facilities, technology, professional fees, depreciation and amortization expense, marketing, and restructuring and transaction-related expenses. We anticipate that restructuring and transaction-related expenses, including potential impairments, will be influenced by future acquisition activity, strategic restructuring activities, and the commencement of new leases. Specifically, as new leases commence, we may face increased impairment expenses for spaces that we do not intend to occupy and/or that we plan to sublease, which could cause these costs to vary, potentially significantly, from our historic levels. Refer to Note 13 - Leases of our audited consolidated financial statements included in Part II, Item 8 of this Form 10-K for further information.

Previous wording

We anticipate that we will continue to invest in sales and marketing capacity to enable future growth. We anticipate that sales and marketing expense excluding equity-based compensation as a percentage of revenue will fluctuate from period to period depending on the interplay of our growing investments in sales and marketing capacity excluding equity-based compensation, the recognition of revenue, and the amortization of contract acquisition costs.

Current wording

We anticipate that we will continue to invest in sales and marketing capacity to enable future growth. We anticipate that sales and marketing expense excluding equity-based compensation as a percentage of revenue will fluctuate from period to period depending on the interplay of our growing investments in sales and marketing capacity excluding equity-based compensation, the recognition of revenue, and the amortization of deferred commissions costs.

Previous wording

Research and development. Research and development expenses support our efforts to enhance our existing platform and develop new software products. Research and development expenses primarily consist of employee compensation such as salaries, bonuses, equity-based compensation, and other employee-related benefits for our engineering and product management teams, as well as overhead costs. Research and development expenses do not reflect amortization of internally developed capitalized software. We believe that our core technologies and ongoing innovation represent a significant competitive advantage for us.

Current wording

Research and development. Research and development expenses support our efforts to enhance our existing platform and develop new software products. Research and development expenses primarily consist of employee compensation such as salaries, bonuses, equity-based compensation, and other employee-related benefits for our engineering and product management teams, as well as overhead costs, and technology. Research and development expenses do not reflect amortization of internally developed capitalized software. We believe that our core technologies and ongoing innovation represent a significant competitive advantage for us.

Previous wording

General and administrative. General and administrative expenses primarily consist of employee-related costs such as salaries, bonuses, equity-based compensation, and other employee related benefits for our executive, finance, legal, human resources, IT, and business operations and administrative teams, as well as overhead costs. Additionally, we incur expenses related to bad debt and collections, as well as for professional fees including legal services, accounting, banking, and other consulting services, including those associated with operating as a public company.

Current wording

General and administrative. General and administrative expenses primarily consist of employee-related costs such as salaries, bonuses, equity-based compensation, and other employee related benefits for our executive, finance, legal, human resources, IT, and business operations and administrative teams, as well as overhead costs. Additionally, we incur expenses related to bad debt and collections, as well as for professional fees including legal services, accounting, banking, and other consulting services. General and administrative expenses also include restructuring and transaction-related expenses, such as impairment charges associated with our leasing activity. Refer to Note 13 - Leases of our audited consolidated financial statements included in Part II, Item 8 of this Form 10-K for further information. We also incur charges associated with litigation settlements, such as the Class Action settlement previously disclosed, which are presented within General and administrative on the Consolidated Statements of Operations.

Previous wording

We anticipate that interest expense could be impacted by changes in variable interest rates or the issuance of additional debt.

Current wording

We anticipate that interest expense could be impacted by changes in variable interest rates, the issuance of additional debt, or changes in our interest rate hedging strategies, such as entering into new hedging arrangements or the expiration of existing interest rate swaps.

Previous wording

Other (income) loss, net consists primarily of the revaluation of tax receivable agreement liabilities, investment income, and foreign currency realized and unrealized gains and losses related to the impact of transactions denominated in a foreign currency.

Current wording

Other loss (income), net consists primarily of the remeasurement of TRA liabilities, investment income, and realized and unrealized gains and losses related to the impact of transactions denominated in a foreign currency.

