UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
(Mark One)
For the quarterly period ended June 30, 2020
or
For the transition period from to
Commission File Number 001-39310
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
( | ||||||||
| (Registrant’s telephone number, including area code) | ||||||||
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | ☐ | Accelerated Filer | ☐ | ||||||||
☒ | Smaller reporting company | ||||||||||
Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐
As of August 7, 2020, the number of outstanding shares of the registrant's common stock was:
Explanatory Note
ZoomInfo Technologies Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (“Form 10-Q/A” or the “Amendment”) to amend its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020, that was originally filed with the Securities and Exchange Commission (the “SEC”) on August 11, 2020 (the “Original Filing”), to restate its unaudited Condensed Consolidated Balance Sheet as of June 30, 2020, its unaudited Consolidated Statements of Operations, its unaudited Consolidated Statements of Comprehensive Loss, its unaudited Consolidated Statements of Changes in Equity (Deficit), its unaudited Consolidated Statements of Cash Flows, and related footnote disclosures for the three and six months ended June 30, 2020.
As further discussed in Note 1 to the Company’s unaudited condensed consolidated financial statements in Part I, Item 1, “Financial Statements” of this 10-Q/A, in connection with the preparation of the Company's unaudited condensed consolidated financial statements as of and for the periods ended September 30, 2020, the Company reviewed its determination of a tax benefit of approximately $21.6 million related to the difference between the GAAP basis of tax partnerships owned by corporations within the Company's corporate structure during the quarterly period ended June 30, 2020 in the Company's unaudited condensed consolidated financial statements as of and for the periods ended June 30, 2020. In the Company's current judgment, this tax benefit should not have been recorded. Consequently, the Company’s unaudited condensed consolidated financial statements included in the Original Filing should no longer be relied upon.
As disclosed in the Original Filing, the Company’s management had previously determined that there were deficiencies in internal control over financial reporting that constituted a material weakness. For a description of the material weakness in internal control over financial reporting, see Part I, Item 4 “Controls and Procedures” included in this Form 10-Q/A.
Items Amended in this Form 10-Q/A
For the convenience of the reader, this Form 10-Q/A sets forth the Original Filing in its entirety, as modified and superseded as necessary to reflect the restatement described above. Accordingly, the Amendment is presented as of the filing date of the Original Filing and does not reflect events occurring after that date or modify or update those disclosures affected by subsequent events or modify or update disclosures in any way other than as required to reflect the restatement described above and should be read in conjunction with the Original Filing and our other filings with the SEC. The following items in the Original Filing have been amended and restated in their entirety as a result of, and to reflect, the restatement:
A.Part I, Item 1. Financial Statements; and
B.Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
We have also updated the signature page and the certifications of our Chief Executive Officer and Chief Financial Officer in Exhibits 31.1, 31.2 and 32.1. No other sections of the Original Filing are updated or otherwise affected by the Amendment.
ZoomInfo Technologies Inc.
Quarterly Report on Form 10-Q/A
(Amendment No. 1)
For the Quarterly Period Ended June 30, 2020
TABLE OF CONTENTS
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i
GLOSSARY
As used in this quarterly report on Form 10-Q/A (this “Form 10-Q/A”), the terms identified below have the meanings specified below unless otherwise noted or the context indicates otherwise. References in this Form 10-Q/A to “ZoomInfo Technologies Inc.” refer to ZoomInfo Technologies Inc. and not to any of its subsidiaries unless the context indicates otherwise. References in this Form 10-Q/A to “ZoomInfo,” the “Company,” “we,” “us,” and “our” refer (1) prior to the consummation of the Reorganization Transactions, to ZoomInfo OpCo and its consolidated subsidiaries, and (2) after the consummation of the Reorganization Transactions, to ZoomInfo Technologies Inc. and its consolidated subsidiaries unless the context indicates otherwise.
•“2020 Plan” refers to ZoomInfo Technologies Inc.’s 2020 Omnibus Incentive Plan.
•“22C Capital” refers to investment funds associated with 22C Capital LLC and its predecessor.
•“ACV” refers to annual contract value, or the total annualized value that a customer has agreed to pay for subscription services at any particular point in time under contract(s) that are or were enforceable at that point in time.
•“Blocker Companies” refers to certain of our Pre-IPO OpCo Unitholders that are taxable as corporations for U.S. federal income tax purposes.
