| Snowflake Score | |
|---|---|
| Valuation | 3/6 |
| Future Growth | 5/6 |
| Past Performance | 4/6 |
| Financial Health | 2/6 |
| Dividends | 0/6 |
ZI Stock Overview
ZoomInfo Technologies Inc., through its subsidiaries, provides go-to-market intelligence and engagement platform for sales and marketing teams in the United States and internationally.
ZoomInfo Technologies Inc. Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$42.29 |
| 52 Week High | US$79.17 |
| 52 Week Low | US$30.31 |
| Beta | 1.39 |
| 1 Month Change | -7.58% |
| 3 Month Change | 27.23% |
| 1 Year Change | -30.97% |
| 3 Year Change | n/a |
| 5 Year Change | n/a |
| Change since IPO | 24.38% |
Recent News & Updates
ZoomInfo: A Quintessential Tool For Every B2B Sales Rep
Summary ZoomInfo is a B2B contact database with a better data collection methodology by crowdsourcing from an ever-growing customer base. ZoomInfo has no close competitors after consolidating the industry, enabling pricing power. With an opportunity set of 700k businesses, ZoomInfo is barely 4% penetrated into its TAM today. ZoomInfo combines growth and profitability as a Rule of 90 company. Problem Prior to sales and marketing technologies like CRM systems, sales representatives gathered data through in-person meetings and stored this information in their rolodexes. This process was manual, expensive, and inefficient. The data gathered was limited in depth, breadth, and accuracy, and began decaying as soon as it was captured. When sales representatives departed for another organization, they took their rolodexes with them. To address these problems, businesses invested in CRM systems to digitize rolodexes and easily share customer data throughout an organization. However, because the data that supports CRM and sales automation systems were largely collected manually, 30% to 50% of data in customers' CRM and ERP systems would be incorrect at any given time. Today, sales reps only spend 1/3 of their time actually selling, the rest focused on activities such as researching and organizing leads. Companies that have implemented some B2B intelligence practices and technology, even at limited levels of maturity, have realized 35% more leads and 45% higher-quality leads, leading to higher revenue and faster growth. However, market adoption is still very early, with only 1.2% of companies having mature B2B intelligence practices and technology. A large part of this is due to legacy solutions like D&B Hoovers having weak data quality that is largely still gathered manually. Solution ZoomInfo (ZI) at its core is a B2B contact database. It was able to leapfrog incumbents due to a better data collection methodology by crowdsourcing go-to-market intelligence from an ever-growing customer base. ZoomInfo's database covers over 220M business professionals across over 100M companies. As of August 2019, only 8% of sales and marketing professionals said that their sales and marketing data is sufficiently accurate (greater than 90% accuracy). ZoomInfo offers a contractual guarantee that at least 95% of the employment information they access will be current. In some cases, ROI can exceed 100 times the annual spend on the ZoomInfo platform. ZoomInfo gets its data from three main sources: users can log in and update their ZoomInfo profile (<10% of data), ZoomInfo has algorithms that scrape the web (<40% of data), and finally, ZoomInfo has a proprietary Contributory Network where users get 10 contact credits for free a month in exchange for installing an email plug-in that reads the signature block of every person that they correspond with. This data is also reviewed by a team of 50 data scientists for accuracy. This contributory network is why ZoomInfo has the best quality data and why they are ranked as a leader by Forrester, with 80-90% of data being proprietary. ZoomInfo Analyst Day Presentation ZoomInfo has built several modules on top of its core data asset to form RevOS, as it moves beyond just a contact database to become a fully-featured go-to-market intelligence platform. SalesOS includes use cases such as intent data which informs sales reps when a company is actively researching their services, org charts which enable sales reps to reach the right people, and recent acquisitions like Chorus for conversation intelligence. MarketingOS allows marketers to build precise audiences for ad targeting, OperationsOS allows companies to use ZoomInfo's data alongside other data in data warehouses or CRM systems for analytics purposes, and TalentOS allows recruiters to source the right candidates. Competition and Moat When ZoomInfo was an independent company, its main competitors were RainKing and DiscoverOrg. DiscoverOrg acquired RainKing in August 2017 and merged with ZoomInfo in February 2019, naming the combined company ZoomInfo under Henry, who