Previous wording

Changes to existing tax law including changes to the corporate income tax rates and the Company’s state tax footprint could lead to substantial revaluations of the tax receivable agreement liability recorded through Other (income) loss, net. Additionally, the magnitude of Other (income) loss, net may increase as we expand operations internationally and add complexity to our operations. Refer to the Provision (Benefit) for Income Taxes section below for further information.

Current wording

Changes to existing tax law, including changes to the corporate income tax rates or the Company’s state tax footprint could lead to substantial remeasurement of the TRA liability recorded through Other loss (income), net. Additionally, the magnitude of Other loss (income), net may increase as we expand operations internationally and add complexity to our operations. Refer to the Provision for income taxes section below for further information.

Previous wording

The Company recognizes deferred tax assets and liabilities based on temporary differences between the financial statement and tax basis of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future deductible temporary differences, net operating losses and credits by assessing the carryforward period and adequacy of future expected taxable income from all sources, including reversing taxable temporary differences, future growth, and forecasted earnings, as well as, historical earnings, taxable income in prior years, if carryback is permitted under the law, and prudent and feasible tax planning strategies. A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized.

Current wording

The Company recognizes deferred tax assets and liabilities based on temporary differences between the financial statement and tax basis of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future deductible temporary differences, net operating losses and credits by assessing the carryforward period and adequacy of future expected taxable income from all sources, including reversing taxable temporary differences, future growth, and forecasted earnings, as well as historical earnings, taxable income in prior years, whether carryback is permitted under the law, and prudent and feasible tax planning strategies. A valuation allowance is established only if it is more likely than not that all or a portion of the deferred tax asset will not be realized.

Previous wording

The Company has significant U.S. deferred tax assets, including deferred tax assets created by various historical restructuring events. The preponderance of our deferred tax assets have long lives or are otherwise indefinite. We regularly review whether it is more likely than not that our U.S. deferred tax assets will be realizable, and as of December 31, 2023 determined it was appropriate to create a valuation allowance for certain state-level attributes.

Current wording

The Company has significant U.S. federal and state deferred tax assets, including deferred tax assets created by various historical restructuring events. The preponderance of our deferred tax assets have long lives or are otherwise indefinite. We regularly review whether it is more likely than not that our deferred tax assets will be realizable. As of December 31, 2024, a valuation allowance continues to be recorded against certain state-level attributes.

Previous wording

The value of our deferred tax assets are regularly remeasured to consider the impact of statutory changes and other guidance, as well as changes in our state income apportionment factors. Given the amount of our deferred tax assets, minor changes can materially affect our Provision (Benefit) for income taxes. A significant portion of our deferred tax assets are associated with our Tax Receivable Agreements, and upon a remeasurement of our deferred tax assets, the Tax Receivable Agreements liability is typically concurrently remeasured with an partially offsetting impact within Other (income) loss, net on the Consolidated Statement of Operations. Refer to Note 17 - Tax Receivable Agreements to our audited consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

Current wording

The value of our deferred tax assets are regularly remeasured to consider the impact of statutory changes and other guidance, as well as changes in our state income apportionment factors. Given the amount of our deferred tax assets, minor changes can materially affect our Provision for income taxes. A significant portion of our deferred tax assets are associated with our TRA, and upon a remeasurement of our deferred tax assets, the TRA liability is typically concurrently remeasured with a partially offsetting impact within Other loss (income), net on the Consolidated Statements of Operations.

Previous wording

We have regularly taken tax positions, including with respect to our various corporate events and restructurings in the ordinary course of determining our Provision (Benefit) for income taxes. We recognize the tax benefit of an uncertain tax position only if it is more likely than not the position is sustainable upon examination by the taxing authority based on the technical merits. We regularly review our tax positions with consideration of a number of factors, including changes in facts or circumstances, changes in tax law or guidance, correspondence with tax authorities during the course of audits and effective settlement of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in our Provision (Benefit) for income taxes in the period in which we make the change, which could have a material impact on our effective tax rate and operating results.