•“Blocker Mergers” refers to the mergers described under “Reorganization Transactions” in Note 1 to our unaudited consolidated financial statements included in Part I, Item 1 of this Form 10-Q/A.
•“Carlyle” refers to investment funds associated with The Carlyle Group.
•“Class P Units” refers to Class P Units (including, without limitation, any indirectly held Class P Units) of ZoomInfo OpCo.
•“Continuing Class P Unitholders” refers to certain pre-IPO owners who continued to hold Class P Units following the consummation of the Reorganization Transactions and the IPO.
•“Continuing members” refers to pre-IPO owners who continue to hold HoldCo Units or OpCo Units following the Reorganization Transactions and the IPO.
•“Customers” refers to companies that have contracted with us to use our services and, at the time of measurement, maintain one or more active paid subscriptions to our platform. Paid subscriptions will generally include access for a number of employees or other affiliated persons of the customer.
•“Datanyze” refers collectively to Datanyze, Inc. and Datanyze Rus, LLC.
•“Exchange Tax Receivable Agreement” refers to the tax receivable agreement entered into with certain Pre-IPO OpCo Unitholders.
•“Founders” refers to Henry Schuck, our Chief Executive Officer, and Kirk Brown.
•“HoldCo Units” refers to the class of units of ZoomInfo HoldCo.
•“HSKB” and “HSKB I” refers to HSKB Funds, LLC, a privately held limited liability company formed on February 9, 2016 for the purpose of issuing equity to certain persons who had performed and would continue to perform services for ZoomInfo OpCo.
•“HSKB II” refers to HSKB Funds II, LLC, a privately held limited liability company formed on May 28, 2020 for the purpose of effecting a reorganization of HSKB I at the time of the IPO and to issue equity to certain persons who had performed and would continue to perform services for ZoomInfo OpCo.
•“IPO” refers to the initial public offering of Class A common stock of ZoomInfo Technologies Inc.
•“IPO Prospectus” refers to ZoomInfo Technologies Inc.’s prospectus dated June 3, 2020 filed with the SEC pursuant to Rule 424(b) of the Securities Act on June 5, 2020.
•“LTIP Units” refers to a class of partnership units that are intended to qualify as “profit interests” in ZoomInfo OpCo for federal income tax purposes that, subject to certain conditions, including vesting, are convertible by the holder into OpCo Units.
•“NeverBounce” refers to Metrics Delivered LLC.
•“OpCo Units” refers to the class of units of ZoomInfo OpCo, and does not include Class P Units.
•“Pre-Acquisition ZI” refers to Zoom Information Inc.
•“Pre-IPO Blocker Holders” refers to the pre-IPO owners that held their interests in us through the Blocker Companies immediately prior to the IPO.
•“Pre-IPO HoldCo Unitholders” refers to the pre-IPO owners that held HoldCo Units immediately prior to the IPO.
ii
•“Pre-IPO OpCo Unitholders” refers to the pre-IPO owners that held OpCo Units immediately prior to the IPO.
•“Pre-IPO owners” refers collectively to the Sponsors, the Founders, and the management and other equity holders who were the owners of ZoomInfo OpCo immediately prior to the Reorganization Transactions.
•“RainKing” refers to Rain King Software, Inc.
•“Reorganization Tax Receivable Agreement” refers to the tax receivable agreement entered into with the Pre-IPO Blocker Holders.
•“Reorganization Transactions” refers to the transactions described under “Reorganization Transactions” in Note 1 to our unaudited consolidated financial statements included in Part I, Item 1 of this Form 10-Q/A.
•“SEC” refers to the Securities and Exchange Commission.
•“Securities Act” refers to the Securities Act of 1933, as amended.
•“Series A Preferred Units” refers to the Series A preferred units of ZoomInfo OpCo outstanding immediately prior to the IPO.
•“Sponsors” refers collectively to TA Associates, Carlyle, and 22C Capital.
•“TA Associates” refers to investment funds associated with TA Associates.
•“Tax Receivable Agreements” refers collectively to the Exchange Tax Receivable Agreement and the Reorganization Tax Receivable Agreement.
•“Topic 606” refers to Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers, later codified as Accounting Standards Codification (“ASC”) Topic 606.
