ZoomInfo Technologies (Nasdaq: ZI) has been fighting uphill against a tough macro this year. But I think there’s a lot to like with this company, and it might be worth putting on our investing watchlist for further consideration.

Zoom has a database of a quarter billion business professionals, collecting information about their purchasing behavior and its associated context. The end result is helping sales folk use modern digital tools to close deals more quickly.

Most customers report that it provides a Lifetime Value/Acquisition Cost of 10:1. That is incredibly high (I generally consider 3:1 to be very good and 7:1 to be best-in-class).

Yet I’m not surprising anyone when I say that it’s been a tough year for software companies. There have been layoffs of tech headcount, reductions in budgets, and the sales cycle is generally just taking longer. All of the above have been the primary reason why ZoomInfo’s stock is down (36%) during the past 12 months.

But is there light at the end of the tunnel?

Despite all of the headwinds, it’s still growing the top line at 9%. And it’s generating an impressive 30% free cash flow margin. Perhaps ironically, the company has a pretty lean cost structure. It spends just 28% of revenue on sales, marketing, and overhead.

Investors should be aware that it carries a bit more than $1 billion of long-term debt. And the interest rates on those loans are mostly floating/variable. This is why the company typically likes to report *unlevered* free cash flow. That ignores the variability of the interest payments, in an attempt to report its FCF in more of a consistent manner.

It also is paying around $160 million per year in stock-based compensation. But even with the stock grants, it’s still buying back shares and is reducing its outstanding share count on a net basis.

All of this is in the middle of a tough macro. Which really makes me wonder…how good those results might look in a stronger economy — when there would be more deals getting done and margins would expand even higher?

I’m looking through the dark clouds and seeing a lot of things that I like here. ZoomInfo could be worth a worth a closer look in 2024.

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