I am a year into this board, and it is time that I attempt to contribute. I am challenging myself to really learn the companies I am invested in beyond the numbers. Essentially I want to understand at a deep level: what problem are they solving, why are they special, is the business model translating into results, what are the risks, and how do I determine my conviction level. Here we go.
What is ZoomInfo:
ZoomInfo is a leading go-to-market intelligence platform for sales and marketing teams. It was founded to develop a comprehensive and real time resource for information on companies and related information for sales & market personnel to maximize their efforts in obtaining business contacts.
What Problem Do they Solve:
How to achieve meaningful sales lead generation efficiently is the problem ZoomInfo solves, both in the effort it takes to generate it and also the accuracy of the information itself. ZoomInfo solves this problem by providing, as a subscription service, the most comprehensive and up to data resource for information on companies and related information for sales & market personnel to maximize their efforts in obtaining business contacts. It is real time accessible, and the company boasts a 95% accuracy rating.
Why is it Special:
The gamechanger is it’s massive, real time updated, contact database of organizations around the world. It can tell you who the decision makers are in an organization, and what the organization’s structure is. It has over 95 million contact record events each day that can either generate a new contact, or make an update to an existing contract (such as title, location, phone, and/or email change). All of this is searched for, analyzed and updated by AI/MI. LinkedIn’s Sales Navigator (owned by Microsoft) is the closest known competitor, but it relies on information posted by users and it is only as accurate as the last update. Other listed competitors are Dun & Bradstreet, TechTarget, Infogroup, and then smaller niche companies
It is a product that does not displace another product. It’s runway is wide open, based on the value proposition of increased sales, and the increased efficiency of finding the right person to contact. No other competitor comes close to this on a global spectrum, though there are niche players. One of its strongest accomplishments is that no one company is responsible for more than one percent of their total sales.
But what about the big name Customer Relationship Management (CRM) companies? ZoomInfo does not see themselves as competitors to the Salesforce and Hubspot names, but rather an enhancer to those services. If the CRM’s are the water, ZoomInfo is the flavor enhancer (I personally love Mio flavor enhancer).
Initial Market and Expanding Market:
Both domestic and international intelligence (up to date contacts, org structures, etc.) created a TAM of 20Bn. There are now seven identified verticals, but the largest one is Conversation Intelligence (18Bn). This is an additional layer that goes beyond just finding contacts. It records and uses previous conversations, and learns from them. What worked, what didn’t work, and helps define the sales pitch to other clients. ZoomInfo’s acquisition of Chorus.ai is a major part of this layer as it gives ZoomInfo the ability to save call recordings, transcripts, interaction history, and other insights.
The most talked about new vertical I have seen is the Recruiter function. This leads to the debate of competition with the gorilla named LinkedIn. I say it’s a nice to have and not a business definer. ZoomInfo only lists the Recruiter TAM at 6Bn, so clearly the biggest growth opportunity is in Conversation Intelligence at 18Bn.
Are they Really Special?
They are consistently rated as the lead B2B marketing data provider & sales intelligence company. Forrester Wave B2B Marketing Data Provider – As far right and to the top as you can get on the quadrant. G2 Grid for Sales Intelligence – again to far right upper quadrant. Sales Intelligence Software Trust Map – no one even close to the frequency of research updating level that ZoomInfo achieves.
Where is the Market, Now and the Future?
Eight Nine percent of the market is domestic. What is meaningful here is that the value proposition is global, and there is literally and untapped market to generate sales from. This is their fastest growing market and they grew their international business by 80% last year alone.
What are the Risks?
I think that from an investment perspective, while they are the brand name, investors do not know the brand well. When I think recruiting, I think LinkedIn. I simply do not think sales leads generation because it does not apply to me personally. I think there is more work to do here.
They could be an acquisition target. I am reaching, but the thought process has precedence. Microsoft bought LinkedIn. It was far and away their largest acquisition. If Microsoft wanted this and wanted to make the single biggest recruiting and market intelligence platform, what is to stop them? I admit, I am no expert in acquisitions, but I have come across the scenario multiple times from my research. It makes sense from a business fit perspective. Is that good for us as investors? I do not know and I will leave that to the comment section.
Lastly, is it a must have. I see the value proposition and I think it can become a must have. I am not sure it is at this time.
How does this Translate into Numbers?
YoY Revenue accelerated the last two quarters from 50% to 57% and then 60% growth. Both quarters came in at QoQ of 14%
Adj Gross Margins had been 84% but dropped to 82% last quarter. Still high.
Adj Op Margin 39%, the highest of any company I own
Already profitable on Adj Net income basis at 50M last Quarter
High FCF relative to my other companies at 73M
NRR stated at 108% but will likely be 120ish% at next reporting (only publish annually from what I could find)
Currently is leveraged with 1Bn in Debt. ZoomInfo has made five acquisitions since its IPO and I have to believe that this is the cause.
Wrapping it up
I wanted to better know the company I am investing in. I want to know why they are special and the path to growth. I will admit that the space ZoomInfo is in does not excitement because I am not in sales. However, after my research beyond the numbers and beyond what I have learned on this board, they are amazing at what they do. I honestly can’t see how large companies can avoid tapping into this if NEW sales avenues are required. This will make it a must have. There is simply nothing else in its league. THAT excites me.
So what is my conviction level? Middle tier - I hold a 7.3% position. I see the product, I want to see it translate into a business must have. I think its well on its way to doing that.
I want to thank this board (found it a full year ago) for challenging me to learn to do this! I want to challenge others to do it beyond the vital few that do it on this board. They are the teachers, lets show them what we’ve learned (and are learning).