Current wording

We have regularly taken tax positions, including with respect to our various corporate events and restructurings, in the ordinary course of determining our Provision for income taxes. We recognize the tax benefit of an uncertain tax position only if it is more likely than not the position will be sustainable upon examination by the taxing authority based on the technical merits. We regularly review our tax positions with consideration of a number of factors, including changes in facts or circumstances, changes in tax law or guidance, correspondence with tax authorities during the course of audits and effective settlement of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in our Provision for income taxes in the period in which we make the change, which could have a material impact on our effective tax rate and operating results.

Previous wording

Gross profit. Gross profit for the year ended December 31, 2023 was $1,061.4 million and represented a gross margin of 86%. Gross profit for the year ended December 31, 2022 was $909.6 million and represented a gross margin of 83%. The increase in gross profit in the year ended December 31, 2023 relative to the year ended December 31, 2022 was an increase of $151.8 million, or 17%, driven primarily due to higher revenues. The gross margin improvement in the year ended December 31, 2023 was primarily due to a lower headcount within cost of service.

Current wording

Gross profit. Gross profit for the year ended December 31, 2024 was $1,024.5 million and represented a gross margin of 84%. Gross profit for the year ended December 31, 2023 was $1,061.0 million and represented a gross margin of 86%. The decrease in gross profit in the year ended December 31, 2024 relative to the year ended December 31, 2023 was a decrease of $36.5 million, or 3%. The gross profit and gross margin decline in the year ended December 31, 2024 was primarily due to lower revenues, as described above, and charges incurred related to lease restructuring activities, increased amortization expense on internally developed capitalized software, and hosting fees.

Previous wording

Operating expenses. Operating expenses were $801.9 million for the year ended December 31, 2023, an increase of $68.1 million, or 9%, as compared to $733.8 million for the year ended December 31, 2022. Excluding equity-based compensation expenses, operating expenses were $650.0 million for the year ended December 31, 2023, an increase of $88.3 million, or 16%, as compared to $561.7 million for the year ended December 31, 2022.

Current wording

Operating expenses. Operating expenses were $927.1 million for the year ended December 31, 2024, an increase of $125.6 million, or 16%, as compared to $801.5 million for the year ended December 31, 2023. Excluding equity-based compensation expense, operating expenses were $799.6 million for the year ended December 31, 2024, an increase of $150.0 million, or 23%, as compared to $649.6 million for the year ended December 31, 2023.

Previous wording

•Amortization of other acquired intangibles was $21.9 million, representing a decrease of $0.1 million, or less than 1%, for the year ended December 31, 2023 as compared to December 31, 2022.

Current wording

•Amortization of other acquired intangibles was $21.6 million, representing a decrease of $0.3 million, or 1%, for the year ended December 31, 2024 as compared to $21.9 million for the year ended December 31, 2023.

Previous wording

Equity-based compensation expense. Equity-based compensation expense was $167.6 million for the year ended December 31, 2023, a decrease of $24.7 million, or 13%, as compared to $192.3 million for the year ended December 31, 2022, primarily due to lower grant date fair values of grants in the current year compared to 2022, capitalization of equity-based compensation, and terminations.

Current wording

Equity-based compensation expense. Equity-based compensation expense was $138.0 million for the year ended December 31, 2024, a decrease of $29.6 million, or 18%, as compared to $167.6 million for the year ended December 31, 2023, due to lower weighted average grant date fair values of grants being amortized in the current period compared to those that were amortized in the prior year and higher capitalization of equity-based compensation, partially offset by decreased termination expense reversals.

Previous wording

Income (Loss) from operations. Income from operations was $259.5 million for the year ended December 31, 2023, an increase of $83.7 million, or 48%, as compared to $175.8 million for the year ended December 31, 2022. The increase was primarily due to the increase in revenues, partially offset by higher operating expenses. Operating income margin was 21% for the year ended December 31, 2023 as compared to 16% for the year ended December 31, 2022 primarily due to improved profit margins.

Current wording

Income from operations. Income from operations was $97.4 million for the year ended December 31, 2024, a decrease of $162.1 million, or 62%, as compared to $259.5 million for the year ended December 31, 2023. The decrease was primarily due to lease impairment and abandonment charges, lease restructuring activities, and costs incurred related to the Class Actions, as well as the change in accounting estimate of collectability of accounts receivable. Operating income margin was 8% for the year ended December 31, 2024 as compared to 21% for the year ended December 31, 2023.

