Would you be interested in investing in this medium-small SaaS company? Last quarter it had Revenue of $140 million, which was up 53% yoy.But HERE COMES the interesting stuff:It had adj operating income of $63 million, which was 45% of revenue!!!! Yes, that was 45% of revenue!!! Have you heard of any other companies with adjusted operating income at 45% of revenue??? And growing at 53%?Its operating cash flow of $67 million was 48% of revenue! Yes, you heard me right!Its adj free cash flow of $77 million was 55% of revenue!!! That gave it a Rule of 40 of 53+55=108!!! Did you ever hear of a score on the Rule of 40 of 108? Or free cash flow of 55%?Now let’s look how they did for the Full-Year:Revenue of $477 million, was up 62%, Adj operating income of $226 million was 47% of revenueOp cash flow of $170 million was 36% of revenueAdj free cash flow of $244 million was 51% of revenue. (That’s a Rule of 40 of 113, and is positively indecent).They closed the year with over 20,000 customers, including more than 850 $100k customers. Forrester Wave rated them highest in what they do. There are two axes with Current Offering going up and Stronger Strategy going right, so the idea is to be in the top right corner of the graph. Well on Current Offering they were a little higher than anyone else, which is good, but on Stronger Strategy they were way better than anyone else, which is even better, pressed against the right hand edge of the graph. (I’m not sure I’ve ever seen a company pressed against the edge or the top before).Their CEO is a co-founder, and was recognized in 40 Best CEO’s Under 40, and in another Best Twenty CEO’s.The only softer point is that they only had an annual net retention rate of 108, presumably because they only had one platform which they sold up front. Now they have released more bells and whistles and an entirely new companion platform.Okay, are you interested? Do you want to know who they are? xxxxxxxxxxxxxOkay, the company is ZoomInfo (ZI). I suggest you learn what they do from their website and from Burt Hochfeld’s current article on Seeking Alpha (currently public), which I won’t bother repeating now that I have your interest. https://seekingalpha.com/article/4419018-zoominfo-technologi... I’d also suggest you subscribe to Bert’s newsletter (Ticker Target). One recommendation like this is worth at least 20 years of subscription cost.Saul
Dear Saul,Did you check long-term debt on ZoomInfo's most recent balance sheet? AFAIR it was ~$0.75B (5x larger than trailing cash from operations).Best wishes,Lemat
Hi Lemat, Something about their long term debt bothers you, but for the life of me I can’t figure out what it could be. I’m just not sure what your concern is. First of all, they are obviously not adding to their debt, as they are about the most profitable company you or I has ever seen. Their gross margins are 81% and they are obviously not a high capex company. Possibly the debt came from the early years of starting the business. Maybe they wanted to do it all themselves and not take money from venture capitalists. Or maybe the present company bought it from prior owners. I don’t know because it hasn't seemed of any importance to me.Think of it this way, their long term debt at the end of 2019 was $1200 million, and at the end of 2020 was $750 million so they have reduced it by $450 million over the past year. But what is much more important is that, over time, the long term debt will stay the same or gradually decrease, while the revenue, operating income, and free cash flow will keep growing by leaps and bounds until any remaining long term debt becomes insignificant and irrelevant, considering the size of the business. So again, I don’t see your concern, but I will ask Bert Hochfeld if he knows where the debt came from, as I’m now curious about that, even though it will fade away as time goes on.Best wishes,Saul
On the balance sheet, ZI also has $300M in cash and is obviously generating cash at astronomically high levels. The debt is completely irrelevant at this point except that one could argue it might not be a bad idea to borrow even more given the returns the business generates. I have not seen anything like it before. NRR in 2020 was 108% as Saul mentioned. Here is some additional info. ZI used to report NRR by customer cohorts of employees greater than 1,000, between 1,000 and 100 and less than 100. For 2018, NRR of the cohorts respectively was 125%, 105% and 78%. Total NRR was 102%. For 2019, NRR of the cohorts was 127%, 112% and 87%. The total was 109%. 2020 was likely impacted by Covid, but the overall NRR held steady. This will be a number to watch, but it has improved from 2018 pretty significantly. Finally, they aren’t clear on gross margins from my limited research. I have them calculated at over 88% when removing stock based compensation and amortization. This is a very interesting opportunity based on the incredible margins they generate and potentially accelerating revenue growth. We will see on the revenue growth. Last quarter was 53% and an average beat for this coming quarter would be 51% growth. A.J.
