Sign in

You're signed outSign in or to get full access.

ZG

Zeta Global Holdings Corp. (ZETA)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 revenue grew 24% year over year to $195.0M, with Adjusted EBITDA up 27% to $30.5M (15.6% margin). Results exceeded the company’s Q1 guidance for both revenue and Adjusted EBITDA, and management raised guidance for Q2 and full-year 2024 .
  • Customer quality and expansion accelerated: super‑scaled customers (>$1M TTM) rose by a record 13 q/q to 144, and scaled customer ARPU grew 11% y/y; however, super‑scaled ARPU declined 3% y/y and direct mix fell to 67%, pressuring gross profitability vs. last year .
  • Management cited earlier‑than‑expected recoveries in automotive and insurance, rapid agency ramp, and strong AI product traction (intelligent agents, GenAI) as key drivers; the direct revenue mix is expected to trough in Q1 and improve over 2024 as agencies migrate to Zeta‑owned channels .
  • Guidance raised: Q2 revenue to $210–$214M and Adjusted EBITDA to $35.3–$35.8M; full‑year revenue to $895–$905M and Adjusted EBITDA to $170–$172M; FCF guide maintained at $75–$85M. Political spend assumptions unchanged at $15M for 2024, implying potential upside if spend trends exceed plan .

What Went Well and What Went Wrong

  • What Went Well

    • Beat-and-raise quarter: Revenue ($195.0M) and Adjusted EBITDA ($30.5M) exceeded the prior guide ($185–$189M revenue; $28.8–$29.3M EBITDA), and guidance was raised across Q2 and FY24 .
    • Strong customer expansion and AI traction: Super‑scaled customers jumped by a record 13 q/q to 144; scaled ARPU +11% y/y; over 300 intelligent agents built, with an internal example cutting campaign workload by 70% (~400 hours/month) .
    • Early rebound in auto/insurance and accelerating agency ramps: Both verticals returned to growth ~90 days sooner than expected; management now embeds double‑digit growth for the two combined in 2024; visibility improved via new contracts and late‑stage pipeline .
    • Quote: “Growth catalysts are showing green shoots… creating deeper and stickier relationships with our enterprise and new agency customers.” – CFO Chris Greiner .

  • What Went Wrong

    • Mix and margin headwinds vs. last year: Direct platform revenue mix declined to 67% (from 73% in Q4’23), and GAAP cost of revenue rose 490 bps y/y to 39.4% (though improved 80 bps q/q); super‑scaled ARPU fell 3% y/y .
    • GAAP loss remains sizable due to stock‑based compensation: GAAP net loss was $39.6M in Q1 (includes $52.6M of SBC) .
    • Political revenue assumptions unchanged: FY24 political candidate revenue held at $15M (2Q $2M, 3Q $5M, 4Q $8M), leaving limited upside embedded from that vector; collection cycles for newer agencies can gate FCF timing .

Financial Results

MetricQ3 2023Q4 2023Q1 2024
Revenue ($M)$189.0 $210.3 $194.9
GAAP Net Loss ($M)$(43.1) $(35.3) $(39.6)
GAAP Diluted EPS ($)$(0.27) $(0.22) $(0.23)
Adjusted EBITDA ($M)$33.7 $44.8 $30.5
Adjusted EBITDA Margin (%)17.9% 21.3% 15.6%
GAAP Cost of Revenue (%)38.9% 40.2% 39.4%
Cash from Operations ($M)$22.8 $27.0 $24.7
Free Cash Flow ($M)$13.4 $18.2 $15.1

Channel mix and KPIs

KPI / MixQ3 2023Q4 2023Q1 2024
Direct Platform Revenue Mix (%)70% 73% 67%
Scaled Customers (#)440 452 460
Super‑Scaled Customers (#)124 131 144
Scaled Customer ARPU (Quarterly, $K)$418 $454 $416
Super‑Scaled ARPU (Quarterly, $M)$1.31 $1.31 $1.12

Q1 2024 actuals vs Q1 company guidance (from 2/27/24)

MetricCompany Guidance (2/27)ActualVariance
Revenue ($M)$185–$189 $194.9 +$5.9M vs high end
Adjusted EBITDA ($M)$28.8–$29.3 $30.5 +$1.2M vs high end

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q2 2024$204 midpoint $210–$214 (mid $212) Raised (+$8M at midpoint)
Adjusted EBITDA ($M)Q2 2024$34.2 midpoint $35.3–$35.8 (mid $35.5) Raised (+$1.3M at midpoint)
Revenue ($M)FY 2024$875 midpoint $895–$905 (mid $900) Raised (+$25M at midpoint)
Adjusted EBITDA ($M)FY 2024$166 midpoint $170–$172 (mid $171) Raised (+$5M at midpoint)
Free Cash Flow ($M)FY 2024$75–$85 $75–$85 Maintained

Context: Political candidate revenue assumptions remain $15M for FY24 (2Q $2M, 3Q $5M, 4Q $8M) and were not a driver of the raise .