•“Total Addressable Market” refers to the revenue opportunity that we believe is available to go-to-market intelligence solutions, such as ours.
•“ZoomInfo HoldCo” refers to ZoomInfo Intermediate Holdings LLC, a Delaware limited liability company, and a direct subsidiary of ZoomInfo Technologies Inc.
•“ZoomInfo OpCo” refers to ZoomInfo Holdings LLC (formerly known as DiscoverOrg Holdings, LLC), a Delaware limited liability company, and a direct subsidiary of ZoomInfo HoldCo and indirect subsidiary of ZoomInfo Technologies Inc.
iii
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
From time to time we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied by these statements. You can generally identify our forward-looking statements by the words “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “might,” “objective,” “outlook,” “plan,” “potential,” “predict,” “projection,” “seek,” “should,” “target,” “trend,” “will,” “would” or the negative version of these words or other comparable words.
We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements.
The following are some of the factors that could cause actual results to differ from those expressed or implied by our forward-looking statements, including forward-looking statements contained in this Quarterly Report on Form 10-Q/A:
•the COVID-19 pandemic, including the global economic uncertainty and measures taken in response, could materially impact our business and future results of operations;
•larger well-funded companies shifting their existing business models to become more competitive with us;
•our ability to provide or adapt our platform for changes in laws and regulations or public perception, or changes in the enforcement of such laws, relating to data privacy;
•the effects of companies more effectively catering to our customers by offering more tailored products or platforms at lower costs;
•adverse general economic and market conditions reducing spending on sales and marketing;
•the effects of declining demand for sales and marketing subscription platforms;
•our ability to improve our technology and keep up with new processes for data collection, organization, and cleansing;
•our ability to provide a highly accurate, reliable, and comprehensive platform moving forward;
•our reliance on third-party systems that we do not control to integrate with our system and our potential inability to continue to support integration;
•our ability to adequately fund research and development potentially limiting introduction of new features, integrations, and enhancements;
•our ability to attract new customers and expand existing subscriptions;
•a decrease in participation in our contributory network or increased opt-out rates impacting the depth, breadth, and accuracy of our platform;
•our failure to protect and maintain our brand and our ability to attract and retain customers; and
•other factors described under “Risk Factors” in Item 1A of Part II of this Form 10-Q/A, and in other reports we file from time to time with the SEC.
These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this Form 10-Q/A and our other filings with the SEC. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, our actual results may vary in material respects from those projected in our forward-looking statements. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, investments, or other strategic transactions we may make.
You should not place undue reliance on our forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to update or revise any
iv
forward-looking statements whether as a result of new information, future developments or otherwise, except as required by law.
The Company intends to use its website as a distribution channel of material company information. Financial and other important information regarding the Company is routinely posted on and accessible through the Company’s website at https://ir.zoominfo.com. In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Email Alerts” section of our investor relations page at https://ir.zoominfo.com. The information on our website is not incorporated herein or otherwise a part of this Form 10-Q/A.
v
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Unaudited Consolidated Financial Statements of ZoomInfo Technologies Inc. and Subsidiaries | |||||
1
| ZoomInfo Technologies Inc. | |||||||||||
Condensed Consolidated Balance Sheets | |||||||||||
(in millions, except share data) | |||||||||||
| June 30, | December 31, | ||||||||||
| 2020 | 2019 | ||||||||||
| (unaudited) | |||||||||||
| (As restated) | |||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Accounts receivable | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Deferred costs | |||||||||||
| Income tax receivable | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets, net | |||||||||||
| Other assets: | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Deferred tax assets | |||||||||||
| Deferred costs, net of current portion | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities, Temporary, and Permanent Equity (Deficit) | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Unearned revenue, current portion | |||||||||||
| Income taxes payable | |||||||||||
| Related party payable | |||||||||||
| Current portion of operating lease liabilities | |||||||||||
| Current portion of long-term debt | |||||||||||
| Total current liabilities | |||||||||||
| Unearned revenue, net of current portion | |||||||||||
