Zeta Global Holdings Corp Q3 2024 Earnings Call Transcript

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

Question: DJ Heinz - Canaccord Genuity - Analyst : Thanks for all the color on the guidance. I appreciate you breaking all that stuff out and obviously, the agency color as well, super helpful. David, I want to ask about a completely separate topic, which is published or cloud, right? It's newer to the business. Just can you talk a little bit about your vision there, how to think about sizing the potential for that opportunity? I just don't have a good feel for how material that effort might be?

Question: DJ Heinz - Canaccord Genuity - Analyst : Yes. Super helpful color. Chris, maybe a follow-up for you. Can you just help us think about scaled customer ARPU growth? If we were to exclude the political candidate revenue, if we're excluding the agency customers, are maybe looking at them at like a brand level, I mean, obviously, the agencies skew that metric a bit, which is a good problem to have. But just trying to think about kind of underlying trends in customer spend on a cleaner basis if that makes sense?

Question: DJ Heinz - Canaccord Genuity - Analyst : Yeah. Okay. Got it. That's helpful. Thank you, guys. Congrats. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 11, 2024 / 9:30PM, ZETA.N - Q3 2024 Zeta Global Holdings Corp Earnings Call

Question: Arjun Bhatia - William Blair - Analyst : Perfect. Thank you guys and congrats on a very strong quarter here. Maybe if I can start with the agencies. Again, it sounded like the mix shift in terms of the channels the agencies are using is starting to move a little bit more towards direct, which certainly is a big benefit. Can you just talk a little bit about, which channels on the digital side that you're seeing early adoption from? And where kind of we are in that overall journey of agencies moving more and more of their, spend on to the Zeta platform? And then for Chris, maybe you can talk a little bit about where we should think about gross margins going just from that impact?

Question: Arjun Bhatia - William Blair - Analyst : Wonderful. That's great to hear. And thank you for that. And Chris, if I can follow-up on one for you. I saw the guidance for political contribution in Q4 had implied that it might be down from where Q3 shook out. Can you just maybe give a little color on what we should expect in political in the REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 11, 2024 / 9:30PM, ZETA.N - Q3 2024 Zeta Global Holdings Corp Earnings Call fourth quarter? And is that just -- is that conservatism? Or is there kind of anything else that we should be aware of, given the last few election cycles played out for political revenue? Thank you.

Question: Arjun Bhatia - William Blair - Analyst : All right, Understood. Thank you. Congrats to you guys.

Question: Richard Baldry - Roth Capital Partners - Analyst : Thanks. Can you talk about any early feedback you've gotten sort of an open market post the LiveIntent acquisition? And then maybe with that as a backdrop, your cash stepped up significantly even once you pay the cash component of LiveIntent. So how's your appetite looking forward for acquisitions, or how does that play into your back now history of doing sort of buybacks on an ongoing basis? Thanks.

Question: Richard Baldry - Roth Capital Partners - Analyst : Thanks. Congrats on a great quarter.

Question: Ryan MacDonald - Needham & Company - Analyst : Hi, thanks for taking my questions and congrats on a great quarter. Maybe to start on the independent agency channel opportunity that you talked about, obviously, going after about 1,000 of these opportunities and have expanded the sales force. Can you just talk about -- one is, have you won any of these independent agencies thus far? And if so, what do the size potentially or revenue mix of those customers look like when you initially land them? And then just anything you could comment on sort of sort of sales cycles of these types of opportunities relative to, say, the direct business or maybe the top five agency Hold Cos? Thanks.

Question: Ryan MacDonald - Needham & Company - Analyst : Super helpful. Maybe just then on a second question on the LiveIntent business as you start to get that integrated and go-to-market there. Is there any difference in sort of the -- how is the go-to-market motion or the seasonality of that business operates in? Or is that more of a ratable revenue stream that we should expect as we move forward? And then any differences on the margin profile relative to core data? Thanks.

Question: Ryan MacDonald - Needham & Company - Analyst : Excellent. Thanks for the color.

