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Zeta Global Holdings Corp. (ZETA)·Q3 2024 Earnings Summary

Executive Summary

  • Zeta delivered record Q3 revenue of $268.3M, up 42% year over year, with Adjusted EBITDA of $53.6M and 20.0% margin; results were above previously raised guidance and marked the company’s 13th consecutive beat-and-raise quarter .
  • Mix shift toward direct channels accelerated: Direct revenue grew 41% Y/Y and the direct mix expanded to 70% (up 300 bps Q/Q), contributing to lower GAAP cost of revenue Q/Q and operating leverage; Scaled Customer ARPU hit a record $557K (+33% Y/Y) .
  • Guidance raised: Q4 revenue to $293–$297M and FY revenue to $984.1–$988.1M; Q4 Adjusted EBITDA to $64.9–$66.9M and FY Adjusted EBITDA to $187.5–$189.5M; FY FCF raised to $88–$92M .
  • Catalysts: new intelligent mobile product and expanded AI agents, Yahoo partnership, and LiveIntent acquisition integration ahead of schedule; RFP pipeline up ~60% vs 90 days ago, and management is “very comfortable” with 2025 consensus levels (excluding LiveIntent but including political headwind) .

What Went Well and What Went Wrong

  • What Went Well

    • Strong top-line and profitability momentum: revenue +42% Y/Y, Adjusted EBITDA +59% Y/Y, margin +210 bps Y/Y; Free Cash Flow +93% Y/Y, with direct mix at 70% boosting leverage .
    • Strategic wins and partnerships: Yahoo migrating email marketing to ZMP; Snowflake-powered Media Engine; LiveIntent acquisition closed with synergies ahead of schedule; pipeline growth +60% post Zeta Live .
    • Product innovation: launch of intelligent mobile and expanded GenAI agents; management emphasized “must-have Zeta” positioning and version 3 agents adoption across customers .
    • Quote: “Not only did we break the rule of 60 for the first time… we were above the rule of 50 excluding political candidate revenue” — CEO David Steinberg .

  • What Went Wrong

    • GAAP net loss persisted: $(17.4)M (−6.5% margin), driven primarily by $47.2M SBC; SBC materially affects GAAP profitability .
    • Working capital headwinds from agency payment cycles reduced cash conversion (48% FCF/EBITDA; would have been 67% absent ~$10M headwind), and these headwinds are expected to persist with agency growth .
    • Cost of revenue % still elevated vs prior year (39.4% Q3, +50 bps Y/Y), though improved 60 bps Q/Q; integrated mix remains meaningful despite direct shift .
    • Analyst concern: ARPU mix and political contribution; ex-political ARPU growth remains strong (mid-20s), but management flagged advocacy contributions down vs 2022 cycle .

Financial Results

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$188.984 $194.947 $227.839 $268.295
Diluted EPS ($USD)$(0.27) $(0.23) $(0.16) $(0.09)
Adjusted EBITDA ($USD Millions)$33.739 $30.505 $38.539 $53.595
Adjusted EBITDA Margin (%)17.9% 15.6% 16.9% 20.0%
Net Loss Margin (%)(22.8)% (20.3)% (12.3)% (6.5)%

Segment/Mix and Cost Metrics

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Direct Revenue Mix (%)70% 67% 67% 70%
Direct Revenue Growth (Y/Y)———41%
GAAP Cost of Revenue (%)—39.4% 40.0% 39.4%

KPIs

KPIQ3 2023Q1 2024Q2 2024Q3 2024
Scaled Customers (≥$100K TTM)440 460 468 475
Super-Scaled Customers (≥$1M TTM)124 144 144 144
Scaled Customer ARPU ($USD)—$416,000 $479,000 $557,231
Super-Scaled ARPU ($USD)—$1.12M $1.3M $1.6M

Cash Flow Highlights

MetricQ3 2023Q3 2024
Cash from Operating Activities ($USD Millions)$22.828 $34.402
Free Cash Flow ($USD Millions)$13.360 $25.732

Notes:

  • Non-GAAP definitions and reconciliations provided in 8-K press release exhibits .

Guidance Changes

MetricPeriodPrevious Guidance (Midpoint)Current Guidance (Midpoint)Change
Revenue ($USD Millions)Q4 2024$263.0 $295.0 Raised
Adjusted EBITDA ($USD Millions)Q4 2024$59.4 $65.9 Raised
Adjusted EBITDA Margin (%)Q4 2024~21.2% (59.4/280.0 illustrative prior ref) —22.3% Raised
Revenue ($USD Millions)FY 2024$925.0 $986.0 Raised
Adjusted EBITDA ($USD Millions)FY 2024$175.5 $188.5 Raised
Adjusted EBITDA Margin (%)FY 2024~18.6% (175.5/944.6 illustrative prior ref) —19.1% Raised
Free Cash Flow ($USD Millions)FY 2024$85.0 $90.0 Raised