| Tax receivable agreements liability, net of current portion | |||||||||||
| Operating lease liabilities, net of current portion | |||||||||||
| Long-term debt, net of current portion | |||||||||||
| Deferred tax liabilities | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Series A Preferred Units | |||||||||||
Commitments, Contingencies, and Guarantees (Note 10) | |||||||||||
| Permanent Equity (Deficit) | |||||||||||
| Members' equity (deficit) | ( | ||||||||||
Class A common stock, par value $ | |||||||||||
Class B common stock, par value $ | |||||||||||
Class C common stock, par value $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive income (loss) | ( | ( | |||||||||
| Retained Earnings | ( | ||||||||||
| Noncontrolling interests | |||||||||||
| Total equity (deficit) | ( | ||||||||||
| Total liabilities, temporary, and permanent equity (deficit) | $ | $ | |||||||||
2
| ZoomInfo Technologies Inc. | |||||||||||||||||||||||
Consolidated Statements of Operations | |||||||||||||||||||||||
(in millions, except per share amounts; unaudited) | |||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| (As restated) | (As restated) | ||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of service: | |||||||||||||||||||||||
(2) | |||||||||||||||||||||||
| Amortization of acquired technology | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Sales and marketing(2) | |||||||||||||||||||||||
Research and development(2) | |||||||||||||||||||||||
General and administrative(2) | |||||||||||||||||||||||
Amortization of other acquired intangibles | |||||||||||||||||||||||
Restructuring and transaction related expenses | |||||||||||||||||||||||
Total operating expenses | |||||||||||||||||||||||
Income (loss) from operations | ( | ( | |||||||||||||||||||||
Interest expense, net | |||||||||||||||||||||||
Loss on debt extinguishment | |||||||||||||||||||||||
Other (income) expense, net | |||||||||||||||||||||||
Income (loss) before income taxes | ( | ( | ( | ( | |||||||||||||||||||
Benefit (expense) from income taxes | ( | ( | |||||||||||||||||||||
| Net income (loss) | ( | ( | ( | ( | |||||||||||||||||||
| Less: Net income (loss) attributable to ZoomInfo OpCo prior to the Reorganization Transactions | ( | ( | ( | ||||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interests | ( | ( | |||||||||||||||||||||
| Net income (loss) attributable to ZoomInfo Technologies Inc. | $ | ( | $ | $ | ( | $ | |||||||||||||||||
Net income (loss) per share of Class A and Class C common stock:(1) | |||||||||||||||||||||||
Basic | $ | ( | N/A | $ | ( | N/A | |||||||||||||||||
Diluted | $ | ( | N/A | $ | ( | N/A | |||||||||||||||||
________________
(1)Basic and diluted net income (loss) per share of Class A and Class C common stock is applicable only for the period from June 4, 2020 through June 30, 2020, which is the period following the initial public offering ("IPO") and related Reorganization Transactions (as defined in Note 1 to the Unaudited Consolidated Financial Statements). See Note 12 for the number of shares used in the computation of net income (loss) per share of Class A and Class C common stock and the basis for the computation of net income (loss) per share.
(2)Amounts include equity-based compensation expense, as follows:
Cost of service | $ | $ | $ | $ | |||||||||||||||||||
Sales and marketing | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Total equity-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
3
| ZoomInfo Technologies Inc. | |||||||||||||||||||||||
| Consolidated Statements of Comprehensive Loss | |||||||||||||||||||||||
| (in millions; unaudited) | |||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| (As restated) | (As restated) | ||||||||||||||||||||||
| Net income (loss) | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss), net of tax | |||||||||||||||||||||||
| Unrealized gain (loss) on cash flow hedges | ( | ( | ( | ( | |||||||||||||||||||
| Realized loss (gain) on settlement of cash flow hedges | |||||||||||||||||||||||
| Amortization of deferred losses related to the dedesignated Interest Rate Swap | |||||||||||||||||||||||
| Other comprehensive income (loss) | ( | ( | ( | ||||||||||||||||||||
| Comprehensive income (loss) | ( | ( | ( | ( | |||||||||||||||||||
| Less: Net income attributable to ZoomInfo OpCo prior to the Reorganization Transactions | ( | ( | ( | ( | |||||||||||||||||||
| Less: Comprehensive income (loss) attributable to noncontrolling interests | ( | ( | |||||||||||||||||||||
| Comprehensive income (loss) attributable to ZoomInfo Technologies Inc. | $ | ( | $ | $ | ( | $ | |||||||||||||||||
4
| ZoomInfo Technologies Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Statements of Changes in Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions, except share data; unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ZoomInfo Holdings LLC (Prior to Reorganization Transactions) | ZoomInfo Technologies Inc. Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Members' Deficit | Class A Shares | Class B Shares | Class C Shares | Class A Amount | Class B Amount | Class C Amount | Additional paid-in capital | Retained Earnings | AOCI | Noncontrolling interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2019 | $ | ( | $ | $ | $ | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | ( | — | — | — | — | — | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Member distributions | ( | — | — | — | — | — | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2020 | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) prior to Reorganization Transactions | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss prior to Reorganization Transactions and IPO | — | — | — | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Member distributions prior to Reorganization Transactions | ( | — | — | — | — | — | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity-based compensation prior to Reorganization Transactions | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impacts of Reorganization Transactions and IPO | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Initial effect of the Reorganization Transactions and IPO on noncontrolling interests | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Class A common stock in IPO, net of costs | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchases of ZoomInfo OpCo units in connection with IPO | — | ( | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchases of Class C units in connection with IPO | — | — | ( | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Opco Units exchanged into Class A shares | — | ( | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Forfeitures / cancellations | — | ( | ( | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A Preferred Unit redemption accretion | — | — | — | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Increase in deferred tax asset from step-up in tax basis under TRA related to unit exchanges (as restated) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income subsequent to Reorganization Transactions (as restated) | — | — | — | — | — | — | — | — | ( | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss subsequent to Reorganization Transactions and IPO | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity-based compensation subsequent to Reorganization Transactions | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2020 (as restated) | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5
| ZoomInfo Technologies Inc. | |||||||||||||||||
Consolidated Statements of Changes in Equity (Deficit) (continued) | |||||||||||||||||
| ($ in millions; unaudited) | |||||||||||||||||
| Members' Deficit | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | |||||||||||||||
| Balance at December 31, 2018 | $ | ( | $ | $ | ( | ||||||||||||
| Net income (loss) | ( | — | ( | ||||||||||||||
| Member distributions | ( | — | ( | ||||||||||||||
Impact of adoption of new accounting standard | ( | — | ( | ||||||||||||||
| Equity-based compensation | — | ||||||||||||||||
| Other comprehensive income (loss) | — | — | — | ||||||||||||||
| Balance at March 31, 2019 | ( | ( | |||||||||||||||
| Net income (loss) | ( | — | ( | ||||||||||||||
| Member distributions | ( | — | ( | ||||||||||||||
| Repurchase outstanding equity / member units | ( | — | ( | ||||||||||||||
| Equity-based compensation | — | ||||||||||||||||
| Other comprehensive income (loss) | — | ( | ( | ||||||||||||||
| Balance at June 30, 2019 | $ | ( | $ | ( | $ | ( | |||||||||||
6
| ZoomInfo Technologies Inc. | |||||||||||
Consolidated Statements of Cash Flows | |||||||||||
| (in millions; unaudited) | |||||||||||
| Six Months Ended June 30, | |||||||||||
| 2020 | 2019 | ||||||||||
| (As restated) | |||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of debt discounts and issuance costs | |||||||||||
| Amortization of deferred commissions costs | |||||||||||
| Loss on early extinguishment of debt | |||||||||||
| Deferred consideration valuation adjustments | |||||||||||
| Equity-based compensation expense | |||||||||||
| Deferred income taxes | ( | ||||||||||
| Provision for bad debt expense | |||||||||||
| Changes in operating assets and liabilities, net of acquisitions: | |||||||||||
| Accounts receivable | ( | ||||||||||
| Prepaid expenses and other current assets | ( | ( | |||||||||
| Deferred costs and other assets | ( | ( | |||||||||
| Income tax receivable | ( | ||||||||||
| Related party receivable | ( | ||||||||||
| Accounts payable | |||||||||||
| Accrued expenses and other liabilities | |||||||||||
| Unearned revenue | |||||||||||
| Net cash provided by (used in) operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property and equipment and other assets | ( | ( | |||||||||
| Cash paid for acquisitions, net of cash acquired | ( | ||||||||||
| Net cash provided by (used in) investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Payments of deferred consideration | ( | ( | |||||||||
| Proceeds from debt | |||||||||||
| Repayment of debt | ( | ( | |||||||||
| Payments of debt issuance costs | ( | ( | |||||||||
| Repurchase outstanding equity / member units | ( | ( | |||||||||
| Proceeds from equity offering, net of underwriting discounts | |||||||||||
| Payments of IPO issuance costs | ( | ||||||||||
| Tax distributions | ( | ( | |||||||||
| Net cash provided by (used in) financing activities | |||||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | |||||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents, and restricted cast at end of period | $ | $ | |||||||||
| Supplemental disclosures of cash flow information | |||||||||||
| Interest paid in cash | $ | $ | |||||||||
| Supplemental disclosures of non-cash investing and financing activities: | |||||||||||
| Deferred variable consideration from acquisition of a business | $ | $ | |||||||||
| Issuance cost reimbursements included in accounts receivable | $ | $ | |||||||||
7
ZoomInfo Technologies Inc.
