first of all thank you for your complete and very clear monthly reports. It's always a pleasure to read them. I see that zoominfo has been on your radar for several months but you have never taken any positions. I wish I knew why? Indeed they are showing good growth and higher margins and a better valuation than most of your other positions. Is it just about the narrative of the company and the innovation in this sector?
Thanks for the question. I guess it boils down to not feeling like ZI is better than my current options. A few things make me hesitate:
1) The slight slowdown in organic growth the last couple quarters.
2) My lack of understanding in exactly where they expand beyond their core offering. I'm not clear on how the hiring and/or communications monitoring products become major revenue drivers. They both strike me as niche products rather than must have. With DDOG or CRWD, you just tack on another module. Adding another ZI products seems more like an entirely new purchase than a natural add on.
3) It strikes me as being more acquisitive than adept at its own R&D. I've had some unpleasant experiences with that business model in the past (that's probably a bias, but there you have it).
4) The low NRR compared to other holdings. This year's 116% is a big improvement over 108%, but it still trails all my other names. That dynamic puts more pressure on the "land" part of land and expand. In my opinion, that also makes the law of large numbers a bigger concern in the future as it gets harder to move the needle QoQ.
5) And this might seem odd, but it actually bugs me a little they generate so much profit so early. Most hypergrowth companies this size plow profits back into the opportunities they see for continued expansion. ZI doesn't appear to do that. That makes me question just how long or durable ZI's runway is for continued growth. In that respect, it almost looks like a more mature cash cow than a growth company with room to grow magnitudes larger.
That doesn't mean I'm right on any of this, of course. And it's fair to point out I would likely have a ZI position if I owned say 12-15 stocks. But at 8 I just can't get it over the hump.
Hi StockNovice,
first of all thank you for your complete and very clear monthly reports. It's always a pleasure to read them. I see that zoominfo has been on your radar for several months but you have never taken any positions. I wish I knew why? Indeed they are showing good growth and higher margins and a better valuation than most of your other positions. Is it just about the narrative of the company and the innovation in this sector?
Hi Tyb,
Thanks for the question. I guess it boils down to not feeling like ZI is better than my current options. A few things make me hesitate:
1) The slight slowdown in organic growth the last couple quarters.
2) My lack of understanding in exactly where they expand beyond their core offering. I'm not clear on how the hiring and/or communications monitoring products become major revenue drivers. They both strike me as niche products rather than must have. With DDOG or CRWD, you just tack on another module. Adding another ZI products seems more like an entirely new purchase than a natural add on.
3) It strikes me as being more acquisitive than adept at its own R&D. I've had some unpleasant experiences with that business model in the past (that's probably a bias, but there you have it).
4) The low NRR compared to other holdings. This year's 116% is a big improvement over 108%, but it still trails all my other names. That dynamic puts more pressure on the "land" part of land and expand. In my opinion, that also makes the law of large numbers a bigger concern in the future as it gets harder to move the needle QoQ.
5) And this might seem odd, but it actually bugs me a little they generate so much profit so early. Most hypergrowth companies this size plow profits back into the opportunities they see for continued expansion. ZI doesn't appear to do that. That makes me question just how long or durable ZI's runway is for continued growth. In that respect, it almost looks like a more mature cash cow than a growth company with room to grow magnitudes larger.
That doesn't mean I'm right on any of this, of course. And it's fair to point out I would likely have a ZI position if I owned say 12-15 stocks. But at 8 I just can't get it over the hump.
I hope that answers your question.
Thank you for the complete answer ! This leaves food for thought !