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01/11 03:18
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Revenue $337 million, up 28% year-over-year excluding political and LiveIntent. This represents an acceleration in growth from Q2. The increase is attributed to leadership in AI-powered marketing and strong customer adoption.
Adjusted EBITDA $78 million, up 46% year-over-year. This growth reflects improved profitability and operational efficiency while investing in AI leadership.
Free Cash Flow $47 million, up 83% year-over-year, representing a margin of 14%. This is the highest free cash flow margin achieved, driven by operational leverage and revenue growth.
Scaled Customer Count 572, up 20% year-over-year. Growth driven by cross-sell initiatives and the OneZeta initiative.
Super-Scaled Customer Count 180, up 25% year-over-year. Growth attributed to broad-based industry verticals and cross-sell of LiveIntent customers.
Scaled Customer Quarterly ARPU $579,000, up 4% year-over-year or 13% when adjusting for political candidate revenue. Growth driven by increased customer spending.
Super-Scaled Customer Quarterly ARPU $1.6 million, up 1% year-over-year or 12% excluding prior year political candidate revenue. Growth driven by higher customer engagement and spending.
Net Cash Provided by Operating Activities $57.9 million, up 68% year-over-year. Growth driven by improved operational efficiency and revenue growth.
GAAP Net Loss $3.6 million, an improvement from a loss of $17.4 million in the third quarter of 2024. Improvement driven by reduced acquisition-related expenses and operational efficiency.
Athena AI: Launched as an AI conversational superintelligent agent, Athena acts as a real-time voice-activated command center for Zeta's marketing platform. It simplifies operations by allowing users to plan, execute, analyze, and optimize in plain English. Athena is expected to be in client beta by Q4 2025 and fully production-ready by Q1 2026.
Zeta Live Event: The fifth annual Zeta Live event saw a 35% increase in attendance, with over $100 billion in annual marketing spend decision-makers present. The event generated a strong pipeline, aiming to close over $100 million in incremental business.
Revenue Growth: Q3 revenue reached $337 million, up 28% year-over-year excluding political and LiveIntent contributions. Adjusted EBITDA grew 46% year-over-year to $78 million, and free cash flow increased 83% year-over-year to $47 million.
Customer Expansion: Scaled customer count grew to 572, up 20% year-over-year, with super-scaled customers increasing by 25% to 180. Customers adopting multiple use cases generate over 3x the revenue of single-use case customers.
Marigold Acquisition: Zeta is on track to acquire Marigold's enterprise software business by the end of 2025. This acquisition will add over 100 enterprises, including 20 of the top 100 advertisers in North America, and enhance Zeta's data cloud and AI capabilities.
Regulatory Risks: The company acknowledges risks and uncertainties related to forward-looking statements, including regulatory hurdles that may impact financial outlook, business plans, and objectives.
Acquisition Integration Challenges: The acquisition of Marigold’s enterprise software business presents potential challenges in integration, including aligning teams, systems, and customer bases, which could impact operational efficiency and strategic goals.
Economic and Market Conditions: Economic uncertainties and market conditions, such as variability in customer spending and agency payment cycles, could affect revenue growth and cash flow.
Competitive Pressures: The company faces competition from peers with legacy tech debt and other AI-powered marketing platforms, which could impact its market share and growth.
Supply Chain and Operational Risks: Longer agency payment cycles and increased costs in display and video channels could strain operational cash flow and profitability.
Strategic Execution Risks: The success of new initiatives like Athena and OneZeta depends on customer adoption and execution, which, if not achieved, could hinder growth and ROI.
2025 Revenue Guidance: Raised by $11 million at the midpoint to $1.275 billion, representing 26% year-over-year growth excluding political and LiveIntent.
2026 Revenue Outlook: Initial guidance set at $1.54 billion, representing 21% growth on 2025 guidance. This is an organic-only view and does not include Marigold.
2025 Adjusted EBITDA Guidance: Increased to $273.7 million at the midpoint, up $9 million from prior guidance, representing a 42% year-over-year increase at a margin of 21.5%.
2026 Adjusted EBITDA Outlook: Guided to $354 million, representing a 23% margin and a 150 basis point improvement year-over-year.
2025 Free Cash Flow Guidance: Increased to $157.4 million at the midpoint, up $15 million from prior guidance, representing 71% year-over-year growth and a conversion of 57% of adjusted EBITDA.
2026 Free Cash Flow Outlook: Guided to $209 million, representing a 14% margin and a 59% conversion of adjusted EBITDA.
Athena AI Platform: Currently in internal beta, expected to enter client beta by the end of Q4 2025, and fully production-ready by the end of Q1 2026.
Marigold Acquisition: Expected to close by the end of 2025. Contributions from Marigold are not included in 2025 or 2026 guidance. Post-acquisition guidance will be provided upon closing.
2026 Political Candidate Revenue: Assumed to be $15 million, which is 2x the midterms in 2022.
Share Repurchase: During the third quarter, we repurchased 1.7 million shares for $28 million and have repurchased 6 million shares for $85 million year-to-date. We also continue to make significant progress in reducing dilution and stock-based compensation expense. Just like the second quarter, in the third quarter, we had 0 net dilution and year-to-date, our dilution is 1.6% as of September 30. We remain on track to achieve both our 4% to 6% normal course dilution target in 2025 and our $190 million equity compensation expense target even when factoring in the equity we anticipate issuing for the Marigold acquisition.
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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