Notes to Unaudited Consolidated Financial Statements (Unaudited)
(In millions, except share/unit data and per share/unit amounts, unless otherwise noted)
8
Note 1 - Organization and Background
Business
ZoomInfo Technologies Inc. through its operating subsidiaries provides a go-to-market intelligence platform for sales and marketing teams. The Company’s cloud-based platform provides accurate and comprehensive information on organizations and professionals in order to help users identify target customers and decision makers, obtain continually updated predictive lead and company scoring, monitor buying signals and other attributes of target companies, craft messages, engage via automated sales tools, and track progress through the deal cycle. Unless otherwise indicated or the context otherwise requires, references to “we,” “us,” “our,” “ZoomInfo,” and the “Company” refer (1) prior to the consummation of the Reorganization Transactions, to ZoomInfo OpCo and its consolidated subsidiaries, and (2) after the consummation of the Reorganization Transactions, to ZoomInfo Technologies Inc. and its consolidated subsidiaries.
Organization
ZoomInfo Technologies Inc. was formed on November 14, 2019 with no operating assets or operations as a Delaware corporation for the purposes of facilitating an initial public offering (“IPO”) and other related transactions in order to carry on the business of ZoomInfo Holdings LLC (“ZoomInfo OpCo”) (formerly known as DiscoverOrg Holdings, LLC), a Delaware limited liability company. Following consummation of the Reorganization Transactions (as described below), ZoomInfo OpCo became a direct subsidiary of ZoomInfo Intermediate Holdings LLC (“ZoomInfo HoldCo”), a Delaware limited liability company and an indirect subsidiary of ZoomInfo Technologies Inc.
The Company headquarters are located in Vancouver, WA, and we operate in six offices throughout the U.S. and one office in Israel.
Initial Public Offering
On June 8, 2020, ZoomInfo Technologies Inc. completed the IPO, in which it sold 51,175,000 shares of Class A common stock (including shares issued pursuant to the exercise in full of the underwriters’ option to purchase additional shares) at a public offering price of $21.00 per share for net proceeds of $1,019.6 million, after deducting underwriters’ discounts (but excluding other offering expenses and reimbursements in accounts receivable as of June 30, 2020). ZoomInfo Technologies Inc. used all of the proceeds from the IPO to (i) purchase 48,528,783 newly issued HoldCo Units from ZoomInfo HoldCo for approximately $966.9 million (which ZoomInfo HoldCo in turn used to purchase the same number of newly issued OpCo Units from ZoomInfo OpCo); (ii) purchase 2,370,948 OpCo Units from certain Pre-IPO OpCo Unitholders for approximately $47.2 million; and (iii) fund $5.5 million of merger consideration payable to certain Pre-IPO Blocker Holders in connection with the Blocker Mergers (as defined below).
