Executive Summary

Zeta delivered a record quarter with revenue of $227.8M, up 33% Y/Y, and Adjusted EBITDA of $38.5M (16.9% margin); the company achieved the “Rule of 50” for the first time as a public company and beat its own Q2 revenue/EBITDA guidance materially, citing agency-driven brand adds and strength in insurance/auto as key drivers .
Guidance was raised across Q3 and FY24: Q3 revenue to $237.2–$241.2M and Adjusted EBITDA to $46.8–$47.3M; FY24 revenue to $920–$930M, Adjusted EBITDA to $174.5–$176.5M, and FCF to $80–$90M. Management emphasized high visibility and confidence heading into 2H24 .
KPIs strengthened: Scaled Customers rose to 468, Scaled ARPU accelerated to $479K (+22% Y/Y), and 1/3 of scaled customers now use 3+ channels; cash from operations was $31.1M and FCF $19.8M in Q2 (+51%/+53% Y/Y) .
Near-term stock catalysts: accelerating growth (33% Y/Y), guidance raise, “beat and raise” print, visible AI product momentum (ZOE, Amazon Bedrock) and upcoming mobile offering; watch gross margin mix (integrated/social) and sustained GAAP losses from stock-based comp .

What Went Well and What Went Wrong

What Went Well
- Record revenue and margin expansion: Q2 revenue $227.8M (+33% Y/Y) and Adjusted EBITDA $38.5M (+44% Y/Y) with margin 16.9% (+130 bps Y/Y); CEO: “we have achieved the rule of 50” .
- Agency-led ARPU acceleration and multi-channel adoption: Scaled ARPU $479K (+22% Y/Y), with agency Holdcos expanding from ~12 to 19 brands on average; 1/3 of scaled customers now using 3+ channels .
- Guidance raised on high visibility: CFO cited momentum in insurance/auto and agency social as drivers for the beat and confidence to raise Q3 and FY24 guidance; “visibility into our business is hot” .
What Went Wrong
- Gross margin mix pressure: GAAP cost of revenue rose to 40% (vs. 36.1% in 2Q’23) on faster growth in integrated/social channels, though management notes it is accretive to operating margins .
- Continued GAAP losses: Net loss of $28.1M (–12.3% margin), driven primarily by $52.2M in stock-based compensation despite Y/Y improvement from 2Q’23 .
- Working capital timing with agencies: A ~$5M working-capital headwind persisted as Zeta learns agency payment patterns, though management expressed high collectability confidence .

Financial Results

Metric	Q4 2023	Q1 2024	Q2 2024
Revenue ($USD Millions)	$210.3	$194.9	$227.8
GAAP Diluted EPS ($)	$(0.22)	$(0.23)	$(0.16)
Net Income Margin %	(16.8)%	(20.3)%	(12.3)%
Adjusted EBITDA ($USD Millions)	$44.8	$30.5	$38.5
Adjusted EBITDA Margin %	21.3%	15.6%	16.9%
GAAP Cost of Revenues %	40.2%	39.4%	40.0%

Results vs Company Guidance (Q2 2024):

Revenue: $227.8M vs $210–$214M guidance; beat midpoint by ~$16M (company-stated) .
Adjusted EBITDA: $38.5M vs $35.3–$35.8M; CFO noted ~$3M above midpoint .

Revenue Mix

Mix	Q4 2023	Q1 2024	Q2 2024
Direct Platform (% of revenue)	73%	67%	67%
Integrated Platform (% of revenue)	27% (calc)	33% (calc)	33% (calc)

Customer & ARPU KPIs

KPI	Q4 2023	Q1 2024	Q2 2024
Scaled Customers (≥$100K TTM)	452	460	468
Super-Scaled Customers (≥$1M TTM)	131	144	144
Scaled Customer ARPU ($K, quarterly)	$454	$416	$479
Super-Scaled Customer ARPU ($M, quarterly)	$1.31	$1.12	$1.30

Cash Flow (select)

Metric	Q2 2023	Q1 2024	Q2 2024
Cash from Operating Activities ($M)	$20.6	$24.7	$31.1
Free Cash Flow ($M)	$13.0	$15.1	$19.8

KPIs/Other Operating Data (Q2 2024 commentary)

Integrated/social grew 71% Y/Y; direct growth improved to 20% Y/Y .
1/3 of scaled customers now use 3+ channels; conversations with AI agents rose 300% M/M in June .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($M)	Q3 2024	$230.0 (prior midpoint reference)	$237.2–$241.2	Raised
Adjusted EBITDA ($M)	Q3 2024	$45.3 (prior midpoint reference)	$46.8–$47.3	Raised
Revenue ($M)	FY 2024	$895–$905	$920–$930	Raised
Adjusted EBITDA ($M)	FY 2024	$170–$172	$174.5–$176.5	Raised
Free Cash Flow ($M)	FY 2024	$75–$85	$80–$90	Raised
Political revenue ($M)	FY 2024	N/A	~$15 (maintained)	Maintained