Question: Terry Tillman - Truist Securities - Analyst : Yes. I'll echo congratulations as well. David, Chris and Madison. Some of my questions have been answered. But one of the statistics that I think, David, you had discussed was 60% plus RFP or RFP pipeline growth. I hope I got that right, but from 90 days ago, that seems pretty dramatic. I'm curious if you could kind of double-click on that in terms of is this is the replacement cycle that's accelerating? Or was it some of the sales reps that Chris was talking about that you added and they just have an effect and becoming productive. Maybe the timing is Zeta Live. I just love to unpack that a little bit more because it sounds like that was a standout, and then I had a follow-up for Chris?

Question: Terry Tillman - Truist Securities - Analyst : That's great to hear. And I guess, sorry for my confusion earlier. I guess it's been long earnings -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 11, 2024 / 9:30PM, ZETA.N - Q3 2024 Zeta Global Holdings Corp Earnings Call

Question: Terry Tillman - Truist Securities - Analyst : Well, on the sales reps, one of the questions I think people are going to ask you a lot, it seems like you're at an inflection point here. What about maybe stepping on the gas more in hiring. And I know you're looking for the best of the best. But I think Chris had said about 150 or 155 reps and like up 20% or up 25%. I'm just curious how you're thinking about as you go into the New Year kind of steady growth, potentially if you can find it, pick up the pace of growth. And this long-winded question I'll end it with, does that include the 25 to 30 folks from LiveIntent? Thank you.

Question: Jackson Ader - KeyBanc Capital Markets - Analyst : Thanks for taking our questions, guys. Good evening. Can we actually follow-up really quickly, David, on what you just said about the LiveIntent sales reps. Would the expectation be or I guess, has it been your experience that when you make an acquisition, bring on some salespeople, do they ramp as quickly or as consistently as net new hires that come from other competitors or other areas of software? Or does it take them a little bit longer to get used to selling core data? Thank you.

Question: Jackson Ader - KeyBanc Capital Markets - Analyst : Okay. All right. Great. Got it. And then a quick follow-up on the agencies. I guess I totally understand the leverage and the benefit from like those top five agency Holdcos. But I am curious what kind of multiplier effect to the independent agencies have? And is there like does that multiplier effect in terms of brands that you can attack per agency, does that dwindle as you go out to the long tail of like the 1,000 that you're trying to target? Thank you.

Question: Jackson Ader - KeyBanc Capital Markets - Analyst : Okay. All right, great. Thank you.

Question: Matt Swanson - RBC Capital Markets - Analyst : All right, thank you guys for taking my question and I'll add my congratulations on the quarter. In Rule 60 quarter, it feels weird to be asking about a potential headwind. But across a lot of the advertising ecosystem, we've heard about kind of this political crowding effect for nonpolitical spend, just brands kind of pulling back because the CPMs got higher on political. Do you think there was any headwinds, I guess, to any of the Holdcos or your nonpolitical spend from the ramp-up of political?

Question: Matt Swanson - RBC Capital Markets - Analyst : All right. Thank you. And then second was just on the Data Cloud and really kind of that 360 view of the customer that, you talked about specifically with LiveIntent. Can you just talk about kind of the compounding value of bringing differentiated data sets and how that kind of brings a more

Question: Matt Swanson - RBC Capital Markets - Analyst : Thank you.

Question: Jason Kreyer - Craig-Hallum Capital Group - Analyst : Great. Thank you, guys. Congrats again, I'll echo, great quarter. Just the success you saw in political this season, wondering if you think you can translate that into other verticals or maybe like the broader advocacy spend over time?

Question: Jason Kreyer - Craig-Hallum Capital Group - Analyst : Okay. And then maybe just a follow-up for Chris. Appreciate the color on agencies and how that has impacted that EBITDA to free cash flow conversion. Do you think we're primarily -- like do you think that's trough by now do you think we're through kind of the majority of the headwind there? Because it sounds like you've penetrated the big five agencies reasonably well. And as you go after that mid-market or independent agencies, probably less of that free cash flow conversion or less of that gets trapped in that conversion there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 11, 2024 / 9:30PM, ZETA.N - Q3 2024 Zeta Global Holdings Corp Earnings Call

Question: Jason Kreyer - Craig-Hallum Capital Group - Analyst : All right, got it. Thank you.