Lemat,I think if I were to pick 1 gripe with the company it would be valuation rather than their debt levels, which seem to be manageable by any account. Bert also addresses the question regarding their high valuation but he tempers this concern by pointing to the level of FCF margins generated. I have traded this name successfully in the past as they seem to fall in and out of favor with the market since IPO, thereby creating interesting buying points. This should be a long term hold howeverThanks Saul for bringing ZI to the board
It would be good to see how our criteria are all playing out for ZI.Purchase Criteria- >40% Revenue growth- Special niche, something special- Moat- Big future- Rule breaker- Recurrent Revenue, and expanding. (software, saas, not sell THINGS/Hardware, Not capital intensive, not cyclical boom/bust stocks like mining, drilling, natural resources, restaurant chains)- High Gross Margin, Rising Margins.- Rapidly improving metrics (rapidly dropping losses as a percent of revenue, or increasing profits if they are already profitable, increasing gross margins, rapid customer acquisition, improving cash flow, dropping operating expenses as a percent of revenue, or justified slowness )- Dollar-based retention rate over 110%, 120%. 130% is very good. High Net Promoter Score if available.- Positive and growing Free Cash Flow (FCF), or progress in that direction- Lot of cash and little or no debt. - Founder led - Substantial insider ownership- Not huge customer concentration- How well the price matches its prospects- Company has a long way to grow - the total addressable market (TAM) is so big, and there is a lot of room in that for the company to triple/quadruple.- Management must be interested in making a profit (unlike amazon, but opportunity cost available elsewhere)- A degree of switching costs - If worried about high EV/S, Look at Oomph Factor (About, Calculation)
Dear Saul,Thank you for your valuable comments!I’ve to admit that I wanted to start a position some time ago. There was (and is) a lot to like (e.g., a revenue growth, an operating margin, already profitable business, the founder-CEO with good reviews on Glassdoor and with skin in the game), but I like to look beyond the operating metrics and to see the compelling story to select my investments as I prefer to have a very strong conviction in the future potential of a business. I remember that the long-term debt of ZoomInfo (ZI) was the red flag for me. There were also some other issues I came across, e.g., scrapping (private) information and reselling it sounds… a bit risky? Is it a secular trend I would like to be exposed to?I decided to pass and focus more on companies with my highest conviction like CRWD. Looking at the chart it was not a bad decision so far.However, I still remember how exciting(!) on so many metrics ZI was (incl. looking at the Rule of 40 chart) so I thank you for bringing ZI to the board and for a thorough discussion of ZI as a possible investment.Best wishes,LematPS Having my major background in software engineering, I am more than happy to listen to the arguments of the authorities on this board I follow (Saul, Bear, GauchoRico, Stocknovice, Muji, WillO2028 and many incredible people) with much more financial expertise even if I'm perhaps more careful in case of this particular stock. Last but not least - thank you so much for creating this incredible community with an approach to investment that fits me so well.
Here are the prepared remarks by the CEO, Henry Schuck, in the Conference Call. Sounds inspiring to me, and what we are looking for, but who knows, I could be wrong so make your own decisions. For full disclosure, I took a moderate sized position in this company last week.Saul"As it did for many companies, 2020 presented a unique set of operating circumstances for ZoomInfo. Our team managed past headwinds and tailwinds, stay-at-home orders and virtual work mandates, and through it all, we adapted, moved fast, defined new possibles and stepped up to deliver the strongest fourth quarter and the strongest year in our Company’s history. During the quarter, we set company growth records for new sales, new customers added, customers over $100 thousand in ACV, efficiency metrics such as LTV to CAC, and we saw broad- based strength across all areas of the business -- a truly impressive end to our first year in the public markets.At ZoomInfo we are building the modern go-to-market platform from the foundational level up, starting with a market-leading robust and accurate data layer that fuels a suite of next generation workflow software. This is delivered across a purpose-built interface that powers go-to-market efforts for companies of all sizes, in all industries, all over the world.Our vision to fully digitize go-to-market is resonating more today than ever before and is reflected in the momentum we see in every aspect of our business - from new customer acquisition to customer retention to end- user engagement and new product adoption."
