Breaking Down ZoomInfo Technologies Inc. (ZI) Financial Health: Key Insights for Investors

Understanding ZoomInfo Technologies Inc. (ZI) Revenue Streams

Understanding ZoomInfo Technologies Inc.’s Revenue Streams

Revenue was $291.5 million for the three months ended June 30, 2024, a decrease of $17.1 million, or 6%, compared to $308.6 million for the three months ended June 30, 2023. The decrease was primarily due to a change in accounting estimate that reduced revenue by $15.3 million.

For the six months ended June 30, 2024, revenue totaled $601.6 million, a decrease of $7.7 million, or 1%, compared to $609.3 million for the same period in 2023. This decrease was also primarily due to the accounting estimate change, impacting revenue by $15.3 million, partially offset by the addition of new customers.

Year-over-Year Revenue Growth Rate

The revenue growth rate year-over-year shows a decline. For the three months ended June 30, 2024, revenue decreased by 6% compared to the same quarter in the previous year. For the six-month period, the growth rate reflected a 1% decrease year-over-year.

Contribution of Different Business Segments to Overall Revenue

Revenue from international customers accounted for approximately 12% of total revenues for the three months ended June 30, 2024, compared to 13% for the same period in 2023. This trend remained consistent for the six-month periods as well.

Analysis of Significant Changes in Revenue Streams

As of June 30, 2024, the company reported unearned revenue of $440.4 million, which was relatively consistent with $441.9 million as of December 31, 2023. This indicates a stable backlog of future revenue despite the recent declines in recognized revenue.

Conclusion

The overall revenue performance reflects a combination of external market pressures and internal adjustments in accounting estimates. The company continues to maintain a robust level of unearned revenue, indicating future revenue opportunities.

A Deep Dive into ZoomInfo Technologies Inc. (ZI) Profitability

Profitability Metrics

Gross Profit: For the three months ended June 30, 2024, the gross profit was $245.6 million, representing a gross margin of 84%. This reflects a decrease from the gross profit of $265.0 million and a margin of 86% for the same period in 2023. For the six months ended June 30, 2024, the gross profit was $512.3 million, maintaining a gross margin of 85%, compared to $520.2 million in gross profit for the same period in 2023.

Operating Profit: The operating loss for the three months ended June 30, 2024, was $(20.0) million, a significant decrease from an operating income of $59.6 million for the same period in 2023. For the six months ended June 30, 2024, the income from operations was $23.0 million, down from $125.9 million in the prior year.

Net Profit: The net loss for the three months ended June 30, 2024, was $(24.4) million, compared to a net income of $38.1 million in the same quarter of 2023. For the six months ended June 30, 2024, the net loss was $(9.3) million, down from a net income of $82.6 million for the same period in 2023.

Trends in Profitability Over Time

Over the last year, the profitability metrics have shown a downward trend. The gross profit for the six months ended June 30, 2024, saw a slight decline of 2% compared to the same period in 2023. Operating income margin for the six months dropped to 4% from 21% in the previous year. The net income margin also turned negative, indicating deteriorating financial health.

Comparison of Profitability Ratios with Industry Averages

In comparison to industry averages, the gross margin of 84% for the most recent quarter is above the typical SaaS industry average of 70%-80%. However, the operating margin of (7%) and net margin of (8%) are significantly below industry expectations, which typically range from 10%-20% for established SaaS companies.

Analysis of Operational Efficiency

The operational efficiency has been adversely impacted by rising operating expenses. Total operating expenses for the three months ended June 30, 2024, were $265.6 million, up 29% from $205.4 million in the previous year. Sales and marketing expenses decreased slightly to $100.5 million, while general and administrative expenses surged to $111.3 million, up 164% year-over-year.

Debt vs. Equity: How ZoomInfo Technologies Inc. (ZI) Finances Its Growth

Debt vs. Equity: How ZoomInfo Technologies Inc. Finances Its Growth

Overview of the Company's Debt Levels

As of June 30, 2024, ZoomInfo Technologies Inc. had total contractual maturity of outstanding indebtedness amounting to $1,241.0 million. After accounting for cash and cash equivalents, restricted cash, and short-term investments of $408.2 million, the net contractual maturity of outstanding indebtedness stands at $832.8 million.

