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01/11 03:22
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Zeta's earnings call presents a positive outlook with strong growth metrics, including a 48% increase in direct revenue and significant ARPU growth. The company shows effective cost management with improved EBITDA margins and reduced stock-based compensation. The Q&A session reveals no macro uncertainties and strong demand, further supporting a positive sentiment. However, some caution arises from management's conservative guidance for H2, yet overall, the market is likely to react positively to the robust performance and optimistic outlook, especially given the company's market cap of approximately $3.8 billion.
Revenue $264 million, up 36% year-over-year. The increase is attributed to Zeta's strong performance and market share gains, driven by their focus on delivering measurable ROI and effective marketing solutions.
Adjusted EBITDA $47 million, up 53% year-over-year. The growth is due to improved cost of revenue and operational efficiencies, resulting in expanded adjusted EBITDA margins.
GAAP Net Loss $22 million, improved from $40 million in Q1 2024. The reduction in net loss indicates better financial performance despite ongoing macroeconomic challenges.
Free Cash Flow $28.2 million, up 87% year-over-year, representing a margin of 10.7%. The significant increase in free cash flow is attributed to improved operational performance and cash generation.
Free Cash Flow Conversion 60%, a significant improvement from 45% in Q4 2024 and 50% in Q1 2024. This reflects better efficiency in converting operating cash flow into free cash flow.
Scaled Customer Count 548, up 19% year-over-year. The growth in customer count indicates Zeta's expanding market presence and customer acquisition success.
Super Scaled Customer Count 159, an increase of 10% year-over-year. This growth highlights Zeta's ability to attract larger clients who contribute significantly to revenue.
Scaled Customer Quarterly ARPU $467,000, increased 12% year-over-year. The rise in average revenue per user reflects Zeta's success in upselling and enhancing customer value.
Super Scaled Customer Quarterly ARPU $1.4 million, increased 23% year-over-year. This increase indicates strong performance and value delivery to larger clients.
Direct Revenue Growth 48% year-over-year. The growth in direct revenue is attributed to Zeta's effective marketing strategies and customer engagement.
GAAP Cost of Revenue 39.1%, a 90 basis point improvement sequentially and a 30 basis point improvement year-over-year. The improvement in cost of revenue contributes to better overall margins.
Adjusted EBITDA Margin 17.7%, 200 basis points higher year-over-year. The margin expansion is a result of operational efficiencies and cost management.
2025 Revenue Guidance $1.242 billion, representing a year-over-year growth of 23%. The increase in guidance reflects strong first quarter performance and positive market conditions.
2025 Adjusted EBITDA Guidance $258.5 million, representing a year-over-year increase of 34%. The growth is supported by operational leverage and cost management.
2025 Free Cash Flow Guidance $131.5 million, representing year-over-year growth of 43%. The increase in free cash flow guidance reflects improved cash generation capabilities.
Stock-Based Compensation Expense Expected to be $190 million for 2025, lower than the $195 million in 2024. The reduction in stock-based compensation is part of Zeta's strategy to minimize dilution.
Normal Core Share Count Dilution Expected to be 4% to 6% for 2025, a significant reduction from 15% total dilution in 2024. This reflects Zeta's commitment to reducing dilution and improving shareholder value.
AI Agent Studio Launch: Zeta launched AI Agent Studio, a suite of generative AI tools that enable users to create and activate custom agents for complex marketing tasks.
Agentic Workflows: Introduced agentic workflows that allow marketers to build and customize AI agents for enhanced productivity across the customer journey.
Revenue Growth: In Q1 2025, Zeta generated revenue of $264 million, up 36% year-over-year, indicating strong market positioning.
Customer Acquisition Success: Zeta's solutions helped major clients reduce customer acquisition costs significantly, leading to increased spending commitments.
Free Cash Flow: Free cash flow grew by 87% year-over-year to $28.2 million, with a conversion rate of 60%.
Share Repurchase: Zeta repurchased 1.6 million shares for $25 million, representing 89% of free cash flow generated in the quarter.
Guidance Adjustment: Zeta raised its 2025 revenue guidance to $1.242 billion, reflecting a conservative approach amid macroeconomic uncertainty.
