ZoomInfo Technologies: Zeroing in on Sales Leads
July 1 2020
ZoomInfo Technologies (NASDAQ: ZI), not to be confused with Zoom Video Communications (NASDAQ: ZM), is the first software IPO in many months. Based in Vancouver, Washington, ZoomInfo provides a database utilized by sales and recruitment professionals to identify key decision makers, and accelerate the sales process. Company revenue in 2019 was $293 million, up from $144 million in the prior year. In 2019, the company generated operating income of $36 million.
ZoomInfo priced its 44.5 million share Class A common stock IPO on June 4, 2020 at $21, with the stock closing at $34. Net proceeds of roughly $887 million will be used to redeem the outstanding Series A preferred units of ZoomInfo Holdings for roughly $274, repay $370 million aggregate principal of its outstanding second lien term loans, repay $35 million of debt under its first lien revolving credit facility, and buy ZoomInfo OpCo equity interests from certain equity holders for roughly $43 million. It also intends to pay expenses relating to the offering. This would leave it with roughly $140 million for general corporate purposes.
The deal was led by sizable number of investment banks, all of which will also provide research on the company to investors, after receiving compensation for their participation in the IPO. These include J.P. Morgan, Morgan Stanley, Credit Suisse, and Barclays, along with BofA Securities, Deutsche Bank Securities, RBC Capital Markets, UBS Investment Bank, Wells Fargo, Canaccord Genuity, JMP Securities, Mizuho Securities, Piper Sandler, Raymond James, Stifel, SunTrust Robinson Humphrey, and Roberts & Ryan.
At a recent share price of $51, ZoomInfo has a market cap of roughly $21 billion, based on 56 million Class A, 239 million Class B, and 98 million Class C shares. We note that public shareholders will own about 12 percent of the company’s outstanding common stock, and hold less than 1.5 percent of the voting rights.
ZoomInfo serves roughly 15,000 companies with a cloud database platform that collects company-specific information relating to personnel, location of facilities, news and events, products and services sold, as well as technologies utilized—among other attributes—on roughly 14 million companies. The information is utilized by sales, marketing, and recruiting professionals to target key decision-makers, in order to sell their products and services. ZoomInfo’s database is updated frequently, and draws upon artificial intelligence to help determine the accuracy of the information that it collects.
ZoomInfo is the combination of two companies: Zoom Info (originally Eliyon Technologies), and DiscoverOrg. Eliyon Technologies was established in 2000. After having been acquired private equity firm Great Hill Partners in August of 2017 for an estimated $240 million, the company acquired RainKing in 2017, and NeverBounce in 2018.
Separately, Henry Schuck and Kirk Brown created DiscoverOrg in 2007. In November of 2019 DiscoverOrg acquired Zoom Information in 2019 for an estimated $500 million, and renamed the combined company ZoomInfo Technologies. As a result of the merger, the company serves a wide range of customers across multiple sectors, including software, business services, manufacturing, telecom, financial services including insurance, and retail.
Nearly all of ZoomInfo’s revenue comes from software subscriptions. Six hundred thirty, or less than five percent of the company’s 15,000 customers generate subscription revenue exceeding $100,000 per year. In 2019, the combined companies generated $293 million, up from $144 million. Income from operations on a pro forma basis grew from $27 million to $36 million. As a result of multiple rounds of private equity and venture capital funding, ZoomInfo, prior to its IPO, had just $63 million in cash, along with $1.2 billion in long term debt. Based on the company’s stated post-IPO plans, it will still have over $800 million in long term debt on a pro-forma basis following the offering.