ZoomInfo's S-1 posted an EBITDA profit and a GAAP loss

The record

ZoomInfo Technologies Inc. filed a Form S-1 on 26 February 2020 ahead of its Nasdaq listing under the ticker ZI. The registration statement discloses revenue of $144.3 million for fiscal 2018 and $293.3 million for fiscal 2019, alongside a GAAP net loss of $28.6 million and $78.0 million in those same years. The filing index confirms this accession record. The filing also reports adjusted EBITDA, the company's own non-GAAP earnings measure before interest, taxes, depreciation and amortization, of $86.2 million in 2018 and $173.2 million in 2019. It names sponsors including TA Associates and The Carlyle Group, describes the February 2019 acquisition of Zoom Information, Inc. by DiscoverOrg, and sets out an umbrella-partnership structure with a tax receivable agreement covering 85 percent of certain tax benefits.

What the documents establish

The two profitability figures answer different questions, and the filing itself explains why they diverge: interest expense on the company's debt totaled $58.2 million in 2018 and $102.4 million in 2019, and amortization of acquired technology and other intangibles from the DiscoverOrg-ZoomInfo combination added tens of millions more each year. A GAAP net loss driven by leverage and purchase-accounting amortization is a different fact than an operating loss, and the filing's adjusted EBITDA margin, roughly 59 percent of revenue in 2019 on the company's own definition, is a provider-defined figure that excludes exactly those costs. Both numbers are verified filing disclosures; neither substitutes for the other.

The operating read

A private-equity-owned company arriving at an IPO with a GAAP loss and a large adjusted EBITDA is not a contradiction once the debt and acquisition history are read alongside the income statement; it is the arithmetic of a leveraged buyout structure working as designed. Editorially, a reader should treat the adjusted EBITDA figure as management's own construct, useful for understanding underlying cash generation, but not as a substitute for the audited net loss when assessing the company's actual reported earnings during the private-equity ownership period.

What to check before you decide

Before comparing a leveraged company's adjusted metrics to a peer's GAAP results, check the following.

• Does the adjusted EBITDA definition exclude interest, taxes, depreciation and amortization only, or does it add back other operating costs as well?
• How much of the company's debt was used to fund acquisitions or sponsor distributions rather than operations?
• Does the tax receivable agreement or Up-C structure route future cash to pre-IPO owners in a way not obvious from the income statement alone?

ZoomInfo Technologies is unrelated to Zoom Video Communications, the videoconferencing company that filed its own S-1 the prior year; the two names describe different businesses with different filings.