Question: Elizabeth Porter - Morgan Stanley - Analyst : Great. Thank you so much. I first wanted to ask about the mobile product, where you highlighted some faster-than-expected traction. And I believe LiveIntent also has a mobile product. So I'd just love to better understand the capability of Zeta's mobile product versus LiveIntent what the

Question: Elizabeth Porter - Morgan Stanley - Analyst : Great. And then just as a follow-up, I wanted to ask about the collective contribution between political and advocacy. I believe last quarter it was referenced that it was less than $10 million collectively between political and advocacy. So is there an update that you could provide for Q3? And then looking ahead, the color on the halo effect was super helpful. And I just wanted to know if there's any cyclicality, to keep in mind for the advocacy group as we think about next year?

Question: Elizabeth Porter - Morgan Stanley - Analyst : Thank you.

Question: Koji Ikeda - Bank of America - Analyst : Yes, thanks for taking the question, guys. Two from me. And the first one, it's about the 2025 commentary, Chris. I totally understand this year is going to be great from a growth perspective. Exit rate, 40%. But then excluding political and inorganic contributions more like 25%. And when we look at the organic side of the performance over the past two quarters, 30%-plus. But when I think about the commentary that you have for 2025 on the organic standpoint, it looks like its low 20s. And so just is there anything we should be aware of in the business or the way you're thinking about the business in 2025 where organic growth wouldn't reach a similar type of performance that we have been seeing here?

Question: Koji Ikeda - Bank of America - Analyst : Yes. Totally get it. And just one follow-up here on LiveIntent. When I look at the acquisition deck, it did mention pro forma revenue around $76 million for this 2024. Any sort of update into the growth rates or growth rates you're seeing there post close? And any sort of purchasing accounting assumptions that we should be thinking about with this acquisition? Thanks guys.

Question: Koji Ikeda - Bank of America - Analyst : Thank you.

Question: Zach Cummins - B. Riley Securities - Analyst : Hi, good afternoon, David and Chris. Congrats on another strong quarter. David, I just wanted to ask about your expanded lineup of Gen AI agents that you rolled out at Zeta Live. I mean can you give us a sense of the interest you've been seeing from both agencies and enterprise clients? And any sort of update adoption trends as you think about expanding out that lineup?

Question: Zach Cummins - B. Riley Securities - Analyst : Understood. And my one follow-up is really around partnership channel. Great to see expanded relationships with Snowflake also a new relationship with Yahoo! But any update you can give us on the system in a greater channel? I know you had plans of building out a practice on that side. So I'm just curious of how you're thinking about that as a lever for growth moving forward?

Question: Zach Cummins - B. Riley Securities - Analyst : Understood. Well, thanks for taking my questions and best of luck with the rest of the quarter.

Question: Clark Wright - DA Davidson - Analyst : Awesome. Thank you. Can you talk about the LiveIntent deal and how this will impact some of the KPIs, like the skilled customer account? And then additionally, do you believe that the 17 times uplift in ARPU from scaled customers to super scaled to be applied to the customers who started with LiveIntent and adopted other Zeta offerings?

Question: Clark Wright - DA Davidson - Analyst : Got it. Thank you. All. My other questions have been answered.

Question: Brian Schwartz - Oppenheimer & Co. Inc. - Analyst : Yes, hi. Thanks for taking my question. I'll just ask one for the sake of time. David, I wanted to ask you where the spending is coming for your new agent studio product that you released. I know you talked to a lot of C-level executives. So as we think about the spending for these type of products and these agent products next year, is it coming out of IT budgets or our customers building a second budget for these AI products? And then talk to us how you can make sure that you can continue to gain share in that one. What is that dynamic? What are you seeing in terms of conversation in regards to the budgeting process for these new Asian products? Thanks.

Question: Brian Schwartz - Oppenheimer & Co. Inc. - Analyst : Thanks for that color. Congratulations on the results.

Question: Ryan MacWilliams - Barclays Investment Bank - Analyst : Hi guys, thanks for the question. Love to hear just how the macro impacted Zeta in the quarter. And I know it's early, but have you noticed any changes from customers post the election in terms of unlocking marketing spend? And any thoughts into your customers' plans for holiday season messaging at this point for the fourth quarter?

Question: Ryan MacWilliams - Barclays Investment Bank - Analyst : Appreciate that. And anything on the holiday season at this point.

Question: Ryan MacWilliams - Barclays Investment Bank - Analyst : Appreciate that. And just on guidance for next year. Have the top five agency Holdco customers talked about their plans for Zeta next year? And would you expect your agency business, to be a stronger contributor to your revenue growth next year compared to this year?