was DiscoverOrg's CEO. Although DiscoverOrg had better data, they could not compete with ZoomInfo's volume of data and were discounting prices to compete pre-merger. Today, the combined company has no real competition and raised prices by 15% before its IPO which did not have a big impact on churn. In fact, 40% of customers who churn return within one year, and 80% of enterprises who churn return within one year. Their main competitors besides D&B Hoovers are smaller players like Infogroup, InsideView, Databook, Clearbit, Apollo, etc. The closest peer might be InsideView and some of them like Apollo are even said to have more data than ZoomInfo but none can match ZoomInfo's quality of data because they lack the contributory network and scale. LinkedIn Sales Navigator is another competitor but it is a closed platform so they don't have people's emails and phone numbers, rather relying on InMail. As people go back to the office and use their office phones more, ZoomInfo will be even more important. Organizations usually see LinkedIn and ZoomInfo as complementary because sales reps would find their target on LinkedIn and get their contact info on ZoomInfo. It is very unlikely that LinkedIn would sell user data both because of regulatory concerns against Microsoft (MSFT) and the potential for user backlash. Salesforce (CRM) also attempted to enter the sector with the acquisition of Jigsaw in 2010 which turned into Data.com but was ultimately shut down in 2020. ZoomInfo is the most expensive solution, but they have the power to be. There is a network effect with ZoomInfo's Contributory Network. Because ZoomInfo has the largest customer base by far at over 30k clients, they can get the best database that everyone wants to access, leading to more free users and better data, leading to even more users. 60% of their paid clients also participate to improve data accuracy. Because contact data changes all the time, ZoomInfo also benefits from their scale and the labor that they're able to employ (data scientists) and amortize over an increasingly large revenue base. Financials ZoomInfo has very strong and accelerating revenue and customer growth. For 2022, they are forecasting 45% growth at a $1.09B run rate with 41% adjusted FCF margins. They have 80%+ gross margins and a best-in-class payback period of under 10 months with LTV/CAC over 10x. The number of customers with ACV greater than $100k grew 8.6% QoQ in Q2'22. Their client list includes innovative companies such as Snowflake (SNOW), Okta (OKTA), Zoom (ZM), DocuSign (DOCU), Shopify (SHOP), and Uber (UBER). International revenue grew 80% YoY to an annualized run-rate of $100M or just over 12% of their total revenue. On TAM, they currently have 30k customers, and the CEO sees white space of 700k businesses. ZoomInfo is also constantly adding new modules to build an application layer around their core, differentiated data asset. This has grown their TAM from $24B at the time of IPO to over $100B today. ZoomInfo Investor Presentation So far, they've executed well in terms of cross-selling with over 75% of customers now using advanced functionality (ancillary products like Chorus, Engage, Intent, etc.), representing 29% of ACV and growing over 100% YoY. Chorus, a leader in conversation intelligence, has grown 3x since ZoomInfo's 2021 acquisition and Engage, MarketingOS, and TalentOS added the most ACV ever in a quarter in Q2. Net Retention Rate was ~108% in '20 which improved to 116% in recent quarters as they cross-sell more modules, an impressive number given their primarily SMB client base. Gross Retention Rate was also over 90% in 2021. ZoomInfo updated their long-term target to achieve at least a $2B revenue run-rate by Q4'24, implying a 31% CAGR. Although ZoomInfo is seeing elongated sales cycles due to the current macro environment, they note that deals are still closing and they are benefitting from customers choosing to consolidate multiple sales intelligence and automation vendors. ZoomInfo recently reported a strong Q2, growing revenue at 54% YoY with a 40% FCF margin, making them a Rule of 90 company. ZoomInfo's outperformance despite macro turbulence proves their value-add, with clients able to set it up within days. Although ZoomInfo is certainly not cheap at 37x EV/NTM FCF, it deserves a premium multiple due to its combination of hypergrowth and profitability, its dominant market position and increasing returns to scale, and its long runway. Assuming ZoomInfo meets its 2025 revenue target, earns 45% FCF margins and trades at 35x FCF, that implies a 20% 3-year IRR. ZoomInfo has $1.2B of long-term debt but should have no issues meeting its interest payments given the amount of cash it generates. Risks ZoomInfo has two main risks: regulatory changes in how data is collected and potential competition from LinkedIn.