Think of it this way, their long term debt at the end of 2019 was $1200 million, and at the end of 2020 was $750 million so they have reduced it by $450 million over the past year.IMHO being able to pay down a third of a huge debt in one year is in itself an endorsement.cheersdraj
I think if I were to pick 1 gripe with the company it would be valuation rather than their debt levels, which seem to be manageable by any account. Bert also addresses the question regarding their high valuation but he tempers this concern by pointing to the level of FCF margins generated.Bert initial discussion of ZI was sometime during the middle of last year. I recall the writeup was very positive but he had concerns about valuation. At the time ZI did not seem to me to be superior to other available issues.In his most recent writeup he points to improved valuations and to the spectacular profitability. Clearly the case for ZI has strengthened.cheersdraj
I initially passed on ZI when it went public in June 2020 because a lot of their growth was due to acquisitions at the time, making growth numbers very high. However we have a more clear picture from the company today. Q3: revenue up 53% YOY, 10% sequentially. Organic growth up 41% YOY. Q4: revenue up 53% YOY, 13% sequentially. organic revenue up 12% sequentially. I can't find yoy organic growth. Nor have I looked into when the acquisitions lapse.
Here's Bert's explanation of the debt:Basically, what is now ZI bought its principal competitor as you can see below. To finance the transaction, it issued debt. Here is the relevant information from the 10k.ZoomInfo was originally founded as DiscoverOrg in 2007 by Henry Schuck and Kirk Brown. It operated as DiscoverOrg until February 2019, when it acquired its competitor Zoom Information, Inc. and subsequently rebranded as ZoomInfo. Zoom Information was originally established in 2000 as Eliyon Technologies by founders Yonatan Stern and Michel Decary, and in August 2017 was acquired by Great Hill Partners, a private equity firm, for $240 million in cash. The company acquired RainKing in 2017 and NeverBounce in 2018, and, following the rebrand, Komiko in 2019 and both Clickagy and EverString Technology in 2020.It is the rebrand of what was DiscoverOrg to ZoomInfo that is a bit confusing. But that is why they needed the funding. Saul
Interesting discussion on ZoomInfo (ZI)in this YouTube video. The balance sheet is discussed at the ~ 11:11 minute mark. https://www.youtube.com/watch?v=2RWx4-yEZPo
Zoominfo raised $1b thru IPO to pay down the debt. They still have $744m long term debt. The debt will expire at Feb 1, 2026. the Company also acquired Clickaway and Everstring for a total of $71.7m in 2020. I felt the company is growing up with a series of significant acquitsition. The goodwill in the balance sheet balloon to $1b. The growth through acquisition is not the way I like to see.Also, I am not sure if selling contact informations obey the privacy regulation in USA. should it be a concern?
Hi Covediver,When you said I am not sure if selling contact informations obey the privacy regulation in USA. should it be a concern?It reminded me of what Lamat said earlier,...scrapping (private) information and reselling it sounds… a bit risky?I too feel similarly. I don’t want to spend a lot of my time following a company I don’t believe is doing the right thing, legality aside.After reading a few more articles on ZI, I came across one from a writer on Seeking Alpha, he wrote a sell piece:Gary Alexander-ZoomInfo's base of competitors is so broad it's difficult to know if ZoomInfo will ever be a clear dominant force in this lead generation/database space. Uplead, LeadIQ, D&B Hoovers, and even LinkedIn - there are plenty of companies vying for this space, in part because the barriers to entry are fairly low.I was almost thinking pass on this one. Then I re-read Bert Hotchfield’s write up he wrote on his service Tickertarget.com last week and is now appearing in SA:BertThe management of ZoomInfo Technologies has suggested that its addressable market has continued to grow. Last quarter, during the course of its conference call, the company used an addressable market estimate of $30 billion. Adding the recruiting engine to the stack is going to add billions to the estimated TAM. No more than DocuSign is a company about e-signatures, ZI is a company that has been able to take a relatively mundane set of data-a compilation of contacts-and create an automated go-to-market framework. A business will spend lots of money for a workflow/sales process framework and not so much for a list of prospects. .Bert’s first hand knowledge base prior to investing was Sales in the tech space. I’ve subscribed to his service for years. I’ve always appreciated his transparency when discussing his thought processes. I’m planning to initiate a try it out position on Monday.Jason
I've looked into this business in the past and concluded it's not for me. My primary concerns are, and continue to be, the data collection practices and the sustainability of the business.The business, as I understand it, is essentially data harvesting. It's collecting data from mostly unwilling participants for use by third parties for sales and marketing. I see this as a spam enabler. The company even has an automated sales dialer feature which allows users to "build dialing lists" and "leave prerecorded emails". That sounds a lot like robocalls, and there doesn't seem to be any policies aimed at users who abuse or misuse the product, just best practices the company recommends.The company does have an opt-out. In a March press release, they highlighted a global notice and choice program where people are given notice and provided an opportunity to remove or update their information in the database. But it sounds a lot better in the press release than in practice.I found numerous