ZoomInfo Technologies (US:ZI)2023-10-29 16:00Financial Performance - Net income for the three months ended September 30, 2023 was $30.2 million, compared to $17.9 million in the same period in 2022, representing a 69% increase[234] - Adjusted Operating Income for the three months ended September 30, 2023 was $126.2 million, up 7% from $118.4 million in the same period in 2022[240] - Revenue for the three months ended September 30, 2023 was $313.8 million, a 9% increase from $287.6 million in the same period in 2022[240] - Adjusted EBITDA for the three months ended September 30, 2023 was $131.1 million, a 6% increase from $123.2 million in the same period in 2022[246] - Adjusted Net Income for the nine months ended September 30, 2023 was $311.0 million, up 22% from $254.7 million in the same period in 2022[234] - Adjusted Operating Income for the nine months ended September 30, 2023 was $372.1 million, a 16% increase from $320.9 million in the same period in 2022[241] - Revenue for the nine months ended September 30, 2023 was $923.1 million, a 16% increase from $796.4 million in the same period in 2022[240] - Adjusted EBITDA for the nine months ended September 30, 2023 was $386.6 million, a 16% increase from $333.7 million in the same period in 2022[247] - The company's Adjusted Operating Income Margin remained consistent at 40% for both the three and nine months ended September 30, 2023[240][241] - Growth in revenue was driven by additional customers and increasing revenue from existing customers in both the three and nine months ended September 30, 2023[240][241] - Revenue for Q3 2023 was $313.8 million, a 9% increase compared to $287.6 million in Q3 2022, driven by new customer additions partially offset by cancellations[271] - Revenue for the nine months ended September 30, 2023 increased by $126.7 million (16%) to $923.1 million compared to $796.4 million for the same period in 2022, driven by new customer additions partially offset by cancellations[278] - Net income for the trailing twelve months ended September 30, 2023 was $136.0 million, with EBITDA of $412.8 million and Adjusted EBITDA of $518.2 million[310] Customer and Contract Metrics - ZoomInfo's net annual retention rate was 104% for the year ended December 31, 2022[228] - As of September 30, 2023, ZoomInfo had 1,869 customers with over $100,000 in ACV[228] - Over 40% of ZoomInfo's customer contracts (based on annualized value) are multi-year agreements[218] Share Repurchase Program - ZoomInfo repurchased 8,800,000 shares of Common Stock at an average price of $18.19, totaling $160.1 million, during the three months ended September 30, 2023[226] - ZoomInfo repurchased 12,705,412 shares of Common Stock at an average price of $19.44, totaling $247.0 million, during the nine months ended September 30, 2023[226] - As of September 30, 2023, $353.0 million remained available and authorized for repurchases under the Share Repurchase Program[226] - The Board of Directors authorized a share repurchase program of up to $600.0 million, including an additional $500.0 million approved in July 2023[323] Debt and Credit Facilities - ZoomInfo extended the maturity date of $213.0 million of its $250.0 million existing commitments of the first lien revolving credit facility to February 28, 2028[223] - ZoomInfo completed a repricing of its First Lien Term Loan Facility, extending the maturity date to February 28, 2030 and decreasing the applicable margin rate by 0.25%[222] - The company has a remaining balance of $595.5 million on its first lien term loans and $650.0 million in 3.875% Senior Notes, with principal payments due quarterly and at maturity dates in 2030 and 2029, respectively[302] - The effective interest rate on the first lien debt was 8.30% as of September 30, 2023, compared to 7.38% as of December 31, 2022[303] - The company's first lien term loan has a total principal balance outstanding of $595.5 million as of September 30, 2023, with a variable interest rate based on SOFR[332] Operating Expenses and Costs - Cost of service decreased by 7% to $44.8 million in Q3 2023, primarily due to the completion of amortization expenses related to intangible assets from a 2019 acquisition and reduced equity-based compensation[272] - Operating expenses increased by 10% to $205.9 million in Q3 2023, with a 16% increase excluding equity-based compensation, driven by higher sales and marketing expenses and increased accruals for bad debt[273] - Equity-based compensation expense decreased by 11% to $42.9 million in Q3 2023, primarily due to slower headcount growth and higher forfeitures of unvested awards[274] - Sales and marketing expenses (excluding equity-based compensation) increased by 10% to $84.8 million in Q3 2023, driven by additional salaries, benefits, and commission expenses[276] - Research and development expenses (excluding