ZoomInfo: Despite Strong Signals, Get Out Of This Name
Shares of ZoomInfo have rallied about 50% over the past two months, one of the strongest rebounds within the software sector. The company has achieved energized sales growth, particularly through newer offerings like TalentOS. A large chunk of ZoomInfo's growth, however, is cobbled together through M&A. ZoomInfo's existing leverage profile will cap its ability to do major acquisitions. Trading at 19x forward revenue, ZoomInfo doesn't have much room to rally higher. As we look to position ourselves for a potential year-end rebound, stock selection remains top of mind for me, and particularly for tech stocks, I think valuations are going to be the key separator for which names will outperform the broader market through December. Tech multiples have gotten out of whack since the start of the year, and these stocks that have shed their multiples far below historical norms will have the biggest springboard to rebound, while those that have maintained rich valuations will likely perform much weaker. Consider ZoomInfo (ZI) against that backdrop. Now, I've never really thought of this company as "special". ZoomInfo's CRM and sales tools have long operated as a sort of glorified Yellow Pages (part of the company's business model involves discounting/giving away its software to companies who voluntarily fill its database with its own contact information). As ZoomInfo's scope has grown to fill multiple lines of business, it remains, in my view, a second-rate vendor that competes against much better-branded names in each of its product areas. Year to date, ZoomInfo stock is down roughly about 20%, a slightly milder decline than most other SaaS names. ZoomInfo has been on a tear since June (up ~50% since then), and the stock has seen renewed optimism after its Q2 earnings release in early August. ZI data by YCharts Though market sentiment is gung-ho on ZoomInfo at the moment, I continue to swim upstream and remain bearish on ZoomInfo. Now, to the company's credit - it has done an admirable job at empire-building. The company has evolved substantially from its primary lead-sourcing product, and its TAM expansion has allowed the company to maintain terrific growth at scale. The slide below, taken from ZoomInfo's most recent Q2 earnings deck, showcases how its four main products - SalesOS, OperationsOS, MarketingOS, and TalentOS - have gradually expanded its TAM over time. And by simplifying the company's product suite under these simpler and broader umbrellas, the company has streamlined its go-to-market messaging for its customers and prospects. ZoomInfo TAM growth (ZoomInfo Q2 earnings deck) Now, there's a drawback here. The first is that ZoomInfo has relied heavily on M&A to continue its growth streak, and it is carrying a sizable amount of debt - which is relatively unusual for a software company. As of its Q2 balance sheet, ZoomInfo had $365.6 million of cash and $1.23 billion of debt on its books, or a $868.7 million net debt position. Now, trailing twelve-month adjusted operating income was $367.2 million, so ZoomInfo's leverage ratio is roughly 2.4x - which is the cusp of what many lenders would consider to be substantially leveraged. ZoomInfo does generate positive FCF ($234 million on an unlevered basis last year), but its ability to tap into its balance sheet to continue growing via M&A may be more limited from here on out. The second is that the market has seemingly already put a lot of faith into ZoomInfo's success, based on its current valuation and the fact that the stock hasn't bled too much since the start of the year relative to other SaaS peers. At current share prices near $50, ZoomInfo trades at a market cap of $20.13 billion. After we net off the aforementioned $868.7 million of net debt, the company's resulting enterprise value is $21.00 billion. For the current fiscal year FY22, meanwhile, ZoomInfo has pegged its annual revenue at $1.08-1.09 billion, and unlevered FCF at $438-446 million: ZoomInfo outlook (ZoomInfo Q2 earnings deck) This puts ZoomInfo's valuation multiples at: 19.4x EV/FY22 revenue 47.5x EV/FY23 revenue These are very rich multiples for what I'd consider to be a high-growing company, but one that is ultimately outclassed by other SaaS vendors in each of its key products. In both Sales and Marketing software, ZoomInfo stands behind Salesforce (CRM); in recruiting, ZoomInfo is a distant competitor behind the likes of Microsoft LinkedIn (MSFT) and Workday Recruiting (WDAY). In my view, ZoomInfo may get a little bit of a lift as the rest of the market drifts upward in a general