university IT departments identifying these emails as spam and warning students, faculty, and staff about them.One went as far to say, "We believe that this opting out process is to give them a bare minimum defence for any legal action individuals may bring against the company for 'scraping' this information and selling it."https://uwaterloo.ca/arts-computing/news/zoominfo-spamhttps://ccit.clemson.edu/cybersecurity/cybersecurity-alerts/......https://security.virginia.edu/node/4656As we move to a world where data collection practices are more scrutinized, this is the kind of business that will be in the crosshairs. Changes in regulation and data privacy practices are a major risk as is reputation. Will this negative attention scale as Zoominfo scales?As for the sales workflow/process point, isn't that what Salesforce provides? I see that Zoominfo integrates with Salesforce and is often used that way, and I have hard time believing the true value is in the platform. Zoominfo even characterizes this integration as the syncing of "data source" with "CRM". I don’t see much of a moat here. Most of the data is publicly available for collection or purchase. The company lists Salesforce and Microsoft/LinkedIn as potential competitors, and both appear well situated to provide a competing solution. LinkedIn, as Bert mentions in his article, already has an edge in recruiting and is moving into sales.Personally, I just can’t get behind a company that reports billions of automated calls as a metric. Sounds a lot like billions of minutes of busy professionals being wasted. That certainly has been my experience.
The business, as I understand it, is essentially data harvesting. It's collecting data from mostly unwilling participants for use by third parties for sales and marketing. I see this as a spam enabler. The company even has an automated sales dialer feature which allows users to "build dialing lists" and "leave prerecorded emails". That sounds a lot like robocalls...Hi wheelzofsteel,You may be correct and I may be wrong, but I think that you misunderstand the sophisticated process that this company does.Forrester Wave rated ZoomInfo far and away the Leader in B2B Marketing Data Provider, especially in strongest strategy where there was no room to place it further. Here's what Forrester wrote:“In our 24-criterion evaluation of B2B marketing data providers, [Forrester] identified the 11 most significant vendors — Data Axle, Dun & Bradstreet, Enlyft, Global Database, InsideView, Leadspace, Oracle, SMARTe, Spiceworks Ziff Davis, TechTarget, and ZoomInfo Technologies — and researched, analyzed, and scored them. This report shows how each provider measures up and helps B2B marketing professionals select the right one for their needs.”“Since our evaluation of this market in 2018, ZoomInfo has transformed its business and continues to expand aggressively. DiscoverOrg bought ZoomInfo in 2019, taking on the acquired company’s brand, and has bolstered its capabilities with acquisitions such as EverString to extend the breadth of its company and contact data and Clickagy to add its proprietary source of behavioral/intent data.”“ZoomInfo is a best fit for organizations looking for a comprehensive data solution with an expanding array of complementary applications built on a shared data foundation.”Does that sound like a little robocall company to you? Automatic calls is just one optional feature in their comprehensive platform.Here's a link to see the Forrester Wave Leader Graphhttps://www.zoominfo.com/resources/forrester-wave-b2b-market...It's not just Forrester that rates them like that:"We continue to see broad-based momentum and positive feedback from customers and independent ratings firms as we invest in our product. For example, in G2’s Winter 2021 Grid Report released in December, ZoomInfo appeared on 37 Grids, our highest number ever, while also receiving 22 number one rankings (on those 37 grids), including new number one rankings in the Enterprise category for Account Data Management, and Lead Capture. This shows that not only are we building products that span a wide spectrum of go-to-market pain points, we are doing it with best-in-class products." Does that sound like a little robocall company to you?Their CEO, Henry Schuck, made the list of 40 under 40 that is published by Fortune.Does that sound like a little robocall company to you?Their customers include companies like Marathon Oil, Toyota, Honeywell, Pitney Bowes, Stanley Black and Decker, SAP, etc Does that sound like a little robocall company to you? "In 2020, we shared a vision with our customers around being able to take a signal - a funding event, a new technology added to a company’s stack, a spending initiative in the works, or a spike in a relevant intent topic; and cross-reference that signal against an ideal customer profile - say - companies with more than 100 employees who use NetSuite and who are not current customers; and mapping that to their ideal prospect profiles; and then instantly activating a campaign targeting that audience. Our vision is a fully automated go-to-market motion from signal to action. This capability is more than sales automation or marketing automation - it is true go-to-market automation - and is now fully available with our Workflows suite. Today, the Workflows suite which is available within our Elite package, includes a re-imagined interface that turns natural language statements into go-to-market workflows that integrate with a broad range of CRM, sales automation, marketing automation, and advertising platforms. We’ve also added contextual access to create workflows throughout the ZoomInfo platform and the ability to enable every user with this automation capability."Just read that through! Does that sound like a little robocall company? Or a company way ahead in moving towards a sophisticated complex marketing platform.But look, I've been wrong before. Do your own analysis.Saul
