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December 20, 2019
Henry Schuck
Chief Executive Officer
ZoomInfo Technologies Inc.
805 Broadway Street, Suite 900
Vancouver, WA 98660
Re: ZoomInfo Technologies Inc.
Draft Registration Statement on Form S-1
Submitted November 25, 2019
CIK No. 0001794515
Dear Mr. Schuck:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
DRS on Form S-1 filed on November 25, 2019
Summary
Overview, page 1
1. Please provide the definition for the following terms: average lifetime
value ("LTV"),
average customer acquisition cost ("CAC"), and annual contract value
("ACV").
2. You disclose you have approximately 180,000 "paid users" and 13,000
"customers" and
that you define "customers" as a company that maintains one or more
active paid
subscriptions to your platform. Please define the term "paid users" and
clarify how it is
distinguished from your "customers."
Henry Schuck
FirstName Technologies Inc. Schuck
ZoomInfo LastNameHenry
Comapany20, 2019
December NameZoomInfo Technologies Inc.
Page 2
December 20, 2019 Page 2
FirstName LastName
Our Market Opportunity, page 4
3. You disclose that your total addressable market is $23 billion for
your platform as of
September 30, 2019 based on a formula calculating ACV of various sized
companies. To
the extent material, please disclose the amount of ACV that was
applied to each size
category of companies. Further, please provide more details as to the
size and scope of
the population of companies used, such as to whether you included
companies outside the
industry verticals or geographic markets in which you currently
operate.
Organizational Structure, page 5
4. Please provide an additional organizational chart(s) that outlines the
corporate structure
pre-reorganization and pre-IPO.
5. Please revise to summarize the payments to be made under the tax
receivable
agreement. Please also disclose the range of the future payouts that
you expect to pay
under the agreement, the anticipated timing of the payouts, and how
you intend to fund the
required payouts. Please discuss the potential liability to the
company if it fails to make
such payouts.
Unaudited Pro Forma Consolidated Balance Sheet and Statement of Operations,
page 75
6. Please provide a footnote to show how you compute your pro forma
earnings per share
data.
7. Please expand your footnotes to the Unaudited Pro Forma Consolidated
Balance Sheet
and Statement of Operations to explain how each adjustment is
calculated or derived.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview, page 79
8. You disclose that over 500 of your customers spend more than $100,000
in ACV as of
September 30, 2019, and that the net annual retention rate was 102% in
2018. Please
revise to disclose such information for each period presented wherever
applicable
throughout the filing.
9. We note you disclosed: "[O]ur operating results and growth prospects
will depend in part
on our ability to attract new customers.... As of September 30, 2019,
we had over 13,000
customers." Please revise to disclose number of customers for each
period presented
wherever applicable throughout the filing. In addition, consider
disclosing the number of
new customers obtained for each reporting period.
10. Please expand your overview section to discuss the challenges to
integrating
the "ZoomInfo" and "DiscoverOrg" platforms and brands, including any
known trends or
uncertainties that are reasonably expected to have a material impact
on results of
operations or financial condition. For example:
Henry Schuck
FirstName Technologies Inc. Schuck
ZoomInfo LastNameHenry
Comapany20, 2019
December NameZoomInfo Technologies Inc.
Page 3
December 20, 2019 Page 3
FirstName LastName
Describe the efforts that ZoomInfo OpCo has undertakento
integrate the two
platforms and any difficulties faced by the company given that
the assets the
ZoomInfo and DiscoverOrg were in separate subsidiaries. Discuss
management and
operating structure, research and development, and sales and
marketing staff if you
have undergone a material restructuring of your operations.
Provide additional context regarding your statement that certain
customers have
renewed their subscriptions under the original DiscoverOrg and
Pre-Acquisition ZI
platform, which you continue to support. Clarify whether there
are a material amount
of customers on these legacy platforms and how those numbers
differ from each other
and to ZoomInfo by DiscoverOrg.
