Zeta Global Holdings Corp Q4 2023 Earnings Call Transcript

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

Question: Ryan MacDonald - Needham & Company, LLC - Analyst : Thanks for taking my questions and congrats on an excellent quarter. David, as we think about in 2024, you talked about some interesting sort of priorities around the strategy and some really interesting product investments as we think about sort of intelligent agent Composer and mobile, the mobile strategy, how do you look at the magnitude of impact or maybe how you're building any impact in terms of expectations into sort of 2024 outlook from contributions from these newer offerings?

Question: Ryan MacDonald - Needham & Company, LLC - Analyst : Really helpful on maybe as a follow-up, Chris, for you. So maybe two topics to talk about with the guidance as well on. So obviously, auto insurance industry's challenge last year. Can you just talk about what you're seeing in terms of sight lines or pipeline building that gives you confidence in maybe stabilization or recovery there this year? And then just curious on the on the conservatism you're building in from the political contributions this year, maybe what you're seeing in the market. Why you felt that $15 million would be the right starting point and maybe potential for upside from that?

Question: Ryan MacDonald - Needham & Company, LLC - Analyst : Thank you so much. Congrats again.

Question: Elizabeth Porter - Morgan Stanley & Co. LLC - Analyst : Hi, thank you so much. I wanted to go back to the example that you provided in mobile. You talked about getting in the technology enhancement salespeople noted that was interesting and it sounds like you may be getting into a new end user there outside of the traditional marketing department. If so, kind of would love to hear who you might expect to compete within the segment? Should we view this as a expander and how you plan on addressing a potentially new buyer segment with an additional wallet opportunity? 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. FEBRUARY 27, 2024 / 9:30PM, ZETA.N - Q4 2023 Zeta Global Holdings Corp Earnings Call

Question: Elizabeth Porter - Morgan Stanley & Co. LLC - Analyst : Great. And just as a follow-up, you I wanted to ask about the sales cycles that you have with working with agencies versus directly with enterprises on one hand, you might have more decision makers sitting at the table. But on the other hand, you have that trusted agency partner. Is there any opportunities for accelerated sales cycles are lengthening sales cycles you as you're working with more agencies?

Question: Elizabeth Porter - Morgan Stanley & Co. LLC - Analyst : Great. 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. FEBRUARY 27, 2024 / 9:30PM, ZETA.N - Q4 2023 Zeta Global Holdings Corp Earnings Call

Question: Jason Kreyer - Craig-Hallum Capital Group LLC - Analyst : Great, thank you. David, I just wanted to ask if you can maybe summarize how the your conversations with customers have evolved around AI over the last couple of quarters and then maybe how you see Zeta's opportunity evolving with that?

Question: Jason Kreyer - Craig-Hallum Capital Group LLC - Analyst : Thank you. I wanted to squeeze in one for Chris. Just on the gross margins, and I know you just talked about agency influence in direct and indirect channel. I think you've appropriately telegraphed kind of the trajectory of gross margins. I just wanted to ask on that is we saw that slide a little bit from Q3 to Q4 as we look into 2024, do you think we've hit a bottom in gross margins? Or do you have an idea will that bottoms out before you kind of get the reacceleration of the direct mix?

Question: Jason Kreyer - Craig-Hallum Capital Group LLC - Analyst : Perfect. Thanks guys.

Question: Koji Ikeda - BofA Securities, Inc. - Analyst : Hey, guys, thanks so much for taking the questions. A couple for me here. First one, I wanted to ask a question about Boomerang customers with you. You guys have been in the market for over a decade now. And I'm sure over those past 10 years plus many customers have tried out the data platform before. But my gosh, this data platform has changed quite a bit since the early days. And so just wanted to hear a little bit about commentary about how customers have come back to date after trying to data before? And what are some of the most common reasons why you seen customers come back?

Question: Koji Ikeda - BofA Securities, Inc. - Analyst : That's super helpful. And a follow-up here, maybe for Chris. As I look at the deck for the fourth quarter and compare against the deck for the third quarter question here, really on stock-based compensation, it looks like it ended up this year about $10 million and the $12 million higher than were on the non IPO side than when it was originally guided to last quarter, and it looks like it's about $10 million higher for 2024. So just really wanted to understand the dynamic. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2024 / 9:30PM, ZETA.N - Q4 2023 Zeta Global Holdings Corp Earnings Call

Question: Zach Cummins - B. Riley Securities, Inc. - Analyst : Hi, good afternoon, David and Chris. Congrats on the strong 4Q and thanks for taking my questions. Chris. My first one is more of just a clarifying question. I believe there is a year-over-year decline in your scale of superscape customer ARPU here in Q4. I'm assuming most of that's related to headwinds with auto and insurance, but just wanted to get some clarity around that and expectations for growth in that metric moving forward.

Question: Zach Cummins - B. Riley Securities, Inc. - Analyst : And my one follow-up question is, most of your growth over the past couple of years has really just been driven by your direct go-to-market motion and investing in that, but it seems you're starting to get more opportunities on the partnership side, especially the system integrators. So just curious of how you're thinking about investments in the direct channel versus maybe leaning into some of these channel partnership opportunities?

Question: Zach Cummins - B. Riley Securities, Inc. - Analyst : Great. Thanks for taking my questions and best of luck for the coming quarter.

Question: Arjun Bhatia - William Blair & Company, L.L.C. - Analyst : Hey guys. Thank you and nice job on a strong Q4 here. And when we kind of talk to customers and agencies throughout the ecosystem. It seems like this CDP layer certainly is an important differentiator to drive more personalization. I know you guys have a pretty strong CDP layers, but can you maybe just talk about when you're going up against are going to customers and our peers, like how much of a a factor is that in deciding to choose data versus some of the other players? And maybe if you could compare and contrast the CDP layer relative to your data capabilities and where customers are placing more emphasis in recent [RFPs]?

Question: Arjun Bhatia - William Blair & Company, L.L.C. - Analyst : Yeah that's clear, super helpful. And if I can maybe follow up again on the some of the agency traction that you're seeing and the mix between direct and indirect. Do you have a sense for some of these newer agencies that have come on. Since you started this initiative, what how their mix is shifting or how they are kind of indicating to you that they may shift the mix in 2024 or are we getting signs that they're shifting more to director's a little bit too early to tell at this point?

Question: Arjun Bhatia - William Blair & Company, L.L.C. - Analyst : Appreciate that. Thank you.

Question: Richard Baldry - Roth Capital Partners, LLC - Analyst : Thanks. First one may or may not even be a question, but I think in the past, I've heard that the average number of people in each RFP was higher. I have a number 17 in my head and if I'm wrong and just disregard, but if it is higher, who would you be seeing sort of fading out of the competition sort of smaller and midsized or larger. And then the second question be around free cash flow. And I came on later. So I'm not sure if this has been addressed, but you know, over this year's guidance and then a 2025 guide that you're ahead of, it generates something close to $200 million in free cash flow. Could you talk maybe about where your priorities are to deploy that either more aggressive buybacks or offensively on acquisitions, pay down debt and just so you have some idea where that's going to get deployed. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2024 / 9:30PM, ZETA.N - Q4 2023 Zeta Global Holdings Corp Earnings Call

Question: Richard Baldry - Roth Capital Partners, LLC - Analyst : Thanks. On the commentary and congrats on the great quarter.