Management also detailed the components of the FY raise: ~$14M LiveIntent stub (Q4), ~$26M higher political candidate revenue, and ~$21M from core Zeta outperformance and Q4 raise .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2024)Trend
AI/Technology initiativesEmphasis on ZMP with AI/data at core; raised guidance amid structural demand and accelerating replacement cycle ; Achieved “Rule of 50” in Q2; raised FY guidance .Launch of intelligent mobile; expanded GenAI agents (version 3) with strong adoption; pipeline +60% post Zeta Live .Accelerating product velocity and adoption.
Partnerships—Yahoo to migrate email to ZMP; ConnectID integration; Snowflake-powered Media Engine .Strengthening ecosystem reach.
Agency channelNew agency customers contributing to visibility; direct mix 67% .Agency-driven shift to direct channels (CTV/online video/mobile); gross margin tailwind; working capital headwind persists .Positive mix; cash conversion headwind ongoing.
LiveIntent acquisition—Closed; synergies ahead of schedule; high gross margin exhaust-rate model; cross-sell underway .Integration momentum; margin accretive.
Political/Advocacy—Political candidate revenue $21M in Q3; Q4 conservatively guided to ~$18M; advocacy mix lower vs 2022 cycle .Elevated in-cycle; normalization expected.
Macro—Post-election certainty unlocking ad dollars; constructive Q4 setup .Tailwind emerging.

Management Commentary

  • “Our momentum can be directly linked to the acceleration of the AI revolution where Marketing is at the forefront… Zeta Marketing Platform is winning in the marketplace and winning big.” — David A. Steinberg, CEO .
  • “Revenue growth accelerated to 42%… operating leverage flowed solidly to the bottom line… our 13th consecutive beat and raise quarter.” — Chris Greiner, CFO .
  • On LiveIntent: “Faster-than-expected synergy recognition… fully integrated into the Data Cloud by month-end… cross-selling already generating revenue.” — David A. Steinberg .
  • On 2025: “We are very comfortable with 2025 consensus revenue growth… effectively 21–22% pro forma, and with Adjusted EBITDA margin and Free Cash Flow estimates.” — Chris Greiner .

Q&A Highlights

  • Publisher Cloud vision: Unified SSP/DSP/Data Cloud to improve publisher yield and monetize with high gross margin on-platform economics .
  • ARPU ex-political: Mid-20s growth ex-political, with ~one-third of growth from channel adoption, use cases, and agency mix; superscale brands up 29% Y/Y .
  • Channel mix and margins: Agencies shifting to direct channels (email +29%, display/video +46%, CTV >150% Y/Y) raised implied gross margins ~100 bps Q/Q; management expects continued moderated improvements .
  • Political seasonality: Q4 contribution lower than Q3 due to fewer weeks; some upside possible as spending trickles in .
  • Cash conversion: Agency payment cycle drove ~$10M working capital headwind in Q3; expected to persist with growth, absent credit issues .

Estimates Context

  • Wall Street consensus via S&P Global for Q3 2024 and forward quarters was unavailable at time of request due to SPGI daily limit; we attempted retrieval but hit the request cap. As a result, we cannot quantify beats/misses versus consensus in this report today.
  • Management stated they are “very comfortable” with 2025 consensus for revenue growth (effectively 21–22% adjusting for political comps and excluding LiveIntent), Adjusted EBITDA margin, and Free Cash Flow .
  • Given the significant raise to Q4 and FY 2024 guidance and Q3 outperformance versus company guidance, Street estimates may need upward revisions in top-line and Adjusted EBITDA; monitor post-print revisions and February guidance update .

Key Takeaways for Investors

  • Momentum intact: Q3 demonstrated both growth and margin expansion, achieving “Rule of 60” with 42% revenue growth and 20% Adjusted EBITDA margin; non-GAAP profitability is scaling while GAAP remains impacted by SBC .
  • Mix tailwinds: Accelerating shift to direct channels (70% mix) and agency adoption of direct (CTV/online video/mobile) support gross margin trajectory and operating leverage .
  • Pipeline and product catalysts: Intelligent mobile and GenAI agents are resonating, fueling a 60% RFP pipeline increase and stronger ARPU; Yahoo and Snowflake deepen go-to-market .
  • LiveIntent adds scale and margin: Integration ahead of schedule with cross-sell already contributing; exhaust-rate model is high gross margin and accretive to platform economics .
  • Political bump vs normalization: Political candidate revenue boosted Q3/Q4; advocacy mix down vs prior cycles, with halo effects expected into enterprise and agency relationships .
  • Cash conversion watch: Agency payment cycles will continue to weigh on working capital; despite this, FY FCF guidance raised to $90M (48% conversion), with prospects for higher conversion as mix evolves .
  • Near-term trade: Positive catalysts include raised Q4/FY guidance, product/partnership momentum, and integration synergies; risk to monitor is GAAP losses from SBC and working capital timing with agency growth .