Previous wording

Interest expense, net. Interest expense, net was $45.2 million for the year ended December 31, 2023, a decrease of $2.4 million, or 5%, as compared to $47.6 million for the year ended December 31, 2022. The decrease was primarily due to the completion of two debt repricings which resulted in lowering the margin on our variable rate debt as well as lower principal debt outstanding as a result of repayments during the year.

Current wording

Interest expense, net. Interest expense, net was $39.3 million for the year ended December 31, 2024, a decrease of $5.9 million, or 13%, as compared to $45.2 million for the year ended December 31, 2023. The decrease was primarily due to the completion of a debt repricing, which resulted in a lower margin on our variable rate debt, as well as reduced principal debt outstanding from repayments during the year and higher interest income.

Previous wording

Other (income) loss, net. Other income, net was $178.8 million for the year ended December 31, 2023 which primarily consists of the TRA remeasurement gain of $160.7 million and investment income of $22.0 million, partially offset by losses on foreign currency transactions of $3.9 million, as compared to other income, net of $66.4 million for the year ended December 31, 2022 which primarily consists of the TRA remeasurement gain of $65.6 million and investment income of $4.2 million, partially offset by losses on foreign currency transactions of $3.4 million.

Current wording

Other loss (income), net. Other loss, net was $26.1 million for the year ended December 31, 2024 which primarily consists of the TRA remeasurement loss of $38.5 million, partially offset by investment income of $9.5 million, as compared to other income, net of $178.8 million for the year ended December 31, 2023 which primarily consists of the TRA remeasurement gain of $160.7 million and investment income of $22.0 million, partially offset by a loss on foreign currency transactions of $3.9 million.

Previous wording

Provision (Benefit) for income taxes. The Company is subject to income taxes in the United States and various foreign jurisdictions. Provision for income taxes for the year ended December 31, 2023 was $281.5 million, representing an effective tax rate of 72.4%, as compared to provision for income taxes of $131.4 million, representing an effective tax rate of 67.5%, for the year ended December 31, 2022. The increase in income tax expense was primarily due to remeasurement of the deferred tax assets resulting from state law changes, higher non-deductible equity compensation, and the application of valuation allowances. The annual effective tax rate differed from the U.S. federal statutory rate due to non-deductible equity compensations costs, U.S. state taxes including the remeasurement of deferred tax assets for the effect of state law changes, foreign taxes, the net U.S. and Israel tax effects resulting from a tax ruling relating to research and developments activities conducted in Israel, tax costs accrued for future repatriations of foreign earnings; offset by research and development credits. Refer to Note 18 - Income Taxes of our audited consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information related to the components of our income tax provision.

Current wording

Provision for income taxes. The Company is subject to income taxes in the United States and various foreign jurisdictions. Provision for income taxes for the year ended December 31, 2024 was $2.2 million, representing an effective tax rate of 7.2%, as compared to provision for income taxes of $281.5 million, representing an effective tax rate of 72.4%, for the year ended December 31, 2023. The decrease in income tax expense was primarily due to remeasurement of the deferred tax assets resulting from state tax law and apportionment changes and reduction in income before income taxes. The effective tax rate differed from the U.S. statutory rate of 21% due to the remeasurement of deferred tax assets for the effect of state tax law and apportionment changes and research and development tax credits, partially offset by non-deductible equity-based compensation expense, shortfalls in tax-deductible equity compensation compared to amounts recognized in our financial accounts, U.S. state taxes and valuation allowance established over certain state tax attributes. Refer to Note 17 - Income Taxes of our audited consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

