Zeta Global Holdings Corp. Q3 FY2024 earnings call

• Record third quarter financial results above previously raised guidance, with revenue up 42% YOY and adjusted EBITDA up 59% YOY.
• Raised full-year 2024 revenue outlook to $986 million midpoint, representing 35% YOY growth.
• Strengthened foundation through raising over $900 million in capital, record attendance at Zeta Live event, launch of new intelligent mobile product and next-gen generative AI, expanded partnership with Snowflake, and onboarded Yahoo as a major customer.
• Closed acquisition of LiveIntent with integration underway and synergies realized ahead of schedule.
• Secured multiple seven and eight-figure deals with iconic global retail brands, professional sports leagues, and leading e-commerce companies.
• Deepened relationships with five agency Holdco customers, bringing new brands into direct channels.
• Recognized as a leader in marketing automation software by Forrester and a strong performer in the CDP Wave by Forrester.

In the third quarter, Zeta generated revenue of $268 million, which is a 42% year-over-year increase. Adjusted EBITDA was $54 million, up 59% year-over-year. The adjusted EBITDA margin was 20%, up 210 basis points year-over-year. Revenue contributed significantly to the company's strong financial performance, with the growth driven by various strategic initiatives and client wins.

• Raised full-year 2024 revenue guidance to $986 million midpoint, up $61 million from previous outlook.
• Increased fourth quarter revenue guidance to $295 million midpoint, driven by $14 million from LiveIntent, $10 million in additional political candidate revenue, and $8 million from Zeta's core business.
• Raised full-year 2024 adjusted EBITDA guidance to $188.5 million midpoint, up $13 million from previous outlook.
• Increased full-year 2024 free cash flow guidance to $90 million from $85 million in prior outlook.

• Political revenue cyclicality, as political candidate spending can impact financial results.
• Working capital headwinds from growth with agencies and longer industry payment cycles, which can affect cash flow conversion.
• Risks associated with forward-looking statements and uncertainties that may cause actual results to differ from projections, as outlined in SEC filings.

Q: Please talk about the vision for the publisher cloud and sizing the potential opportunity?

A: David Steinberg mentioned the publisher cloud is a next meaningful growth opportunity, with CTV and mobile scaling quickly. Integrating SSP, DSP, data cloud, and publisher will drive yield and gross margin.

Q: How to think about scaled customer ARPU growth excluding political candidate revenue?

A: Chris Greiner said excluding political candidate revenue, ARPU growth was still mid-20s, with drivers including channel adoption, use case adoption, and agency customer mix.

Q: Talk about agencies, channels early adoption, and gross margins?

A: David Steinberg said agencies are moving more to direct channels like connected TV, online video, mobile. Chris Greiner noted direct revenue mix at 41%, with channels like email, display video, CTV driving mix shift and improving gross margins.

Q: Feedback on LiveIntent acquisition and appetite for acquisitions?

A: David Steinberg said synergy recognition is faster than expected, and Zeta will continue to look for opportunistic acquisitions with great teams, technology, and data.

Q: Independent agency channel opportunity and LiveIntent business integration?

A: David Steinberg said there are executed contracts in the independent agency space, and LiveIntent business is an exhaust rate business with high gross margin, scaling steadily with cross-selling opportunities.

Q: RFP pipeline growth and sales reps?

A: David Steinberg said pipeline is up 60% from 90 days ago, driven by new sales reps, Zeta Live event, and industry recognition as a leader.

Q: Mobile product traction and LiveIntent mobile product?

A: David Steinberg said mobile product is scaling faster than expected, with AI at the heart being a differentiator, and combining Zeta's and LiveIntent's capabilities.

Q: Political and advocacy spend cyclicality?

A: Chris Greiner said political candidate revenue growth is substantial, with advocacy also having a halo effect, but cyclicality exists based on election cycles.

Q: 2025 guidance and LiveIntent growth?

A: Chris Greiner said Zeta is comfortable with 2025 consensus estimates, and LiveIntent has a similar growth rate to Zeta historically, with details to be provided in February.

Q: LiveIntent deal impact on KPIs and ARPU?

A: Chris Greiner said LiveIntent's metrics will be included in February's call, with early reads showing incremental scale customers and ARPU in line with Zeta's existing metrics.

Q: Spending on Gen AI agents and budgeting?

A: David Steinberg said spending on Gen AI agents comes from multiple budgets, with high ROI and stickier clients using CDPs and AI agents.

Q: Macro impact and holiday season messaging?

A: David Steinberg said election certainty has unlocked marketing spend, and Zeta is bullish on Q4 performance with raised full-year guidance.