With the world caught up in a recession, and with the investment community rewarding safe havens during this storm, it is not uncommon for investors to get names of companies confused or mismatched. Now there is yet another “new” Zoom coming to the market. ZoomInfo Technologies has set a price range of $16 to $18 per common share for its initial public offering (IPO) of what is currently 44.5 million shares.
Investors need to keep in mind that ZoomInfo has nothing to do with Zoom Video Communications Inc. (NASDAQ: ZM) other than the word “Zoom.” Traders have seen many instances in which companies with the same name have risen handily on news events or other references, and we have seen three other companies with “Zoom” in their name. ZoomInfo will trade under the ZI stock ticker on the Nasdaq.
As for this “Zoom,” ZoomInfo is a Vancouver, Washington-based provider of databases used for sales teams and marketing teams. The company is also backed by venture and private equity. Along with CEO Henry Schuck, the insiders and backers include Carlyle, T.A. Associates and 22C Capital.
The underwriting syndicate is massive. JPMorgan and Morgan Stanley are set to lead the offering, with other book-runners identified as Barclays, Credit Suisse, BofA Securities, Deutsche Bank, RBC Capital Markets, UBS and Wells Fargo Securities. Additional co-managers for the offering include Canaccord Genuity, JMP Securities, Mizuho Securities, Piper Sandler, Raymond James, Stifel and SunTrust Robinson Humphrey.
If the underwriters exercise their full overallotment option, then a total of 51,175,000 shares will have been sold.
Prior to the IPO date, funds and accounts managed by BlackRock and entities affiliated with Dragoneer Investment Group and with Fidelity Management & Research have indicated an interest in purchasing up to $100 million each for an aggregate of up to $300 million.
ZoomInfo claims to have more than 15,000 customers who are 99% subscription revenue based, with more than 630 customers with an average annual customer value of $100,000 or more. It also claims to have approximately 202,000 paid users.
The company’s cloud-based platform is said to provide highly accurate and comprehensive information data on the companies, organizations and individuals that they target. The company also claims to shorten sales cycles and to drive up the “win rates” by “delivering the right message, to the right person, at the right time, to hit their number.”
As for the total addressable market, ZoomInfo sees an approximate $24 billion target based on its view of over 740,000 global businesses that sell to other businesses and that also have more than 10 employees. Of that potential customer base, ZoomInfo’s current base of over 15,000 customers implies a current market penetration of only about 2%.
As for revenues, ZoomInfo’s sales were $144.3 million in 2018 and $293.3 million in 2019. Revenues in the most recent first quarters were $54.6 million (first-quarter 2019) and $102.2 million (first-quarter 2020). Net income before taxes was −$31.5 million in 2018 and −$84.5 million in 2019. For the more recent first quarter, net income before taxes was−$43.5 million (first-quarter 2019) and −$6.3 million (first-quarter 2020).
Investors will want to consider a split-class structure due to sponsors, founders and management. Assuming just 45.4 million shares are sold to the public, the sponsors will hold 65.7% of the outstanding shares and 73.5% of the voting power. The founders will hold 17.3% of the common shares with 19.3% of the voting power, and the management and “others” will hold 5.2% of the outstanding shares with 5.8% of the voting power. That leaves 11.9% that would be owned by the public shareholders, but with just 1.3% of the voting power.
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