Previous wording

We define Adjusted Operating Income as income (loss) from operations adjusted for (i) the impact of fair value adjustments to acquired unearned revenue, (ii) amortization of acquired technology and other acquired intangibles, (iii) equity-based compensation expense, (iv) restructuring and transaction-related expenses, and (v) integration costs and acquisition-related expenses. We exclude the impact of fair value adjustments to acquired unearned revenue and amortization of acquired technology and other acquired intangibles, as well as equity-based compensation expense, because these are non-cash expenses or non-cash fair value adjustments and we believe that excluding these items provides meaningful supplemental information regarding performance and ongoing cash-generation potential. We exclude restructuring and transaction-related expenses, as well as integration costs and acquisition-related expenses, because such expenses are episodic in nature and have no direct correlation to the cost of operating our business on an ongoing basis. Adjusted Operating Income is presented because it is used by management to evaluate our financial performance and for planning and forecasting purposes. Additionally, we believe that it and similar measures are widely used by securities analysts and investors as a means of evaluating a company’s operating performance. Adjusted Operating Income should not be considered as an alternative to operating income as an indicator of operating performance. We define Adjusted Operating Income Margin as Adjusted Operating Income divided by the sum of revenue and the impact of fair value adjustments to acquired unearned revenue.

Current wording

We define Adjusted Operating Income as income (loss) from operations adjusted for, as applicable, (i) the impact of fair value adjustments to acquired unearned revenue, (ii) amortization of acquired technology and other acquired intangibles, (iii) equity-based compensation expense, (iv) restructuring and transaction-related expenses, (v) integration costs and acquisition-related expenses, and (vi) legal settlement. We exclude the impact of fair value adjustments to acquired unearned revenue and amortization of acquired technology and other acquired intangibles, as well as equity-based compensation expense, because these are non-cash expenses or non-cash fair value adjustments and we believe that excluding these items provides meaningful supplemental information regarding performance and ongoing cash-generation potential. We exclude restructuring and transaction-related expenses, as well as integration costs and acquisition-related compensation, because such expenses are episodic in nature and have no direct correlation to the cost of operating our business on an ongoing basis. We have also excluded charges associated with litigation settlements related to class actions because we believe it represents an extraordinary litigation expense outside of our ordinary course of business and is not indicative of our operative performance. Adjusted Operating Income is presented because it is used by management to evaluate our financial performance and for planning and forecasting purposes. Additionally, we believe that it and similar measures are widely used by securities analysts and investors as a means of evaluating a company’s operating performance. We define Adjusted Operating Income Margin as Adjusted Operating Income divided by the sum of revenue and the impact of fair value adjustments to acquired unearned revenue.

Previous wording

We define Adjusted Net Income as net income (loss) adjusted for (i) the impact of fair value adjustments to acquired unearned revenue, (ii) loss on debt modification and extinguishment, (iii) amortization of acquired technology and other acquired intangibles, (iv) equity-based compensation expense, (v) restructuring and transaction-related expenses, (vi) integration costs and acquisition-related expenses, (vii) TRA liability remeasurement (benefit) expense and (viii) tax impacts of adjustments to net income (loss). Adjusted Net Income is presented because it is used by management to evaluate our financial performance and for planning and forecasting purposes. Additionally, we believe that it and similar measures are widely used by securities analysts and investors as a means of evaluating a company’s operating performance. Adjusted Net Income should not be considered as an alternative to cash flows from operating activities as a measure of liquidity or as an alternative to operating income or net income as indicators of operating performance.

Current wording

We define Adjusted Net Income as net income (loss) adjusted for, as applicable, (i) the impact of fair value adjustments to acquired unearned revenue, (ii) loss on debt modification and extinguishment, (iii) amortization of acquired technology and other acquired intangibles, (iv) equity-based compensation expense, (v) restructuring and transaction-related expenses, (vi) integration costs and acquisition-related expenses, (vii) legal settlement, (viii) TRA liability remeasurement (benefit) expense, (ix) other (income) loss, net and (x) tax impacts of adjustments to net income (loss). Adjusted Net Income is presented because it is used by management to evaluate our financial performance and for planning and forecasting purposes. Additionally, we believe that it and similar measures are widely used by securities analysts and investors as a means of evaluating a company’s operating performance. Adjusted Net Income should not be considered as an alternative to cash flows from operating activities as a measure of liquidity or as an alternative to operating income or net income as indicators of operating performance.