I have put together a detailed analysis of Zoominfo as it prepares for its IPO. The analysis is based upon twenty years of experience in the Sales & Marketing Intelligence Space, the past eight as an independent analyst.
Topics include an Overview, COVID Impact, Risks, Market Overview, Key Industry Trends, Content & Functionality, Growth Strategy Analysis, SWOT Analysis, and Key Events. The 100+ slide presentation is bundled with a phone consult. If you are interested in licensing the analysis, please contact me.
I also publish a weekly subscription newsletter which covers Sales & Marketing, B2B DaaS, and B2B Data. Here is my article on the planned IPO:
Zoominfo reaffirmed its plans to IPO, possibly launching a virtual roadshow next month. In Q1 2020, revenue nearly doubled to $102 million year-over-year. The firm also significantly reduced its losses to $5.9 million in Q1 compared to $40.2 million in Q1 2019.
Losses were driven by debt, much of it associated with the Zoom Information acquisition in February 2019. EBITDA rose 55%, year-over-year, to $51 million in Q1. At the end of Q1, long-term debt stood at $1,238.8 million.
Zoominfo included Annualized Contract Value (ACV) data in its amended prospectus. They likely wanted to emphasize that they are doing well during the recession, and revenue figures, which are a trailing indicator of sales success at subscription services, were not going to make that case as strongly as the ACV data.
ACV grew 87% year-over-year in April, with the customer base now above 15,000. As revenue is recognized over the life of a subscription contract, ACV increases precede revenue growth. Prepaid subscription revenue is displayed as a Balance Sheet liability that is reversed over the lifetime of each deal.
Paid users rose to 202,000.
Net ACV growth remains strong, with ACV increasing $9.9 million in March and $10.4 million in April. The April growth was their best first month of any quarter, surpassing October 2019 by ten percent.
The number of customers with ACV greater than or equal to $100,000 grew from 580 on December 31, 2019, to 630 on March 31, 2020. Over 25% of ACV is tied to multi-year contracts.
The size and date of the IPO were not disclosed. In February, a placeholder value of $500 million was provided. The Zoominfo NASDAQ ticker will be ZI.
“Because of our largely subscription-based business model, the effect of the COVID-19 pandemic may not be fully reflected in our results of operations and overall financial condition until future periods, if at all.”Zoominfo Amended S-1, May 11, 2020
As the original S-1 was released before COVID-19 hit the US, this week’s amended prospectus contained the first mention of COVID as a business risk. The pandemic has disrupted global business and could negatively impact Zoominfo’s stock price. Zoominfo listed retail, restaurants, hospitality, airlines, oil, and gas as affected industries. While none of these segments are part of their ICP (except for possibly their NeverBounce email verification subsidiary), they will be negatively impacted in recruitment (roughly ten percent of revenue) and event management. Zoominfo lists recruitment as a targeted job function for ongoing development.
Furthermore, Zoominfo’s strategy is to expand beyond its moat of technology firms into broader sales intelligence and marketing services. The recession reduces the number of favorable segments for executing this expansion strategy.
Zoominfo lists its Total Addressable Market (TAM) at $24 billion with a 2% penetration rate.
“As a result of the Covid-19 pandemic, we expect we will experience slowed growth or decline in new customer demand for our platform and lower demand from our existing customers for upgrades within our platform, as well as existing and potential customers reducing or delaying purchasing decisions.”Zoominfo Amended S-1, May 11, 2020
A secondary impact of the pandemic and subsequent recession is increased buyer negotiating power. Customers are expecting more significant discounts and more favorable contract terms. They are also asking for early contract terminations and waivers of payment obligations.
However, Zoominfo’s core business is reasonably well protected from the recession. In 2019, 39% of their ACV was generated in the software industry and 29% in business services. These segments are less exposed than retail, travel, hospitality, and energy. Software has heavily shifted to subscription models over the past few years, making revenue less volatile. While their core industries are subject to layoffs in revenue operations, Zoominfo offers multiple features that make sales and marketing more efficient and effective in reaching WFH buying committee members. Features and content sets that support WFH outreach include direct-dial and mobile numbers, org charts, deep contacts across the organization, data as a service for enriching and updating enterprise software platforms, the ReachOut Chrome plug-in, ICP/TAM tools, technographics, Scoops (sales triggers), Bombora intent data, and executive change alerts.
New services such as Form Complete (web forms), WebSights (visitor intelligence), Komiko InboxAI (email insights), and Workflows (triggered sequences) help with collecting and enriching activity data.
Zoominfo, which has significant operations in Washington, Massachusetts, Maryland, and Israel, has fully transitioned to remote employment. They have also implemented travel restrictions and shifted to virtual event marketing.