ZETA(ZETA) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2024, the company achieved record revenue of $315 million, representing a 50% year-over-year increase, and record adjusted EBITDA of $70 million, up 57% year-over-year, both exceeding guidance [10][30] - For the full year 2024, revenue surpassed $1 billion, up 38% year-over-year, and adjusted EBITDA was $193 million, reflecting a 49% increase year-over-year [38][30] - The company reported a GAAP net income of $15.2 million in Q4, marking its first positive net income as a public company [38] Business Line Data and Key Metrics Changes - The scaled customer count grew to 527, a 17% increase year-over-year, with a quarterly ARPU of $577,000, up 27% year-over-year [31][33] - Super-scaled customers increased to 148, up 13% year-over-year, with the number of brands spending at least $1 million increasing by 28% year-over-year [32][33] - The direct revenue mix in Q4 rose to 74%, up from 70% in Q3, indicating a shift towards more direct sales [34] Market Data and Key Metrics Changes - Seven of the top ten industries served by the company grew faster than 20% year-over-year, with automotive, consumer and retail, insurance, political and advocacy, and technology and media leading the growth [34] - The dollar value of RFPs reached a record high, up nearly 40% year-over-year, with total pipeline growth of almost 60% [12] Company Strategy and Development Direction - The company aims to achieve over $2 billion in annual revenue by 2028, targeting a 20% organic revenue CAGR from 2024 to 2028 [10][41] - The Zeta 2028 plan includes adjusted EBITDA margin improvement of 580 basis points to at least 25% and free cash flow margin expansion of 700 basis points to at least 16% [11][51] - The company is focusing on an all-in-one marketing platform with AI and data at its core, enhancing customer experiences and driving efficiency [12][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's resilience against macroeconomic challenges, noting no significant client issues [63] - The company anticipates continued strong growth in 2025, guided by a robust pipeline and the successful integration of LiveIntent [54][64] - Management highlighted the foundational role of AI in their platform, with significant adoption and revenue growth driven by AI products [21][19] Other Important Information - The company completed the integration of LiveIntent ahead of schedule, launching the Zeta Direct product, which combines LiveIntent's network with Zeta's Data Cloud [24] - The company has been proactive in addressing allegations from a short seller report, with independent reviews confirming the integrity of its accounting practices [37][38] Q&A Session Summary Question: Can you discuss the macro environment and demand-centric spending for Q1 and 2025? - Management indicated good visibility into Q1 and noted that they have incorporated conservatism into their guidance to account for macroeconomic factors [61][62] Question: What are the initial use cases and adoption feedback for LiveIntent? - Management reported positive initial feedback and highlighted the potential for ARPU growth through new product offerings [66][67] Question: Can you elaborate on the agency business and its growth potential? - Management noted that agencies are increasingly moving brands to Zeta due to profitability and competitive pricing, providing confidence in future growth [72][74] Question: How does Zeta plan to increase wallet share among existing customers? - Management emphasized the importance of the One Zeta initiative and the goal to capture a larger share of customer marketing spend over time [80][81] Question: What is the competitive landscape like, especially with larger players like Meta? - Management stated that they have not seen significant competition from larger players and continue to grow their partnership with Meta [96][100] Question: How is the agency business expected to evolve in the 2028 model? - Management anticipates that the agency business will become a larger part of revenue as they continue to grow their brand strategies [115]