Reorganization Transactions
In connection with the IPO, the Company completed the following transactions (“Reorganization Transactions”):
•ZoomInfo OpCo effected a four— for—one reverse unit split;
•ZoomInfo Technologies Inc. formed a new merger subsidiary with respect to each of the Blocker Companies through which certain of our Pre-IPO Blocker Holders held their interests in ZoomInfo OpCo, each merger subsidiary merged with and into the respective Blocker Companies in reverse-subsidiary mergers, and the surviving entities merged with and into ZoomInfo Technologies Inc. (such mergers, the “Blocker Mergers”), which Blocker Mergers resulted in the Pre-IPO Blocker Holders receiving a combination of (i) shares of Class C common stock of ZoomInfo Technologies Inc. and (ii) a cash amount in respect of reductions in such Pre-IPO Blocker Holders’ equity interests, based on the initial offering price of the Class A common stock in the IPO;
9
•certain pre-IPO owners acquired interests in ZoomInfo HoldCo as a result of the merger of an entity that held OpCo Units on behalf of such pre-IPO owners into ZoomInfo HoldCo (the “ZoomInfo HoldCo Contributions”) and the redemption of some OpCo Units pursuant to which the holders of such OpCo Units received HoldCo Units; and
•the limited liability company agreement of each of ZoomInfo OpCo and ZoomInfo HoldCo was amended and restated to, among other things, modify their capital structure by reclassifying the interests held by the Pre-IPO OpCo Unitholders, the Continuing Class P Unitholders, and the Pre-IPO HoldCo Unitholders, resulting in OpCo Units of ZoomInfo OpCo, Class P Units of ZoomInfo OpCo, and HoldCo Units of ZoomInfo HoldCo, respectively (such reclassification, the “Reclassification”).
In connection with the Reorganization Transactions and the IPO, ZoomInfo Technologies Inc. entered into two tax receivable agreements. See Note 16.
Restatement of Previously Issued Unaudited Condensed Consolidated Financial Statements
The Company has restated these financial statements to make a change relating to our accounting for income taxes. In connection with the preparation of the Company’s unaudited condensed consolidated financial statements as of and for the periods ended September 30, 2020, the Company reviewed its determination of a tax benefit of approximately $21.6 million related to the difference between the GAAP basis and tax basis of partnerships owned by corporations within the Company’s corporate structure recorded during the quarterly period ended June 30, 2020 in the Company’s unaudited condensed consolidated financial statements as of and for the periods ended June 30, 2020. In the Company's current judgement, it should not have recorded the tax benefit.
The effects of the restatement on the line items within the Company’s unaudited Condensed Consolidated Balance Sheet as of June 30, 2020 are as follows:
| June 30, 2020 | |||||||||||||||||
| (in millions) | As Originally Reported | Adjustments | As Restated | ||||||||||||||
| Deferred tax assets | $ | $ | ( | $ | |||||||||||||
| Tax receivable agreements liability, net of current portion | $ | $ | ( | $ | |||||||||||||
| Deferred tax liabilities | $ | $ | $ | ||||||||||||||
| Additional paid-in capital | $ | $ | ( | $ | |||||||||||||
| Retained Earnings | $ | ( | $ | ( | $ | ( | |||||||||||
| Noncontrolling interests | $ | $ | ( | $ | |||||||||||||
The effects of the restatement on the line items within the Company’s unaudited Consolidated Statement of Operations for the six months ended June 30, 2020 are as follows:
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| Six Months Ended June 30, 2020 | |||||||||||||||||
| (in millions, except per share amounts) | As Originally Reported | Adjustments(1) | As Restated | ||||||||||||||
| Benefit (expense) from income taxes | $ | $ | ( | $ | ( | ||||||||||||
| Net income (loss) | $ | ( | $ | ( | $ | ( | |||||||||||
| Less: Net income (loss) attributable to ZoomInfo OpCo prior to the Reorganization Transactions | $ | ( | $ | $ | ( | ||||||||||||
| Less: Net income (loss) attributable to noncontrolling interests | $ | ( | $ | ( | $ | ( | |||||||||||
| Net income (loss) attributable to ZoomInfo Technologies Inc. | $ | ( | $ | ( | $ | ( | |||||||||||
| Net income (loss) per share of Class A and Class C common stock: | |||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | |||||||||||
| Diluted | $ | ( | $ | ( | $ | ( | |||||||||||
(1) May not foot and crossfoot due to rounding
The effects of the restatement on the line items within the Company’s Consolidated Statement of Operations for the three months ended June 30, 2020 are as follows:
| Three Months Ended June 30, 2020 | |||||||||||||||||
| (in millions, except per share amounts) | As Originally Reported | Adjustments(1) | As Restated | ||||||||||||||
| Benefit (expense) from income taxes | $ | $ | ( | $ | ( | ||||||||||||
| Net income (loss) | $ | ( | $ | ( | $ | ( | |||||||||||
| Less: Net income (loss) attributable to ZoomInfo OpCo prior to the Reorganization Transactions | $ | $ | $ | ||||||||||||||