Earnings Call Themes & Trends

TopicQ3 2023 (Prev‑2)Q4 2023 (Prev‑1)Q1 2024 (Current)Trend
AI / GenAI (Intelligent Agents)Building awareness and platform intelligence; strong demand for ZMP Launching Intelligent Agent Composer; monetization vectors outlined 300+ agents built; 70% workload cut in example; AI central to wins Accelerating
Agency HoldCosNew agencies starting on social; mix impact to margins Framework: migrate agencies from integrated to direct; gross margin bottom seen in Q4 Working with 5 largest holdcos; direct mix expected to rise from Q1 low Positive mix shift ahead
Automotive & InsuranceHeadwinds continued in 2023 Expected to return to growth in 2024 Returned to growth 90 days earlier than expected; DD growth embedded Improving
Mobile—Mobile as next $100M+ business; roadmap to integrate and monetize Product in production by mid‑2024; meaningful revenue expected in 2025 Emerging
Political/AdvocacyBuilding into 4Q cycles FY24 assumption $15M; advocacy drafts political Guide unchanged; pipeline building, activity later in summer Seasonal tailwind later
Cookie Deprivation/Email Deliverability—Changes favor Zeta’s first‑party data and infra readiness Continued positioning benefit Tailwind
System Integrators (SIs)—Advanced discussions; impact more 2025+ Deals entering pipeline; still >90% seller‑sourced today Building
CTVScaling across channels +30% q/q in Q4; 2024 poised for good year Low‑40% growth cited across channels in Q1 commentary Solid

Management Commentary

  • CEO framing: “Our strong competitive position combined with structural demand drivers give us confidence to raise our outlook.” – David Steinberg .
  • AI product traction: “Our intelligent agents are becoming an enterprise's virtual data scientists… saving our team 400 hours of work per month.” – David Steinberg .
  • Agency strategy: “Agencies are pivoting to Zeta's platform… identify new audiences… deterministic people‑based measurement… drive better outcomes and prove ROI.” – Chris Greiner .
  • Mix and margins: “Direct revenue mix in the first quarter at 67% is going to be the low point… cost of revenue was 39.4%… an improvement of 80 basis points q/q.” – Chris Greiner .
  • Guidance philosophy: “We’re increasing our revenue and adjusted EBITDA outlook for each quarter in 2024… none of the increase is attributable to higher political candidate revenue assumptions.” – Chris Greiner .

Q&A Highlights

  • Agency ramp and mix migration: Management expects a similar trajectory as the first large agency holdco (from ~7% direct mix in Year 1 to >70% by Year 3), implying improving direct mix from the Q1 low of 67% .
  • AI agent adoption: Over 300 agents built; customers “really using it,” driving platform utilization and revenue; Zeta positions as “first marketing cloud to market with build‑your‑own‑agent” .
  • Mobile monetization timeline: Product targeted to be production‑ready by mid‑2024; meaningful revenue contribution expected next year; management sees mobile as the next $100M business after CTV .
  • Gross margin outlook: Q4 likely marked the bottom; path upward depends on agency migration to direct channels, vertical recoveries (auto/insurance), and political/advocacy mix .
  • Pipeline and verticals: Auto and insurance returned to growth ~90 days early; double‑digit combined growth embedded for 2024; multiple top verticals growing >30% y/y .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q1 2024 were unavailable due to a temporary data access limitation today; as a result, we cannot provide “vs. Street” comparisons in this report.
  • However, results exceeded the company’s Q1 guidance on both revenue ($194.9M vs. $185–$189M) and Adjusted EBITDA ($30.5M vs. $28.8–$29.3M), and management raised Q2 and FY24 guidance accordingly .

Key Takeaways for Investors

  • Mix inflection ahead: Expect direct platform mix to improve from the Q1 trough (67%) as agency cohorts migrate to Zeta‑owned channels, supporting gross margin recovery and EBITDA leverage through 2024 .
  • Growth durability: Early rebounds in auto/insurance, strong enterprise expansions, and multiple channels (CTV, mobile pipeline) support sustained 20%+ growth and raised FY24 guidance (revenue mid $900M; EBITDA mid $171M) .
  • AI as a revenue driver: Intelligent agents and GenAI capabilities are moving beyond efficiency to monetizable modules, increasing platform stickiness and ARPU over time .
  • Cash generation intact: Q1 FCF of $15.1M; FY24 FCF guide unchanged at $75–$85M despite longer agency collection cycles; management notes potential to gravitate to high end of range .
  • Catalysts to watch: Agency mix migration pace, vertical momentum (auto/insurance), political/advocacy ramp in 2H, mobile product launches, and any SI‑driven deal flow .
  • Risk checks: SBC remains a GAAP loss headwind; integrated mix pressures gross margins; execution risk in migrating agencies and scaling new products (mobile, agents) .
  • Stock narrative: A beat‑and‑raise quarter with visible catalysts (AI, agency migration, vertical recoveries) and reaffirmed FCF conversion should be supportive near term; medium‑term thesis centers on sustained 20%+ growth, margin expansion via mix, and AI monetization .

Additional Notes

  • Other Zeta press releases in Q1 2024: None located in the Jan–Mar 2024 window within the corpus searched [press releases list returned none].
  • Prior quarters used for trends: Q3 2023 and Q4 2023 earnings materials were reviewed for comparison and thematic continuity .