ZoomInfo Technologies (US:ZI)2023-07-30 16:00PART I - FINANCIAL INFORMATION Financial Statements This section presents ZoomInfo Technologies Inc.'s unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive income, changes in equity, and cash flows, with detailed notes for Q2 and H1 2023 Consolidated Balance Sheets Total assets reached $7.19 billion as of June 30, 2023, with goodwill and deferred tax assets as primary components, while total liabilities were $4.85 billion Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $509.7 | $418.0 | | Goodwill | $1,692.7 | $1,692.7 | | Deferred tax assets | $3,937.7 | $3,977.9 | | Total Assets | $7,192.2 | $7,136.4 | | Liabilities & Equity | | | | Unearned revenue, current | $438.1 | $416.8 | | Long-term debt, net | $1,228.0 | $1,235.7 | | Tax receivable agreements liability, net | $2,923.0 | $2,978.7 | | Total Liabilities | $4,845.2 | $4,864.6 | | Total Equity | $2,347.0 | $2,271.8 | Consolidated Statements of Operations Q2 2023 revenue increased 16% to $308.6 million, with net income more than doubling to $38.1 million, and H1 2023 revenue grew 20% to $609.3 million Statement of Operations Summary (in millions, except per share data) | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $308.6 | $267.1 | $609.3 | $508.8 | | Gross Profit | $265.4 | $220.1 | $520.6 | $417.8 | | Income from Operations | $59.6 | $39.5 | $125.9 | $71.9 | | Net Income | $38.1 | $15.9 | $82.6 | $22.1 | | Diluted EPS | $0.09 | $0.04 | $0.21 | $0.05 | - Total equity-based compensation expense was $46.3 million for Q2 2023 and $84.0 million for the first six months of 2023 28 Consolidated Statements of Cash Flows Net cash from operations increased to $225.2 million in H1 2023, while investing cash outflow decreased significantly, and financing cash outflow rose due to share repurchases Cash Flow Summary (in millions) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $225.2 | $211.2 | | Net cash used in investing activities | $(33.0) | $(153.0) | | Net cash used in financing activities | $(96.9) | $(13.8) | | Net increase in cash | $95.3 | $44.4 | - The company repurchased $87.0 million of its common stock in the first six months of 2023 38 Notes to the Consolidated Financial Statements Detailed notes explain accounting policies, including revenue recognition, financing arrangements, Tax Receivable Agreements, business combinations, and equity-based compensation - The company's primary revenue source is subscription services for its SaaS platform, with contracts typically lasting one to three years and billed in advance 57 - As of June 30, 2023, remaining performance obligations totaled $1.11 billion, with $848.7 million expected to be recognized within one year 111112 - In March 2023, the Board authorized a $100.0 million share repurchase program, with $87.0 million of common stock repurchased as of June 30, 2023 101102 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q2 2023 performance, highlighting 16% revenue growth, macroeconomic impacts on retention, operating results, non-GAAP metrics, liquidity, and debt obligations Key Factors and Non-GAAP Measures Performance is driven by customer acquisition and expansion, with 1,893 customers exceeding $100,000 ACV, and non-GAAP metrics like Adjusted Operating Income at $125.6 million for Q2 2023 - As of June 30, 2023, the company had 1,893 customers with over $100,000 in ACV 224 - The net annual revenue retention rate was 104% for FY2022, but is expected to be adversely impacted by near-term macroeconomic conditions 224 Non-GAAP Financial Metrics (Q2 2023 vs Q2 2022, in millions) | Metric | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Adjusted Operating Income | $125.6 | $106.9 | | Adjusted Operating Income Margin | 41% | 40% | | Adjusted Net Income | $106.4 | $84.1 | | Adjusted EBITDA | $130.4 | $111.5 | Results of Operations Q2 2023 revenue grew 16% to $308.6 million, driven by new customers, while operating expenses increased 14% due to higher sales & marketing and G&A costs - Q2 2023 vs Q2 2022: Revenue grew $41.5 million (16%) to $308.6 million, primarily from new customers 268 - Q2 2023 Operating Expenses: Increased by $25.2 million (14%), driven by higher sales and marketing and general and administrative costs, including bad debt accruals 270273 - Six Months 2023 vs 2022: Revenue grew $100.5 million (20%) to $609.3 million, primarily due to new customer additions 275 Liquidity and Capital Resources The company maintains strong liquidity with $509.7 million in cash and $250.0 million available credit, a 1.1x net leverage ratio, and significant debt obligations including a $597.0 million term loan - As of June 30, 2023, the company had $509.7 million in cash and cash equivalents and $250.0 million available under its revolving credit facility 282 - The total net leverage ratio to trailing twelve months Adjusted EBITDA was 1.1x as of June 30, 2023 300302 - The liability for Tax Receivable Agreements was substantial at $2.97 billion as of June 30, 2023 317 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from inflation, interest rates, and foreign currency, with interest rate risk from its $597.0 million variable-rate loan partially hedged - The company has a $597.0 million first lien term loan with a variable interest rate, creating exposure to interest rate risk managed through derivative instruments 326 - Foreign currency exchange rate risk is currently not material as most contracts are U.S. dollar-denominated, but may increase with international expansion 328 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of June 30, 2023 330 - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023 331 PART II - OTHER INFORMATION Legal Proceedings The company is defending against multiple putative class action lawsuits in Illinois, Washington, and Ohio, alleging violations of state Right of Publicity laws - The company is defending against multiple putative class action lawsuits in Illinois, Washington, and Ohio concerning alleged violations of state Right of Publicity statutes 160161162163 Risk Factors No material changes have been made to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the 2022 Form 10-K 336 Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2023, the company repurchased 2,847,121 shares for approximately $62.6 million, with $13.0 million remaining in the repurchase program Issuer Purchases of Equity Securities (Q2 2023) | Period | Total Shares Purchased | Avg. Price Per Share | Shares Purchased as Part of Program | Max Value Remaining in Program | | :--- | :--- | :--- | :--- | :--- | | April 2023 | 1,447,121 | $22.56 | 1,447,121 | $43.0M | | May 2023 | 1,404,890 | $21.41 | 1,400,000 | $13.0M | | June 2023 | 6,166 | $24.73 | — | $13.0M | | Total | 2,858,177 | | 2,847,121 | | - In March 2023, the Board authorized a $100.0 million share repurchase program with no expiration date 338 Other Information The company's CTO, Ali Dasdan, adopted a Rule 10b5-1 trading plan on June 15, 2023, for the sale of shares from a restricted stock unit grant - The company's Chief Technology Officer, Ali Dasdan, adopted a Rule 10b5-1 trading plan on June 15, 2023, for the potential sale of shares vesting from a prior RSU grant 341