Note: Company does not reconcile forward-looking non-GAAP metrics to GAAP due to uncertainty in reconciling items .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2: Q4’23)	Previous Mentions (Q-1: Q1’24)	Current Period (Q2’24)	Trend
AI/GenAI as core growth driver	AI at center of platform; 10th straight beat & raise; guiding to 20%+ growth	“Actionable intelligence”/GenAI driving growth; raised outlook	“Rule of 50” achieved; Amazon Bedrock partnership; Zeta Economic Index; 400+ AI agents; 300% M/M agent conversations	Accelerating
Agency channel	Direct mix 73%; no specific agency stats	New agency customers driving visibility; direct mix 67%	Holdco brands per agency up from 12→19; integrated/social growth 71% Y/Y; ARPU acceleration	Strong tailwind
Vertical trends	Not detailed	Early signs of recovery	Insurance/auto outpaced 33% company growth; pipeline remains; not yet at peak	Improving
Channel mix (social/integrated vs direct)	Cost of revenue 40.2%	Cost of revenue 39.4%; direct 67%	Cost of revenue 40%; integrated/social growth lifts cost profile but is EBITDA accretive	Mix pressure, EBITDA accretive
Mobile product	N/A	N/A	Mobile debut at Zeta Live (Sept 26); in beta; not in 2024 numbers	Upcoming catalyst
Political/Advocacy	N/A	N/A	Political $1.5M in Q2; FY guide $15M; advocacy mostly “always on”	Seasonal tailwind H2
Privacy/cookies/regulatory	N/A	N/A	Cookie deprecation manageable; Zeta not reliant on 3rd-party cookies; Zeta ID enables attribution	Competitive advantage
Sales motion & RFPs	N/A	Land-expand extend; pilots to scale	CTO/CMO involvement rising; pilots bypassing RFPs; making RFP scopes bigger	Efficient GTM

Management Commentary

Strategic positioning: “Investments we made over the last seven years to put Artificial Intelligence and data at the core of our platform are now helping us accelerate the marketing cloud replacement cycle” — David A. Steinberg, CEO .
Growth drivers: “Two growth catalysts contributed to the beat… growth in insurance and automotive… and our agency business… led to the highest quarterly ARPU growth rate in 3 years” — Chris Greiner, CFO .
Confidence and visibility: “Visibility into our business is hot, and therefore, confidence in our guidance continues to strengthen” — CFO .
Product momentum: “We recently announced an advancement in Gen AI functionality by partnering with Amazon’s Bedrock platform… to create intelligent AI assistants” — CEO ; ZOE/AI agents now 400+ with 300% M/M conversation growth in June .

Q&A Highlights

Agency expansion and ARPU: Most ARPU strength came from adding brands within existing Holdcos; seasonality minimal on brand adds; 12→19 brands per Holdco on average; management expects trend to continue .
Vertical recovery: Insurance and auto grew faster than company average; not yet at prior peaks; pipeline supports further growth .
GenAI adoption and monetization: Vast majority of customers are using GenAI tools; indirect revenue impact via higher consumption and contract expansion; potential direct monetization longer-term .
Mobile roadmap: Mobile CRM product debuting at Zeta Live (Sept 26); in beta; could scale quickly; not included in 2024 guide .
Cookie deprecation: Zeta not reliant on 3P cookies; Zeta ID enables full-path attribution; expects gradual dissipation, not cliff .
Margin and mix: Integrated/social lowers gross margin but is accretive to operating margins; gross margin around 60% for the year with political as a swing factor .
Collections/FCF: Agency cohorts cause timing headwinds (~$5M in Q2), but collectability high; raised FY FCF midpoint to $85M .

Estimates Context

S&P Global (Capital IQ) consensus estimates were unavailable at the time of analysis due to a data access limitation. As a result, Street comparisons cannot be shown. Values retrieved from S&P Global were unavailable at time of request.
Company vs guidance: Zeta reported revenue $227.8M vs $210–$214M guided (≈$16M beat at midpoint) and Adjusted EBITDA $38.5M vs $35.3–$35.8M guided (~$3M beat at midpoint) .

Key Takeaways for Investors

Zeta posted a classic “beat and raise” with accelerating growth (+33% Y/Y), expanded margins (Adj. EBITDA 16.9%), and “Rule of 50” achieved — a strong setup into 2H24 and 2025 planning cycles .
The agency channel is a durable growth lever: brand adds per Holdco are rising (12→19), integrated/social growth is rapid (71% Y/Y), and multi-channel adoption is broadening; while it pressures gross margin mix, it is accretive to operating margins .
Verticals matter: insurance and auto outperformed; continued recovery here can sustain elevated growth above the corporate average .
AI traction is tangible: 400+ AI agents and surging usage (300% M/M in June) underpin ARPU acceleration; Bedrock partnership and ZOE analytics strengthen competitive moat .
Near-term catalysts: Q3/FY24 raised guidance; mobile product launch (Sept 26) could open a new vector of demand; political/advocacy spend adds seasonal upside in 2H .
Watch items: sustained GAAP losses driven by stock-based comp; cost-of-revenue mix near ~40% from integrated/social; agency working capital timing — though collections risk appears low .
Medium-term thesis: platform-centric AI + first-party data advantage, efficient land-expand-go-to-market, and increasing enterprise/CTO engagement support share gains in a marketing cloud replacement cycle .

Appendix: Additional Q2 Press Releases (Q2’24)

ZOE expansion via Amazon Bedrock (Cannes Lions): enhanced GenAI agent capabilities; GA in Q3 2024 .
Board enhancement: Imran Khan elected to Board of Directors .
Forrester study on CLV in the era of AI: highlights strategic need for predictive value orientation .

Zeta Global Holdings Corp. (ZETA)·Q2 2024 Earnings Summary