Debt Composition

Debt-to-Equity Ratio and Comparison to Industry Standards

The company’s debt-to-equity ratio as of June 30, 2024, is calculated based on total liabilities of $4,820.6 million and total stockholders' equity of $1,862.9 million, resulting in a debt-to-equity ratio of approximately 2.58. This ratio is above the industry average of around 1.5, indicating a higher reliance on debt financing compared to peers.

Recent Debt Issuances and Credit Ratings

In June 2024, the company completed a repricing of its First Lien Term Loan Facility, reducing the applicable rate for Base Rate loans from 1.25% to 0.75% and for SOFR-based loans from 2.25% to 1.75%. This reflects a strategic move to lower interest expenses amid an evolving rate environment. The effective interest rate on the first lien debt was 7.30% as of June 30, 2024.

How the Company Balances Between Debt Financing and Equity Funding

As of June 30, 2024, the total cash and cash equivalents held by the company amounted to $385.9 million, with an additional $13.4 million in short-term investments. The company utilizes cash generated from operations, supplemented with debt offerings, to finance its growth and acquisitions.

Furthermore, the company has a revolving credit facility of $250.0 million available, which provides additional liquidity options.

Financial Summary

Assessing ZoomInfo Technologies Inc. (ZI) Liquidity

Assessing Liquidity and Solvency

Current and Quick Ratios

The current ratio as of June 30, 2024, stands at 0.97, calculated by dividing current assets of $659.6 million by current liabilities of $680.7 million. The quick ratio, which excludes inventories from current assets, is approximately 0.97 as well, indicating that the company can cover its short-term liabilities with its most liquid assets.

Analysis of Working Capital Trends

As of June 30, 2024, working capital is negative at ($21.1 million), reflecting a decrease from the previous quarter. The decline in working capital is primarily due to a rise in current liabilities, which increased by $42.3 million from March 31, 2024.

Cash Flow Statements Overview

The cash flow statements for the six months ended June 30, 2024, show the following trends:

• Operating cash flow: $242.2 million
• Investing cash flow: $44.6 million (net cash provided)
• Financing cash flow: ($348.2 million) (net cash used)

Potential Liquidity Concerns or Strengths

As of June 30, 2024, cash and cash equivalents total $385.9 million, with short-term investments at $13.4 million. The company has $250 million available under its first lien revolving credit facility. However, the total contractual maturity of outstanding indebtedness is $1.241 billion, with a net contractual maturity of $832.8 million, indicating potential liquidity concerns if cash flows from operations do not meet expectations.

Overall, the company's liquidity position shows potential strengths with significant cash reserves and a revolving credit facility but raises concerns with a high level of debt and negative working capital trends.

Is ZoomInfo Technologies Inc. (ZI) Overvalued or Undervalued?

Valuation Analysis

To assess whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, and analyst consensus.

Price-to-Earnings (P/E) Ratio

The current P/E ratio is — as the company reported a net loss of $24.4 million for the three months ended June 30, 2024. This indicates that the P/E ratio cannot be computed meaningfully in this context.

Price-to-Book (P/B) Ratio

The book value per share as of June 30, 2024, is calculated as follows:

• Total stockholders' equity: $1,862.9 million
• Shares outstanding: 366,772,027
• Book value per share = Total stockholders' equity / Shares outstanding = $5.08

The P/B ratio is currently — as the market price is not provided in the data.

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The EBITDA for the six months ended June 30, 2024, is:

• Net income: ($9.3 million)
• Interest expense: $19.9 million
• Tax provision: $14.2 million
• Depreciation and amortization: $40.9 million

Thus, EBITDA = Net income + Interest + Taxes + Depreciation & Amortization = $65.7 million.

As the enterprise value is not provided, the EV/EBITDA cannot be computed meaningfully.