Saul, I can see the point that a company which uses highly sophisticated methods to identify who to call ... or e-mail or whatever ... but in the end the delivered action is to call, may not *just* be a robocall company, but they are delivering robocalls. I can understand not wanting to be associated with that activity, no matter how sophisticated* the operation behind it.* unlike the e-mail I got this morning suggesting that I serve as a middleman in a crude oil supply contract ... and to the e-mail I use for wine-related communications at that.
Not a professional salesman, but leads provided by ZoomInfo are just that. A salesperson completes the process by personally emailing/calling, the prospective client, right?It's not like Glengarry Glen Ross. HP
HermanPotter:A salesperson completes the process by personally emailing/calling, the prospective client, right?A salesperson may be behind curating/managing the list of calls to make, but Zoom Info does have an automatic sales dialer feature: https://engage.zoominfo.com/solutions/sales-dialer/So technically that seems to fall into the category of robocalls, but it seems less egregious than purely random, unrelated, scatter-shot junk calls, as it seems that the list comprises those who've already expressed some interest or buying intent as determined by the sales force.BLancaster
ZoomInfo Picks Up Six Honors for Company Excellence from ComparablyRecognitions Include Best Sales Team, Best Engineering Team, Best Places to Work in Boston, and Best Company Outlookhttps://www.businesswire.com/news/home/20210413005482/en/BLancaster
So technically that seems to fall into the category of robocalls, but it seems less egregious than purely random, unrelated, scatter-shot junk calls, as it seems that the list comprises those who've already expressed some interest or buying intent as determined by the sales force.That's only slightly better. But then I'm a single data point. I will not respond positively to any telephone solicitation, even if I'm interested in the product. When I'm ready I will reach out. Having a salesman call me will just irritate me.So, no, I would not be interested in this company (to answer the OP's question). The "product" offends me, regardless of the financials. They are using my utilities that I pay for (i.e. phone) to conduct their business. I actually think that should be illegal.1poorguy
We worry about zoominfo who uses multiple data sources to find ways to generate sales leads and direct marketing efforts at us, but we have no problems with google, trade desk, Facebook, countless others who direct ads at us and send us spam emails?I guess I don't see a moral issue here at all. Is increasing sales effectiveness bad? Doesn't that ultimately serve society by generating more effective competition which ultimately reduces prices? Isn't this what capitalism is all about?Just curious about the righteous indignation....Rob
Just curious about the righteous indignation....This is wandering a bit off topic, so I'll only answer this one question out of respect for board integrity. I do think it is still relevant to the business being discussed, even if I'm a single data point.Google, for example, does not call me. Their ads target my online activities. They do not interrupt me in the middle of dinner, for example. Emails can wait for days before I look at them. I do have my issues with spam emails and auto-run ad videos. But, as near as I can tell, that's not what ZoomInfo does, so I did not comment on that. They bother me, uninvited, demanding my attention (i.e. a ringing phone). They are as bad as door-to-door salesmen and proselytizers, except that it's easier to use the phone than to come to my door. But each is an unwelcome interruption to my day.I may be the exception, but if someone calls me (or door-to-door), even if I'm interested in the product or support the charity (i.e. I have the same rule for charities) I will not respond positively. I will reach out to whomever I want when I'm ready. Cold calling guarantees you won't get a sale (or donation) from me.1poorguy
We worry about zoominfo who uses multiple data sources to find ways to generate sales leads and direct marketing efforts at us, but we have no problems with google, trade desk, Facebook, countless others who direct ads at us and send us spam emails?Who said we have no problems with the others? That's a bit of a straw man setup.My barrier is the time I have to spend to dismiss it. A google ad as a sidebar to a site I visit is no time at all, entirely irrelevant. It might even be humorous ... as in "I already bought that 300mm lens, why are you trying to sell me another?" Spam emails are a minor inconvenience. If it makes it past the filter and I don't recognize it, I click the spam button immediately, I do *not* waste time investigating.Robo-calls are an entirely different thing. It's an invasion of my space, requires my direct attention. It could be an emergency from a family member, so answering is important. But then I have to wait for the stupid dialer to detect "I got a live one", and then I have to wait to be routed to the poor sap on the other end, or the automated recording to start. And then because the universe has a sarcastic sense of humour, the soup is probably boiling over just about then.Everyone associated with the robo-call industry is either shady, creepy, stupid, or desperate. Should I tell you how I really feel?I'm not going to judge anyone for investing in this...at its heart, the market is fundamentally amoral and we aren't supporting or denying support for a company when we purchase or sell a stock. We're really just buying from each other for a chance at growth. But there are times when I don't want to be associated with a company, and this appears to be one.
