Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Zeta Global Holdings Corp (ZETA, Financial) reported a 33% year-over-year revenue increase to $228 million for Q2 2024, marking the fastest growth rate since going public.
- The company achieved an adjusted EBITDA of $38.5 million, up 44% year-over-year, with an expanded margin of 16.9%.
- Zeta Global Holdings Corp (ZETA) raised its full-year 2024 revenue outlook by $25 million to $925 million, indicating a 27% year-over-year growth.
- The company's AI-driven marketing technology is gaining traction, with significant adoption among enterprises seeking improved productivity and personalized marketing at scale.
- Zeta Global Holdings Corp (ZETA) is leveraging partnerships, such as with Amazon's Bedrock platform, to enhance its AI capabilities and expand its market reach.
Negative Points
- The company's GAAP net loss for Q2 2024 was $28 million, which includes $52 million of stock-based compensation.
- Higher cost of revenue year-over-year, driven by channel mix, including rapid growth in social channels, impacted gross margins.
- Despite strong revenue growth, the company faces challenges in maintaining consistent gross margins due to the mix of direct and integrated revenues.
- The political and advocacy revenue, while increasing, remains a small portion of overall revenue, contributing less than $10 million in Q2.
- Zeta Global Holdings Corp (ZETA) continues to navigate the complexities of sales cycles and customer onboarding, particularly with agency clients, which can impact cash flow timing.
Q & A Highlights
Q: Were there any new agency customers added during the quarter, or are these all brand expansions within the existing base of agencies? Is there any seasonality of brand additions with these agency partners?
A: These are expansions within the existing five agency Holdcos, but new agencies added over the last six months are scaling rapidly. The ARPU growth of 22% from existing customers shows how well our AI, data, and software are working. Seasonality depends on the brand, with some increasing in the fourth quarter around the holiday season, others in the first quarter, and some in the third quarter around back-to-school.
Q: Can you discuss the Gen AI traction you're seeing? Is it driving more consumption revenue or creating conversations to use other modules? How involved is Gen AI in RFPs for replacements?
A: The vast majority of our customers are actively using our Gen AI products, contributing to the 22% ARPU growth. While not directly monetized yet, Gen AI is responsible for our 33% growth rate. Almost every RFP now includes an AI component, and we are winning a high percentage of these due to our AI capabilities.
Q: What are the largest pain points causing the accelerated shift to Gen AI, and how long before personalized marketing becomes an achievable goal with your CDP?
A: The biggest pain point in marketing is eliminating non-ROI marketing. AI allows us to target individuals with high intent and inclination to buy, increasing ROI. We are already doing one-to-one marketing at scale, using 5,000 to 7,000 data signals to target individuals. While not fully there yet, we are well on our way to achieving personalized marketing.
Q: How is AI influencing the growth trajectory? Is it related to RFP pipeline activity, generating more wallet share, or onboarding new customers faster?
A: AI is influencing all aspects: winning more RFPs, scaling new customers faster, and growing existing customers. AI is informing which channels to use in an omnichannel strategy, leading to balanced growth across channels like CTV, email, and display.
Q: Can you comment on the current competitive landscape, especially considering a key competitor is winding down some of their ad tech assets?
A: We have a competitive advantage due to our platform's architecture, with data and AI native to the application layer. This allows us to deliver intelligence faster and in real-time, creating a better ROI. While competitors try to catch up, we are moving to the next generation and are excited about our technological advancements.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
