ZETA(US:ZETA)2025-08-05 21:30Financial Data and Key Metrics Changes - In Q2 2025, revenue reached $308 million, representing a 35% year-over-year increase, while adjusted EBITDA grew by 52% to $59 million, both exceeding guidance [5][13][20] - First half revenue growth was 27% when excluding LiveIntent and political contributions, with free cash flow conversion at 59%, significantly ahead of previous targets [14][25] - GAAP net loss improved to $12.8 million from $28.1 million in the previous year, with free cash flow of $33.6 million, up 69% year-over-year [20][21] Business Line Data and Key Metrics Changes - The total scaled customer count grew to 567, up 21% year-over-year, with 168 super scaled customers, an increase of 17% [17][18] - Quarterly ARPU for scaled customers increased by 11% to $532,000, while super scaled customer ARPU rose by 19% to $1.6 million [17][18] - The agency business saw a 40% year-over-year increase in the average number of scaled brands per large agency holding company [18] Market Data and Key Metrics Changes - Six of the top ten verticals grew faster than 20% year-over-year, with technology, media, consumer retail, and advertising being the largest contributors [18] - Direct revenue mix increased to 75%, up from 67% a year ago, resulting in a 51% year-over-year growth in direct revenue [19][20] Company Strategy and Development Direction - The company is focused on AI innovation, launching Zeta Answers, a prescriptive AI framework that enhances marketing efficiency [6][8] - The One Zeta initiative aims to accelerate multi-use case adoption, leading to better ROI and customer retention [9][10] - The company is expanding its presence in the public sector, leveraging relationships built through political business [90] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in capturing more market share due to strong AI-driven momentum and a robust sales pipeline [11][23] - The company anticipates revenue of $1.263 billion for 2025, a $21 million increase from previous guidance, with adjusted EBITDA expected to grow by 32% [24][25] - Management highlighted the importance of disciplined capital expenditure and reducing equity dilution as key drivers of financial health [21][25] Other Important Information - Zeta Live, the company's annual conference, will feature prominent speakers and is expected to showcase new product launches [12][13] - The company has repurchased $69 million of its shares year-to-date, with an additional $200 million share repurchase authorization approved [21][22] Q&A Session Summary Question: Interest level from customers regarding new AI module - Management noted good awareness and meaningful uptake of the new AI products, with plans to showcase them at Zeta Live [30] Question: Linearity in the quarter - Management confirmed consistent growth throughout the quarter, with strong performance across key verticals [32][33] Question: KPIs and dials being controlled - Focus is on cost of revenue and expense lines, with strong sales productivity driving margin improvements [41][44] Question: Trends in marketing operations moving in-house - Management indicated that most enterprises still rely on agencies, although testing of AI tools is common [70] Question: Success with independent agencies - Independent agencies are under pressure to partner with Zeta for AI tools, as they cannot afford the investments needed to build AI capabilities [77][79] Question: Growth in customer count - The increase in customer count is attributed to a higher sales force and improved brand recognition [95][96]