I agree that "robocalls" are more irritating than Google, Trade Desk, Facebook, etc., ads. The difference is a matter of degree, however, not of kind. Even ads that appear peripherally on screen still command processing resources. But, the main point I wanted to make is that if these calls were so irritating, the business model would have failed long ago, and we wouldn't be talking about ZoomInfo today
I think we've run this thread into the ground with 26 posts in the thread. Some people have made it very clear over and over that they have very negative emotional feelings about ZoomInfo. I won't take phone calls asking for money either, and hate them. However I am following two things: Following the money, I have seen few if any companies with better metrics, ever.Following the awards validating the company that they get from almost everybody (Forrester Wave first place; Grid Reports first on 22 of 37 metrics; Awards from Comparably: Best Sales Team, Best Engineering Team, Best Places to Work in Boston, Best Company Outlook, Best Company for Women,; Fortune Magazine's 40 best CEO's Under 40; etc, etc.)Just because I personally hate cold calls at home doesn't mean I'd react negatively if I was a purchasing agent and a sales person called me to offer to sell me just the product I was looking for. And I try to invest rationally, not depending on my personal feelings about the product. (Although I won't invest in things I feel are immoral or dangerous. I wouldn't invest in a company pushing diet pills, just as an example of what I'm talking about). But I try to invest based on how excellent I feel a company's business is, and when I mentioned .FURTHER POSTS ON THIS THREAD, PRO OR CON, WILL BE DELETED.Best,Saul
Unfortunately, ZI is guiding for $645-$655m revenue in 2021 which represents a large deceleration from 62% to 38%. Shouldn't that be a cause for concern with its relatively high valuation? It does look like QoQ revenue growth is re-accelerating slightly: $ Q Rev QoQ YoY4Q18 40.8 1Q19 54.6 34% 2Q19 68.5 25% 3Q19 79.1 15% 4Q19 91.1 15% 1Q20 102.2 12% 2Q20 110.9 9% 3Q20 123.4 11% 4Q20 139.7 13% 62% 4Q21 655 38%The business makes sense to me and I can understand this being really helpful to those in sales but why is it decelerating so much so soon?
$ Q Rev QoQ YoY4Q18 40.8 1Q19 54.6 34% 2Q19 68.5 25% 3Q19 79.1 15% 4Q19 91.1 15% 1Q20 102.2 12% 2Q20 110.9 9% 3Q20 123.4 11% 4Q20 139.7 13% 62% 4Q21 655 38%
I looked at ZI around IPO last summer. The main point for me (not to buy at that time) was that organic growth was in low 40s if my memory serves me well. The rest was acquisitions. Compared to our other companies - it was worse. So, I passed.I haven‘t dug into it now, but can respect and understand both decisions - invest or not - into this company as a lot of good things like high gross margin, profitability etc are there. But I was not impressed by organic growth rates.Best,V
Unfortunately, ZI is guiding for... a large deceleration in revenue growth from 62% to 38%.Hi buylower, If you look at any of our companies, their guidance is always ridiculously low. No one believes it. In fact, no one is meant to believe it, but it gives the company a chance to beat guidance by a lot every quarter, and also to raise annual guidance each time, which gives the reporting company great headlines four times. That's just the way the game is played.Saul
If you look at any of our companies, their guidance is always ridiculously low. Thanks Saul, that is part of my concern. ZI does not have enough history of giving guidance for me to make this assumption. What qualifies to you as ridiculously low guidance? They have given guidance twice so far that we can compare to and they came in pretty close to what they were guiding towards. Guidance vs Actual2Q20 455 476 (4.4%) 3Q20 467 476 (1.9%) Guidance here is for the FY2020. So as you get closer to the close of the year you should be able to predict FY revenues better so I can understand them not beating by as much. So let's say they continue with their history and will beat FY2021 by 5%. That puts them with revenues of $688m and would make their YoY growth rate 44.5% down from 62%. That's better but still a fairly large deceleration, no? I guess that's what makes it more of a middle position for you as the other metrics are very strong and you have some optionality if the recruiting portion gains any traction.
