Zeta Global Holdings Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Terrell Tillman - Truist Securities - Analyst : Yeah, David, Chris and Matt, bear with me, I've got my own preamble here. First of all, congrats on the 15th beat and raise quarter. And then also on the color on the second half guidance velocity. That's actually very helpful. My first question relates to like progress on One Zeta in terms of accelerating the cross-sell and use case expansion. I know you all brought in some key leaders recently some talent acquisition, but just maybe an update on One Zeta and how that's tracking. And then I have a follow-up. Thank you.

Question: Terrell Tillman - Truist Securities - Analyst : That's great. Just one question as we think about the growth algorithm, excluding live intent, which I'm sure you'll get some questions on. I'm just curious, how are you thinking about the rest of the year as it relates to scale customers and ARPU from skilled customers?

Question: Jason Kreyer - Craig-Hallum Capital Group - Analyst : David, you had mentioned in your prepared remarks, just maybe more pronounced macro uncertainty at the start of Q2. Maybe you can break that down a little bit, what Zeta is seeing or what Zeta customers are seeing versus the broader macro?

Question: Jason Kreyer - Craig-Hallum Capital Group - Analyst : Perfect. Good to hear. I wanted to also just ask about this independent agent opportunity. curious there if the go-to-market like how the go-to-market with independents is different than holdcos? And then, Chris, in the past, we've dealt with some headwinds to margin and cash flow as you've seen greater opportunities with hold post. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:30PM, ZETA.N - Q1 2025 Zeta Global Holdings Corp Earnings Call So just curious if there's anything we need to think about as you deepen that opportunity with independent agents.

Question: David Hynes - Canaccord Genuity - Analyst : Congrats on the nice quarter. I'm glad to hear April closed equally as strong. David, you gave us some great expansion examples in telco and insurance and finance. If we think about some of the verticals that maybe you're keeping a closer eye on today in this current environment, what are those? And where would the impact show up first, right? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:30PM, ZETA.N - Q1 2025 Zeta Global Holdings Corp Earnings Call Is it in ARPU? Like what are you paying attention to and what are the verticals?

Question: David Hynes - Canaccord Genuity - Analyst : Yes. Yes. Okay. That's all very helpful color. Chris, maybe this is probably not a fair question, given the way you're talking about the business and the optimism going forward. But if growth were to slow to sub-20%, is it right to think that the trade-off would be showing more operating leverage. Maybe you could just talk philosophically with respect to the internal scenario planning that you're doing?

Question: Arjun Bhatia - William Blair & Co - Analyst : Congrats on a strong start to the year. David, I think you were right to point out earlier in the call that you grew through 2020, you grew through the post-COVID, post slowdown. But if I think about the business, it seems like you're in a very different situation now than you were two years ago or five years ago, just the business has grown, you have a lot more growth avenues. So if there is -- in the back half of the year, some macro slowdown. I'm curious what strategies you have at your disposal now that you can maybe undertake to protect the growth rate somewhat, not suggesting that you'd be immune, but I'm sure there's maybe new products or different use cases or different customer types that you can lean into at this point. But I'm curious what that looks like.

Question: Arjun Bhatia - William Blair & Co - Analyst : All right. Yes, perfect. Very helpful. And then one for you, Chris. It's encouraging to see the cash flow conversion get better, obviously something investors have been focused on, but what are you doing actually to drive cash flow conversion higher? And maybe what's still available to get that metric higher through the year?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : I first just wanted to ask on the mix between integrated and direct. The direct growth remained really strong and elevated -- well, it's like integrated just slowed a bit. So I was wondering if there was anything to call out there as it relates to customer changing their mix or agencies that typically spend more on that integrated platform.

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Great. And then just as my follow-up, I wanted to just get more perspective on how you're thinking about the growth opportunity with agencies longer term. I think it was about 20% of the business last year. And given the move more into the independent side is to -- could we start to think about the agency business as being a majority piece of the business in the not-too-distant future? And then any more in term changes to be thinking about as it relates to the cohort in 2025. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:30PM, ZETA.N - Q1 2025 Zeta Global Holdings Corp Earnings Call

Question: Ryan MacDonald - Needham & Company - Analyst : Congrats on a nice quarter. David, curious to know about how the generative AI adoption continues to trend throughout Q1, particularly with the launch of [agent Studio]. And as you think about within this environment, are you seeing maybe a tighter budgetary environment if that happens, being a catalyst for faster adoption of AI agents doing more with less? Or do you think this causes maybe more of a pausing on some AI initiatives? What's the sense you're getting from your customers?

Question: Ryan MacDonald - Needham & Company - Analyst : Super helpful color. Chris, maybe for you as a follow-up. I noticed that in the updated guidance that the expectation for LiveIntent didn't really change much. I know it's obviously a small portion of the business relative to the overall size, but is there any reason to believe that, that business acts differently or would be more or less resilient than the core business to the extent you have that visibility, given how new it is?

Question: Richard Baldry - ROTH Capital Partners - Analyst : So you're seeing the agencies mix move overall from indirect to direct. I'm curious, is that because some of their brands are maturing moving along that or as they're onboarding new brands, are they bringing them on also more direct given they've the experiences they've had with initial clients?