equity-based compensation) decreased by 4% to $35.6 million in Q3 2023, primarily due to reduced salaries and benefits expenses[276] - General and administrative expenses (excluding equity-based compensation) increased by 49% to $36.4 million in Q3 2023, primarily due to increased accruals for bad debt[276] - Restructuring and transaction-related expenses increased by 2450% to $5.1 million in Q3 2023, primarily due to costs related to the Ra'anana lease impairment[276] - Cost of service decreased by $5.7 million (4%) to $133.5 million for the nine months ended September 30, 2023, primarily due to completion of amortization expense related to intangible assets and reduced equity-based compensation[279] - Operating expenses increased by $67.1 million (13%) to $600.6 million for the nine months ended September 30, 2023, with a significant increase in sales and marketing expenses (excluding equity-based compensation) of $33.5 million (15%) to $253.5 million[280] - Equity-based compensation expense decreased by $10.7 million (8%) to $126.9 million for the nine months ended September 30, 2023, primarily due to slower headcount growth and higher forfeitures of unvested awards[281] Cash Flow and Liquidity - As of September 30, 2023, the company had $442.6 million in cash and cash equivalents, $125.3 million in short-term investments, and $250.0 million available under its first lien revolving credit facility[285] - Unearned revenue as of September 30, 2023 was $403.1 million, with $399.2 million expected to be recognized as revenue within the next 12 months[287] - Net cash provided by operating activities for the nine months ended September 30, 2023 was $306.1 million, driven by net income of $112.8 million and non-cash charges of $330.5 million[291] - Cash used in investing activities for the nine months ended September 30, 2023 was $11.1 million, primarily consisting of purchases of short-term investments and property and equipment[297] - Adjusted EBITDA for the 12 months ended September 30, 2023 was $518.2 million, with a total net leverage ratio to Adjusted EBITDA of 1.3x[304][305] - Cash EBITDA for the 12 months ended September 30, 2023 was $542.0 million, with a consolidated first lien net leverage ratio of 0.1x[307][308] Tax and Financial Obligations - Income tax expense for the nine months ended September 30, 2023 was $69.3 million, representing an effective tax rate of 38.1%, down from 58.1% in the same period in 2022, primarily due to reduced non-deductible equity-based compensation[284] - The company had a liability of $2,964.9 million related to projected obligations under the Tax Receivable Agreements as of September 30, 2023[322] Leases and Real Estate - The company had additional operating leases for office space with anticipated undiscounted future lease payments of $293.6 million as of September 30, 2023[324] Macroeconomic and Currency Risks - Inflation has not had a material direct effect on the company's business, financial condition, or results of operations, but macroeconomic conditions including inflation could impact future performance[331] - A hypothetical 100 basis points change in the effective interest rate would cause an immaterial impact on the company's financials over the next 12 months[332] - The company initiated a foreign currency hedging program this quarter, with derivative financial instruments totaling $13.3 million in notional value for Israeli shekel exposure[335] - Foreign currency transaction gains and losses are recorded to non-operating income (loss), with past impacts of currency fluctuations being immaterial[336] - Sales contracts are primarily denominated in U.S. dollars, with foreign subsidiaries in Israel, Canada, the UK, India, and Australia using the U.S. dollar as their functional currency[334] - A stronger U.S. dollar could reduce demand for the company's solutions outside the U.S., while a weaker dollar could have the opposite effect[334] - All cash flow hedging relationships are designated as accounting hedges as of September 30, 2023[333] Investment and Credit Risk Management - The company holds cash with reputable financial institutions, often exceeding federally insured limits, and manages credit risk through diversified deposits and periodic evaluations[337] - The investment portfolio consists of highly rated securities with a weighted-average maturity of less than 12 months, aiming to preserve principal and maintain liquidity[337] Other Income and Expenses - Other income was $8.0 million in Q3 2023, primarily consisting of $6.7 million in investment income and a $2.6 million TRA remeasurement gain, offset by a $1.3 million loss on foreign currency transactions[275] - Interest expense, net increased by 3% to $11.9 million in Q3 2023, primarily due to fluctuations in derivative instruments, partially offset by higher deposit rates[276]