Capital Allocation Strategy: Zeta is focusing on reducing dilution and stock-based compensation, with a new guidance item for stock-based compensation expected to be $190 million for 2025.
Macro Economic Uncertainty: The company acknowledges ongoing macroeconomic uncertainty, which has become more pronounced at the start of the second quarter. This uncertainty could impact business performance and customer spending.
Conservative Guidance Approach: Despite strong first quarter results, the company is adopting a conservative approach to its second half guidance due to potential macroeconomic challenges.
Customer Investment Stability: While customers have not expressed intentions to decrease their investments with Zeta, the company is preparing for a softer macro environment in the second half of the year.
Regulatory and Policy Uncertainty: The company highlights the importance of being aware of regulatory and policy uncertainties that could affect business operations and market conditions.
Supply Chain Challenges: The company did not specifically mention supply chain challenges, but the overall macroeconomic context suggests potential risks in this area.
Competitive Pressures: The company recognizes competitive pressures in the market, particularly as it continues to innovate and deliver measurable results to maintain its market share.
Stock-Based Compensation and Dilution: The company is taking steps to reduce stock-based compensation and dilution, which are important topics for investors and could impact shareholder value.
AI Agent Studio Launch: Zeta launched AI Agent Studio, a suite of generative AI tools that enable users to create and activate custom agents for complex marketing tasks.
Agency Partnerships: Zeta executed and platformed two new independent agencies in Q1 and is finalizing agreements with two additional ones, indicating early traction in a market with over 1,000 potential prospects.
Customer Acquisition Success: Zeta's performance in customer acquisition cost has led to increased commitments from major clients, including a two-year agreement with a telecommunications customer that more than doubles their annual investment.
Q2 2025 Revenue Guidance: Zeta expects revenue of $297 million at the midpoint for Q2 2025, an increase of $2 million from previous guidance.
2025 Revenue Guidance: The 2025 revenue guidance is now $1.242 billion at the midpoint, reflecting a 23% growth.
Adjusted EBITDA Guidance: Adjusted EBITDA guidance for 2025 is increased to $258.5 million, representing a 34% year-over-year increase.
Free Cash Flow Guidance: Free cash flow guidance for 2025 is increased to $131.5 million, representing a 43% year-over-year growth.
Stock-Based Compensation Guidance: Stock-based compensation expense is expected to be $190 million for 2025, lower than the $195 million in 2024.
Long-term Revenue Target: Zeta reaffirms its long-term target of over $2 billion in annual revenue by 2028.
Share Repurchase Program: In Q1 2025, Zeta repurchased 1.6 million shares for $25 million, accounting for 89% of their free cash flow generated in the quarter. They continued to repurchase shares after the close of the quarter, acquiring an additional 1.8 million shares for $21 million between April 1st and April 25th. Zeta has approximately $38 million remaining under their current share repurchase authorization and plans to initiate a new one upon completion.
The earnings call highlights strong financial metrics, an optimistic guidance increase, and strategic advancements like Athena and AI integration. The Q&A section reveals positive analyst sentiment, with confidence in achieving ambitious targets and addressing past challenges. The company's proactive approach to sales and marketing, despite slight margin declines, and the potential for future acquisitions, further support a positive outlook. With a market cap of $3.78 billion, the anticipated stock price movement is expected to be positive, within the 2% to 8% range, driven by strong growth indicators and strategic initiatives.
The earnings call summary highlights strong financial performance with increased revenue, EBITDA, and cash flow guidance. Product development, particularly in AI, shows significant growth and customer adoption. Market strategy includes successful partnerships and expansion potential, while expenses are managed with reduced stock-based compensation. Shareholder return plans are not detailed, but overall, the positive guidance and strategic initiatives suggest a positive sentiment. Despite some unanswered questions, the focus on growth and profitability supports a positive outlook.
Zeta's earnings call presents a positive outlook with strong growth metrics, including a 48% increase in direct revenue and significant ARPU growth. The company shows effective cost management with improved EBITDA margins and reduced stock-based compensation. The Q&A session reveals no macro uncertainties and strong demand, further supporting a positive sentiment. However, some caution arises from management's conservative guidance for H2, yet overall, the market is likely to react positively to the robust performance and optimistic outlook, especially given the company's market cap of approximately $3.8 billion.
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