Core Insights - Zeta Global (ZETA) is set to report its second-quarter 2025 results on August 5, with expected revenues of $296.4 million, indicating a 30.1% year-over-year growth [1] - The consensus estimate for earnings per share is 14 cents, reflecting a 7.7% increase from the previous year [1] - The company has a negative earnings surprise history, missing estimates in three of the last four quarters with an average negative surprise of 7.7% [2][3] Revenue and Earnings Estimates - The current earnings ESP for Zeta Global is -8.26%, and it holds a Zacks Rank of 5 (Strong Sell) [3] - The consensus estimates for earnings per share have seen downward revisions over the past 60 days, with a decline of 6.67% for the current quarter [2] Market Performance - Zeta Global's shares have declined by 34.8% over the past year, underperforming its industry, which has seen a 62.3% increase, and the Zacks S&P 500 composite, which rose by 17.2% [9] - The stock is currently trading at a trailing 12-month price-to-earnings ratio of 19.74, lower than the industry average of 23.24 [12] Growth Drivers - The company launched AI Agent Studio in Q1 2025, which is expected to capitalize on the rapidly growing generative AI market, projected to grow at a 43.4% CAGR from 2025 to 2032 [5] - Zeta Global's agentic workflows are designed to enhance marketing capabilities, particularly in sectors like BFSI, Retail, and Travel [6] Investment Considerations - Approximately 73% of Zeta's revenue is generated from direct platform advertising, making it vulnerable to economic downturns that may lead to reduced marketing budgets [15] - The company has not paid dividends and does not plan to, which may deter income-seeking investors [18] Final Outlook - Despite potential growth from AI technologies, Zeta Global faces challenges due to anticipated economic slowdowns that could impact revenue generation [19] - The unpredictability of free cash flow and lack of dividends are significant concerns for investors [20]

Financial Data and Key Metrics Changes - In Q1 2025, the company generated revenue of $264 million, up 36% year over year, with adjusted EBITDA of $47 million, up 53% year over year, both exceeding guidance [8][18][20] - The GAAP net loss for Q1 was $22 million, an improvement from $40 million in Q1 2024 [20] - Free cash flow was $28.2 million, up 87% year over year, representing a margin of 10.7% [21] Business Line Data and Key Metrics Changes - Total scaled customer count grew to 548, up 19% year over year, with 159 superscaled customers, an increase of 10% year over year [18][19] - Scaled customer quarterly ARPU was $467,000, up 12% year over year, while superscaled customer quarterly ARPU was $1.4 million, up 23% year over year [19] Market Data and Key Metrics Changes - Six of the company's top ten verticals grew faster than 20% year over year on a trailing twelve-month basis [19] - The direct revenue mix in Q1 was 73%, up from 67% a year ago, resulting in direct revenue growth of 48% year over year [19] Company Strategy and Development Direction - The company is focusing on performance-based outcomes and has seen strong customer commitments, including a two-year agreement with a telecommunications customer that more than doubles their annual investment [9][10] - The launch of AI Agent Studio aims to enhance marketing efficiency and productivity through generative AI tools [11][12] Management's Comments on Operating Environment and Future Outlook - Management noted macro uncertainty but emphasized the company's resilience and strong value proposition, particularly in delivering measurable results for marketers [7][8] - The company is adopting a conservative approach to guidance for the second half of 2025, despite strong first-quarter performance [25][27] Other Important Information - The company is taking significant steps to reduce dilution and stock-based compensation expenses, with a new guidance item for stock-based compensation expected to be $190 million for 2025 [29][30] - The company plans to initiate a new share repurchase authorization after completing the current one, with approximately $38 million remaining under the current authorization [21][30] Q&A Session Summary Question: Progress on OneZeta and cross-sell opportunities - Management indicated that the OneZeta strategy is ahead of schedule, with significant growth in customer commitments and use cases [34][36] Question: Thoughts on macro uncertainty and customer behavior - Management reported no client pauses or exits, maintaining strong demand and confidence in the business [42][44] Question: Independent agency opportunities and market approach - Management noted that independent agencies are onboarded with long-term contracts, providing more visibility and stability compared to agency holdcos [46][49] Question: Vertical market performance and areas of concern - Management expressed initial concerns about the automotive sector but noted unexpected growth, with no disruptions in retail observed [55][58] Question: Generative AI adoption trends - Management reported increased adoption of AI tools, with no signs of pausing initiatives, indicating a positive trend in customer engagement [84][86]

Financial Data and Key Metrics Changes - In Q1 2025, Zeta Global generated revenue of $264 million, representing a 36% year-over-year increase, and adjusted EBITDA of $47 million, up 53% year-over-year, both exceeding guidance [6][17][19] - The GAAP net loss for Q1 2025 was $22 million, an improvement from $40 million in Q1 2024 [19] - Free cash flow for Q1 2025 was $28.2 million, up 87% year-over-year, with a free cash flow conversion of 60% [20][27] Business Line Data and Key Metrics Changes - Total scaled customer count grew to 548, up 19% year-over-year, with 159 superscaled customers, an increase of 10% year-over-year [17][18] - Scaled customer quarterly ARPU was $467,000, a 12% increase year-over-year, while superscaled customer quarterly ARPU was $1.4 million, up 23% year-over-year [18] Market Data and Key Metrics Changes - Six of the top ten verticals grew faster than 20% year-over-year on a trailing twelve-month basis [18] - The direct revenue mix was 73%, up from 67% a year ago, resulting in direct revenue growth of 48% year-over-year [18] Company Strategy and Development Direction - Zeta's strategy focuses on performance-based outcomes and lower funnel marketing, which has contributed to market share gains [6][7] - The company launched AI Agent Studio, a suite of generative AI tools aimed at enhancing marketing efficiency and effectiveness [10][11] - Zeta is actively expanding its agency business, having onboarded two new independent agencies in Q1 and finalizing agreements with two more [12][13] Management's Comments on Operating Environment and Future Outlook - Management noted macroeconomic uncertainty but emphasized the company's resilience and strong performance, raising guidance for Q2 and full year 2025 [5][26] - The company maintains a conservative approach to guidance, reflecting ongoing macro uncertainties while still expecting growth [24][26] - Management expressed confidence in the company's ability to deliver measurable ROI, which has helped maintain a net revenue retention rate of 111% or higher since the IPO [21][22] Other Important Information - Zeta plans to reduce stock-based compensation expense to $190 million for 2025, down from $195 million in 2024, and expects dilution to be 4% to 6% [28][29] - The company reaffirmed its long-term targets, projecting over $2 billion in annual revenue by 2028 with at least a 25% adjusted EBITDA margin [29] Q&A Session Summary Question: Progress on OneZeta and cross-sell opportunities - Management indicated that the OneZeta strategy is ahead of schedule, with significant growth in customer spending and use case expansion [36][37] Question: Insights on macro uncertainty and customer behavior - Management reported no client pauses or exits, with strong performance continuing into Q2 [43][44] Question: Independent agency opportunities and market approach - Management noted that independent agencies provide long-term contracts and visibility, with a focus on platforming the entire agency at once [46][47] Question: Vertical market performance and growth outlook - Management highlighted that automotive and retail sectors are performing well, with no disruptions noted [55][58] Question: Generative AI adoption trends - Management observed increased adoption of AI tools, with no signs of pausing initiatives, indicating a positive trend in revenue from AI adoption [84][85] Question: Future M&A considerations - Management remains open to M&A opportunities but is currently focused on executing the business and share buybacks [94][95]