Clarify the differences in the solutions offered and pricing. As
you transition to a
single platform, it is unclear whether there were significant
differences in annual
contract value for the original ZoomInfo platform compared to the
original
DiscoverOrg platform and how the merger and integration affected
your overall
annual contract value. To the extent material, please disclose
the annual contract
values of the original ZoomInfo platform, the original
DiscoverOrg, and the
integrated platform.
Non-GAAP Financial Measures, page 81
11. We refer to Acquisition Adjusted Revenue. Please tell us in more
detail why you believe
this presentation is useful to investors and how it illustrates the
trends in your organic
revenue growth. Please also tell us in more detail about the of fair
value adjustments to
acquired unearned revenue described in notes (a) and (c) by
acquisition, providing us with
an indication of the periods that will be affected by these
adjustments.
12. Considering that deferred revenue was adjusted to fair value at the
time of acquisition
pursuant to GAAP, please tell us how you considered whether your
various non-GAAP
measures that include this adjustment are substituting an individually
tailored recognition
and measurement method for a GAAP measure. Refer to Question 100.04 of
the Non-
GAAP Compliance and Disclosure Interpretations and Rule 100(b) of
Regulation G.
Impact of the Reorganization Transactions, page 85
13. We note your disclosure that the reorganization will be accounted for
as a reorganization
of entities under common control. Please explain to us in greater
detail the steps in the
reorganization and how each entity involved is under common control,
including the
identity of the related controlling entity or interest-holder.
Results of Operations, page 90
14. It appears from your revenue recognition policy that you recognize
subscription contracts
are generally based on the number of users that access your
applications, the level of
functionality that they can access, and the number of datasets or
records that can be
accessed. To the extent these underlying operating drivers/factors are
important in
Henry Schuck
ZoomInfo Technologies Inc.
December 20, 2019
Page 4
understanding your revenue trends, please tell us your consideration
of providing an
enhanced quantitative and qualitative discussion and analyses of how
these drivers/factors
impact your revenue, such as the number of users that access your
applications for each
period presented.
15. Due to the significance of the acquisition of Pre-Acquisition ZI,
consider providing a
discussion for the acquisition of Pre-Acquisition ZI based upon pro
forma information for
the years ending December 31, 2019 and 2018 presented in a format that
is consistent with
Article 11 of Regulation S-X. This information is solely to supplement
your results of
operations discussion. The pro forma information should include cost
of revenues as well
as revenue. The discussion can include a comparison of your pro forma
information to
your results of operations for for each of those reporting periods.
This discussion should
include disclosure to explain how the pro forma presentation was
derived, why
management believes the presentation to be useful, and any potential
risks associated with
using such a presentation.
Cash Flows from (used in) Operating Activities, page 92
16. We refer you to the table on page 93 that presents a measure of
operating cash flows after
certain adjustments. Please revise to identify the resulting measure
as a non-GAAP
measure and provide the disclosures required by Item 10(e) of
Regulation S-K. Further,
tell us how you concluded that this measure complies with the guidance
in Item
10(e)(ii)(A) of Regulation S-K, which states that non-GAAP liquidity
measures must not
exclude charges or liabilities that required, or will require, cash
settlement absent an
ability to settle in another manner.
Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk, page 100
17. We note that you are exposed to the interest rate risk related to your
debt instruments.
Please revise your future filings to disclose the quantitative
information for the preceding
fiscal year along with the reasons for material changes in amounts
from the preceding
year. Refer to Item 305(a)(3) and Instruction 3(F) to Item 305(a) of
Regulation S-K.
The ZoomInfo Platform, page 103
18. You state that you are able to provide a guarantee of 95%+ accuracy.
Please clarify how
you calculate your accuracy and whether you track such accuracy figures
as a key metric.