rebound, but it will be very difficult for the company to outperform with its already-rich valuation. Steer clear here. Q2 download This all being said, we do acknowledge that ZoomInfo has been a crowd-pleaser with its recent results. In Q2, which the company released in early August, ZoomInfo delivered an impressive beat-and-raise that sent the stock up ~10%. Let's now go through the company's latest results in greater detail; the earnings summary is shown below: ZoomInfo Q2 results (ZoomInfo Q2 earnings deck) Q2 revenue grew 54% y/y to $267.1 million, beating Wall Street's expectations of $254.4 million (+47% y/y) by a seven point margin and barely decelerating over Q1's 58% y/y growth pace. Now, here's one potential red flag: ZoomInfo notes that sales cycles may be elongating. We've all seen the news on recent hiring freezes. Among the types of headcount that are "discretionary", sales and marketing hires can be delayed at the expense of growth in order to protect profitability. Slowdown in hiring here may hurt the company's core SalesOS business; and needless to say that a cooldown in recruiting activity is also detrimental to the company's TalentOS product as well. Here's some additional context from CEO Henry Schuck's comments on the Q&A portion of the Q2 earnings call: I think what we saw in the early days of COVID was somewhat similar. We had an elongating sales cycle with larger deals. But then kind of immediately afterwards, companies realized they needed to be investing in their sales teams and in their go-to-market efforts, that they needed to be investing behind digital transformation. And I think kind of what we see today is similar. We're seeing that same elongation in sales cycles on some deals, specifically larger deals and international deals. But then we are also seeing companies realize that if they are going to get more out of their sales resources that they need to continue to invest in their go-to-market motion. They need to continue to invest in software that drives productivity, specifically for their sales resources, specifically for their marketing resources. And we are just best positioned by a mile to be the provider for that."
Shareholder Returns
| ZI | US Interactive Media and Services | US Market | |
|---|---|---|---|
| 7D | 0.7% | -4.7% | -5.8% |
| 1Y | -31.0% | -41.6% | -22.1% |
Return vs Industry: ZI exceeded the US Interactive Media and Services industry which returned -41.6% over the past year.
Return vs Market: ZI underperformed the US Market which returned -22.1% over the past year.
Price Volatility
| ZI volatility | |
|---|---|
| ZI Average Weekly Movement | 7.9% |
| Interactive Media and Services Industry Average Movement | 8.4% |
| Market Average Movement | 6.9% |
| 10% most volatile stocks in US Market | 15.7% |
| 10% least volatile stocks in US Market | 2.8% |
Stable Share Price: ZI is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 8% a week.
Volatility Over Time: ZI's weekly volatility (8%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 2007 | 2,742 | Henry Schuck | https://www.zoominfo.com |
ZoomInfo Technologies Inc., through its subsidiaries, provides go-to-market intelligence and engagement platform for sales and marketing teams in the United States and internationally. The company’s cloud-based platform provides information on organizations and professionals to help users identify target customers and decision makers, obtain continually updated predictive lead and company scoring, monitor buying signals and other attributes of target companies, craft messages, engage through automated sales tools, and track progress through the deal cycle. It serves enterprises, mid-market companies, and down to small businesses that operate in various industry verticals, including software, business services, manufacturing, telecommunications, financial services, media and internet, transportation, education, hospitality, and real estate.
ZoomInfo Technologies Inc. Fundamentals Summary
| ZI fundamental statistics | |
|---|---|
| Market Cap | US$17.06b |
| Earnings (TTM) | US$126.40m |
| Revenue (TTM) | US$928.70m |
135.0x
P/E Ratio18.4x
P/S RatioIs ZI overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| ZI income statement (TTM) | |
|---|---|
| Revenue | US$928.70m |
| Cost of Revenue | US$122.90m |
| Gross Profit | US$805.80m |
| Other Expenses | US$679.40m |
| Earnings | US$126.40m |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 0.31 |
| Gross Margin | 86.77% |
| Net Profit Margin | 13.61% |
| Debt/Equity Ratio | 58.1% |
How did ZI perform over the long term?
See historical performance and comparison