Question: Richard Baldry - ROTH Capital Partners - Analyst : Right. And given the strength strategically of the LiveIntent acquisition, curious your thoughts overall on M&A as you go forward. You've been using a lot of free cash flow to do buybacks. But are there other tuck-in technologies or channels that you'd still like to be adding to the suite of offerings?

Question: Matthew Swanson - RBC Capital Markets - Analyst : Yes, my congrats on the quarter. It's not too much trouble, another macro one. I guess typically in a macro downturn, we see the expand motion come easier than land, right, because your existing customers already get the ROI joke and story. Throughout those 2020 and 2022 period, did you see any difference in mix where maybe it was easier to focus on ARPU than the new lands? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:30PM, ZETA.N - Q1 2025 Zeta Global Holdings Corp Earnings Call

Question: Matthew Swanson - RBC Capital Markets - Analyst : That's really helpful. And then I know previously, when you've talked about guidance, you've mentioned the Zeta Economic Index is something that you guys look at as a barometer of health. Is that still a good way to think about for us to keep an eye on to think about the overall, I guess, macro environment as it relates to your business throughout the year?

Question: Jackson Ader - KeyBanc Capital Markets - Analyst : David, can I just confirm, did you say that you've been fielding calls from people interested in buying Zeta the company or buying Zeta's software?

Question: Jackson Ader - KeyBanc Capital Markets - Analyst : Understood. Second question, a little bit maybe capital allocation was, right? So the idea that you're looking to buy back more shares, $25 million a quarter, you have $30 million --or $30 million, $40 million left. And coupled with the comment that you continue to spend money on innovation, but why spend the $25 million, $30 million, $40 million buying back a relatively small number of your shares each quarter? If you are seeing a direct correlation to the amount of money you were spending on innovation, driving revenue growth.

Question: Koji Ikeda - BofA Global Research - Analyst : I wanted to go back to the commentary on the demand environment and the guidance and the conservatism in the guidance. And so loud and clear, you guys aren't seeing any change in the demand environment. And it sounds like the conversations you're having with customers are really good. And I totally get the conservatism. I really do appreciate all the color that you gave on the call in the prepared remarks about the guidance. But I'm just curious, it feels like something outside of just the high-level macro uncertainty is informing the more conservative second half. And so if you could if you could share what are you seeing? Or maybe the better question is, what are you not seeing out there that is tilting you more conservative in the second half?

Question: Koji Ikeda - BofA Global Research - Analyst : Got it. And maybe just a quick follow-up here. On the ARPU front, we did notice that sequential decline. I heard you on the prepared remarks, LiveIntent is playing a factor there. Presumably, there's some political -- postpolitical cycle deflation in ARPU happening there, but I just wanted to be sure there isn't anything else to call out in that ARPU number for the first quarter.

Question: Brian Schwartz - Oppenheimer & Co Inc - Analyst : David, I wanted to circle back on the AI Agent Studio product. Just wanted to ask you what you're seeing in terms of consumption trends. Are the early customer adopters? Are they fully scaled in production with Agentic AI and they're coming back to buy more from you? Or is it still early in most arts and piloting the deployments?

Question: Brian Schwartz - Oppenheimer & Co Inc - Analyst : David. And then the follow-up I have for Chris, what can you share with us from what you're seeing in the chips in terms of the leading indicators? Just thinking about your pipeline, maybe the rate of RFPs, the cadence of conversions, the size of your lands, how have they been trending in Q1

Question: Zach Cummins - B. Riley Securities - Analyst : David and Chris. Chris, I wanted to start off. I don't think I saw it in your script or within the presentation, but in terms of all the new scaled customers added here in Q1, is it fair to assume essentially all of those are from the organic business rather than from any live intent customers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:30PM, ZETA.N - Q1 2025 Zeta Global Holdings Corp Earnings Call

Question: Zach Cummins - B. Riley Securities - Analyst : Got it. That's great to hear. And my one follow-up question, maybe geared towards David. I know most of the major holding companies, at least on their commentary in mid-April, with the macro uncertainty, we're talking about leaning into their more durable businesses, which tend to be the data-driven marketing initiatives. So just curious if that's potentially accelerating any opportunity that you see with these agencies? Or just any update around transits conversations with major holding companies?

Question: Gabriela Borges - Goldman Sachs - Analyst : David, I wanted to ask you a little bit about what you're seeing with replacement cycles for some of the marketing cloud competitors that have talked about having their RNA strategies. Just curious if you're seeing a continuation in the acceleration trend that you've talked about previously and if there's any other color you had out here. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:30PM, ZETA.N - Q1 2025 Zeta Global Holdings Corp Earnings Call

Question: Clark Wright - D.A. Davidson & Co - Analyst : Awesome. There's been some recent events within the walled garden. I was wondering if you could talk about maybe the opportunity that a fragmented ecosystem might have for Zeta, especially with global agencies since they typically start with social media at their first use case.

Question: Clark Wright - D.A. Davidson & Co - Analyst : Got it. And then as a follow-up here, you talked about multiple multiyear deals. Can you talk about maybe the change in duration of contracts that you've seen over the last few years? And what do you expect and which is implied by the guide I said you first?

Question: Clark Wright - D.A. Davidson & Co - Analyst : Awesome. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:30PM, ZETA.N - Q1 2025 Zeta Global Holdings Corp Earnings Call