FirstName LastNameHenry Schuck
For example, it is not clear if it is calculated on a client-by-client
basis or if it is a more
Comapany NameZoomInfo Technologies clarify the risks and consequences to you
should you
global calculation. Further, please Inc.
December 20,meet the 95%+ accuracy guarantee.
fail to 2019 Page 4
FirstName LastName
Henry Schuck
FirstName Technologies Inc. Schuck
ZoomInfo LastNameHenry
Comapany20, 2019
December NameZoomInfo Technologies Inc.
Page 5
December 20, 2019 Page 5
FirstName LastName
Business
Our Growth Strategy, page 108
19. Please explain how you calculate annual recurring revenue. In
addition, please disclose
the amount of the revenue increase that is attributable to new and
existing customers.
Legal Proceedings , page 115
20. We note you disclosed: "[w]e are subject to various legal proceedings,
claims, and
governmental inspections, audits, or investigations that arise in the
ordinary course of our
business. Although the outcomes of these claims cannot be predicted
with certainty, in
the opinion of management, the ultimate resolution of these matters
would not be
expected to have a material adverse effect on our financial position
or results of
operations." Please explain why you have omitted the statement of cash
flows or revise
to reference this financial statement.
Management, page 116
21. Please clarify the role of your co-founder, Kirk Brown, with ZoomInfo
or its subsidiaries.
If Mr. Brown is expected to make significant contributions to the
business, please include
a discussion of his business experience during the last five years.
Refer to Item 401(c) of
Regulation S-K.
Certain U.S. Federal Income and Estate Tax Consequences to Non-U.S. Holders,
page 151
22. You state that the resulting post-organizational structure in the form
of an umbrella
partnership-C corporation ("UP-C") will treat "Pre-IPO Unitholders"
generally
advantageously if they continue to hold their equity interests in an
entity that is not taxed
as a corporation for U.S. tax purposes. Please briefly explain how the
UP-C structure and
reorganization transactions achieves the tax benefits that is
intended. Further, please
provide an analysis of whether the tax consequences of the
reorganization transactions, the
tax receivable agreement, or the tax benefits expected to result from
acquisitions of LLC
Units from existing owners are material to an investor in the Class A
common stock.
Underwriting, page 156
23. Please briefly describe the "customary exceptions" to your lock-up
agreement that is
disclosed on page 157. Please also clarify whether the Class B shares
would be subject to
the lock-up agreements.
Notes to Consolidated Financial Statements
Business Combinations, page F-41
24. Please revise to include the applicable disclosures outlined in
paragraph 2h of ASC 805-
10-50, or advise.
Henry Schuck
ZoomInfo Technologies Inc.
December 20, 2019
Page 6
25. Please disclose a qualitative description of the factors that make up the
goodwill recognized in the Zoom Information, Inc. and NeverBounce
acquisition
transactions in accordance with ASC 805-30-50-1.
Exhibits
26. Please advise us whether you intend to file a consent from Forrester as
an exhibit,
pursuant to Rule 436 of Regulation C and Section 7 of the Securities Act.
It appears that
you commissioned a report from Forrester that is referenced in this
filing.
General
27. Please supplementally provide us with copies of all written
communications, as defined
in Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your
behalf, present to potential investors in reliance on Section 5(d) of the
Securities Act,
whether or not they retain copies of the communications.
You may contact Becky Chow, Staff Accountant, at (202) 551-6524 or
Stephen
Krikorian, Accounting Branch Chief, at (202) 551-3488 if you have questions
regarding
comments on the financial statements and related matters. Please contact Edwin
Kim, Attorney-
Advisor, at (202) 551-3297 or Jan Woo, Legal Branch Chief, at (202) 551-3453
with any other
questions.
Sincerely,
FirstName LastNameHenry Schuck
Division of
Corporation Finance
Comapany NameZoomInfo Technologies Inc.
Office of
Technology
December 20, 2019 Page 6
cc: Richard Fenyes, Esq.
FirstName LastName