Stock Price Trends

Dividend Yield and Payout Ratios

The company does not currently pay dividends, resulting in a dividend yield of 0%. Therefore, the payout ratio is also —.

Analyst Consensus on Stock Valuation

Analyst ratings for the stock are as follows:

• Buy: 0
• Hold: 8
• Sell: 0

The consensus indicates a predominance of hold ratings, suggesting that analysts are cautious about the stock's future performance.

Summary of Financial Ratios and Trends

Key Risks Facing ZoomInfo Technologies Inc. (ZI)

Key Risks Facing ZoomInfo Technologies Inc.

Industry Competition: The competitive landscape for the company is intense, with numerous players in the data analytics and business intelligence sectors. This competition could impact market share and pricing strategies. The company reported a net loss of $24.4 million for Q2 2024, which reflects the pressure from competitive dynamics.

Regulatory Changes: Regulatory scrutiny in data privacy and protection continues to increase. Compliance costs may escalate, affecting profitability. The company has incurred significant expenses related to legal settlements, amounting to $30.2 million in the last six months.

Market Conditions: Economic fluctuations and market volatility can adversely affect customer spending on technology and services. Revenue for the six months ended June 30, 2024, was $601.6 million, a decrease of 1% from the previous year.

Operational Risks

Technology Dependency: The company relies heavily on its technological infrastructure. Any disruption could lead to service outages, affecting customer trust and revenue. The cost of service increased by 5% year-over-year to $45.9 million for Q2 2024.

Customer Retention: High customer churn rates can significantly impact revenue stability. The company must continually innovate and provide value to retain its customer base. As of June 30, 2024, unearned revenue stood at $440.4 million, reflecting prepayments from customers, which is crucial for cash flow.

Financial Risks

Debt Obligations: The total contractual maturity of outstanding indebtedness was reported at $1.241 billion as of June 30, 2024. The net contractual maturity, after accounting for cash and equivalents, was $832.8 million.

Liquidity Constraints: The company had cash and cash equivalents of $385.9 million and $250 million available under its revolving credit facility as of June 30, 2024. However, ongoing operational expenses may strain liquidity.

Strategic Risks

Acquisition Integration: The company may pursue acquisitions to expand its market presence, which can pose integration challenges and lead to additional costs. The last reported adjusted EBITDA for the trailing twelve months was $474.7 million, indicating the need for effective management of growth strategies.

Market Penetration: Failure to penetrate new markets could limit growth opportunities. The company reported a decrease in sales and marketing expenses to $100.5 million, down 4% from the previous year, which may hinder its ability to attract new customers.

Future Growth Prospects for ZoomInfo Technologies Inc. (ZI)

Future Growth Prospects for ZoomInfo Technologies Inc.

Analysis of Key Growth Drivers

The company is positioned for growth through multiple avenues including product innovations, market expansions, and strategic acquisitions. Key product innovations include enhancements in data analytics and AI capabilities, aimed at improving customer engagement and operational efficiency.

Future Revenue Growth Projections and Earnings Estimates

For the six months ended June 30, 2024, revenue was reported at $601.6 million, a slight decrease of 1% from $609.3 million in the same period of 2023. Projections suggest a recovery trajectory with estimates of revenue growth in the upcoming fiscal year driven by an increase in customer acquisition and retention strategies.

Strategic Initiatives or Partnerships

The company has been actively pursuing partnerships that enhance its product offerings and market reach. Notably, it has entered into agreements aimed at integrating its services with complementary platforms, which are expected to drive customer acquisition and cross-selling opportunities.

Competitive Advantages

ZoomInfo's competitive advantages include its extensive database of business contacts and companies, proprietary technology for data collection and analysis, and a strong brand reputation in the market. These factors position the company favorably against competitors in the data intelligence sector.

Financial Overview and Projections

As of June 30, 2024, the company reported $440.4 million in unearned revenue, indicating a strong pipeline for future revenue recognition and cash flow stability.

Overall, these growth opportunities, combined with strategic initiatives and competitive advantages, are expected to drive the company's performance in the coming years.