Guidance vs Actual2Q20 455 476 (4.4%) 3Q20 467 476 (1.9%)
Was that 62% fully organic? DiscoverOrg acquired ZoomInfo in 2019, some of the growth booked in 2020 is therefore inorganic (especially in the beginning of the year, the merger was announced on 4 Feb 2019 but probably not closed until several months later)
As for guidance always being low, I noticed companies will always guide the year very low and raise it up as time goes on, but the next quarter, you can typically take what they come in at vs. what they predicted and get a guideline on how much over guidance they typically come in at to get a "real" estimate what they will do the next quarter.As for organic vs. inorganic, this is what I was able to find looking at their earnings transcript. I am not really interested in this company so am not really going to try and find more numbers.Q3: revenue up 53% YOY, 10% sequentially. Organic growth up 41% YOY.Q4: revenue up 53% YOY, 13% sequentially. organic revenue up 12% sequentially. I can't find yoy organic growth. Nor have I looked into when the acquisitions lapse.They had the following to say in their Q4 earnings call: Our full-year guidance implies 37% revenue growth and an adjusted operating income margin of 43% at the midpoint of the range. or Q1, we expect GAAP revenue in the range of $144 million to $146 million and adjusted operating income in the range of $61 million to $63 million. I show they did $102m in Q1 last year. So as you can see, they are guiding for 42% growth next quarter but 37% for the full year. This is very common to forecast lower growth for the full FY but the next quarter forecast higher growth. So based on your history you show, they may come in at high 40's for Q1 growth. In Q2 they had the following to say: While every company during this pandemic grappled with how to prioritize investments, efficiently finding their next customer is at or near the top of the list forever executives. In the quarter, our team delivered 40% organic... GAAP revenue in Q2 was $111 million, up 62% year-over-year. In Q2 they said: We expect GAAP revenue in Q3 to be $116 million to $118 million and adjusted operating income between $53 million and $55 million. This implies 34% organic revenue growth and 46% margin at the midpoint of the range. The non-GAAP net income is expected to be $0.08 to $0.09 per share.For the full year 2020, GAAP revenue is expected to be between $451 million and $455 million. And adjusted operating income between $213 million and $217 million. This guidance implies 35% organic growth and a 47% margin at the midpoint of the range. Here's what really happened: In Q3, our team has delivered 41% organic growth over the last year, up 40% from last quarter.Also: GAAP revenue in Q3 was $123 million, up 56% year-over-year. So they were $6m higher than they guided. We expect to generate GAAP revenue in Q4 between $129 million and $131 million and adjusted operating income between $58 million and $60 million. This guidance implies 43% annual revenue growth or 35% growth relative to the previously reported allocated combined receipts figure for Q4 2019; and a 45% adjusted operating margin at the midpoint of the range.Then what really happened: In Q4, we delivered GAAP revenue of $140 million, up 53% year over year and sequential-quarter growth of 13%You can see they will continue to raise the Annual Guidance every quarter and overshoot each quarter by, in this case, they came in at 5% more revenue they guided for in Q3, and 7.7% more revenue they guided for in Q4. So taking this, that's roughly 6-7% higher revenue PER QUARTER for the next quarter than they predict, and of course they will raise the guidance for the year each quarter. So I expect them to be somewhere around 55% growth next quarter, given their history of beating estimates. Also, they're going to raise the annual revenue forecast every quarter. In other words, don't worry about trying to calculate growth off their annual forecast they are giving, because it's going to change throughout the year.As for how much organic vs. inorganic, I'm not sure.
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