Q4 2021 Earnings Call
Okay.
[music].
Thank you for standing by this is the conference operator welcome to these data fourth quarter 2021 earnings conference call. As a reminder, all participants are in listen only mode and the conference is being recorded after.
After the presentation, there will be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal, an operator by pressing star zero.
I would now like to turn the conference over to Scott Schmitz head of Investor Relations. Please go ahead.
Thank you operator, Hello, everyone and thank you for joining us for the Data's fourth quarter and full year 2021 conference call before we begin I would like to mention that today's presentation and press release are available on David website at Www Dot investors that data global Dot Com, where you will also find links to our.
SEC filings along with information about data.
Joining me on the call today are David Steinberg latest co founder Chairman and Chief Executive Officer, and Chris Brian Davis, Chief Financial Officer.
Before we begin I'd like to remind everyone that statements made on this call as well as in the presentation and press release contain forward looking statements regarding our financial outlook business plans and objectives and other future events and developments, including statements about the market potential of our product potential competition and revenues of our product.
And our goals and strategies.
These statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected.
These risks and uncertainties include those described in the company's earnings release, and other filings with the SEC and speak only as of today's date.
In addition, our discussion today will include references to certain supplemental non-GAAP financial measures, which should be considered in addition to and not as a substitute for our GAAP results.
These non-GAAP financial measures and managing the business and believe they provide useful information for our investors.
Reconciliations of the non-GAAP measures to corresponding GAAP measures, where appropriate can be found in the company's earnings release and other filings with the SEC with that I will now turn the call over to David.
Thank you Scott good afternoon, and thank you all for joining us.
2021 was an incredible year per se that filled with many important milestones from going public to hosting our inaugural day to live conference to achieving record results in 2021, we generated revenue of $458 million up 25% year.
Every year or 30% adjusting for the 2020 presidential cycle, and we drove significant operating leverage by maintaining a disciplined cost structure.
Our financial performance is a reflection of the measurable value, we deliver for our customers and as a result of continuous investments we have made in our products our people and our go to market initiatives.
These results underscore the disruption that is accelerating and the marketing technology landscape as marketers seek to re architect their strategy and systems to improve how they reach and engage customers and achieve the full potential of data driven identity based marketing.
Jade its founding vision has never been more relevant in the marketplace.
Help brands navigate these challenges.
As a sign of our confidence we're announcing the long term targets of our state of 2025 plant. The financial goals of this plan are to generate in excess of $1 billion in annual revenue with at least a 20% adjusted EBITDA margin by 2025.
We believe in our ability to achieve these results because of the changes in the digital marketing ecosystem.
Evolution of our platform and the expansion of our go to market capabilities over the last 15 months, which are truly resonating in the marketplace.
Nader marketing platform with a customer data platform or CDP plus at its core was purpose built to empower marketers to ingest.
Synthesize and activate identity based data to create personalized marketing programs at scale through any channel and across the entire customer lifecycle.
Single platform makes it easier and faster for marketers to deliver better consumer experiences and achieve higher return on investment.
The Z M. P is electrified by Vedas proprietary first party dataset, which resolved two hours data I D.
Our customers ask us automatically.
The presence of this identity based data means that our customers are unaffected by environmental changes such as the elimination of apples idea phase the elimination of third party cookies.
Even google's recent announcements should the changes in the Android App tracking platform, we do not rely on any of these elements to identify individuals or measure marketing performance.
These shifts in the environment are creating incremental demand for zebra.
The proof is not only in our results, but also substantiated by independent third parties. For example, Forrester included our customer data platform in the large market presence segment of their now tech customer data platforms report published earlier this month data was one.
Only five C D piece out of the 34, they analyzed to be included in the large market presence segment, which the notes greater than $75 million in annual revenue. Additionally.
Additionally, data was recognized as an automation CBP the segment with the most highly functional capabilities.
This was also supported by the CDP Institute, which recently conducted a thorough review of our CDP and issued a report.
Highlighting data's quote powerful capabilities data exceeded the core functionality requirements and earned perfect scores in each of their 17 categories evaluated which span core data management unified customer profiles activation and Anil.
Alex.
The most important validation of this is coming from the customers as we continue to win against the largest marketing clouds in the world let.
Let me give you an example.
In the fourth quarter, one of the largest players in the U S retail industry replace Salesforce. After a 15 year partnership with Zeta is all in one data marketing platform.
Our team's expertise drove rapid time to deployment and in only a matter of weeks. This client began deriving insights into their own customer base.
<unk> CDP now sits at the heart of their marketing ecosystem enriching their existing data and helping to inform on key business decisions.
Delivering differentiated value is our north star, we will continue to invest in the areas of greatest opportunity and the highest return to strengthen our platform and sharpen our differentiation.
Over the last two years Veda has invested approximately $250 million into research and development and go to market initiatives.
And while this investment has contributed to our record 2021 performance I continue to tell our data team not all things that got us here will get us where we want to go.
As such we continue to evolve as a company to support our stated 2025 growth and profitability targets for starters, we are raising our brand awareness through events like <unk> with over 3000 participants at our inaugural conference paired with incredible content from some of the.
Foremost leaders in the industry, we have seen an increase in new pipeline opportunities and an acceleration of our close rate.
Encourage you to view this eight a lifetime test, which is available in the events section of our Investor Relations website.
We will further expand our partnerships similar to what we announced in 2021 with Snowflake and Dun <unk> Bradstreet.
We will continue to look to drive more sales productivity behind our newly appointed Chief revenue officers, leading us to the next phase of growth for the company.
Looking out to 2025, we believes it is well positioned to become the leading marketing cloud in the world.
We plan on accelerating disruption in the ecosystem is creating massive opportunities for zebra walled garden providers continue to attempt to tightened their grip and change the rules just last week, Google announced plans to restrict cross app tracking on Android devices mirroring the.
<unk> changes at Apple this is forcing marketers to look for new alternatives like data.
Data has at ball from a disparate set of silos to the unified hub of a modern enterprise artificial intelligence has gone from experimentation to mission critical.
New ways of ingesting synthesizing and storing data like the CVP are transformational for marketers. So the acceleration of channels that deliver scale and precision such as connected TV and wall CTV is the fastest growing channel in the marketing ecosystem marketers have.
<unk> to realize its potential and integrate <unk> with their other people based channels.
Marketers need the ability to target individuals not groups through more relevant omni channel experiences and measure the impact with deterministic attributions.
The need for data driven identity based marketing has never been stronger and we are just beginning to scratch the surface of our rapidly growing multibillion dollar addressable market.
And of course, none of this would be possible without our talented and dedicated data people, which is why we're making major investments in our own team. We recently expanded the number of paid holidays doubled our health and wellness benefits and quadruple the number of learning and.
<unk> classes to reward and retain our most valuable resource our people.
Where we have done the best job, attracting new people isn't skill and constrained areas, such as sales and engineering, where we actually exceeded our hiring plans for last year we.
We are focused on becoming an employer of choice and strive to create a positive diverse and inclusive environment with significant growth opportunities for all diversity equity and inclusion is a strategic imperative and data and we believe critical to our long term success.
In conclusion, I would like to sincerely, thank our <unk> team, our customers and our partners for an incredible 2021 I.
I have never been more optimistic about our future and I am honored to be able to share ours. Ada 2025 goals with you we're off to a fantastic start in 2022 as we continue to capitalize on the disruption in the market and provide more value than ever to our customers.
The best part is we are just getting started now.
Now, let me hand, it off to Chris to discuss our results in greater detail Chris.
Thank you David and good afternoon, everyone.
As David highlighted 2021 was an incredible year and say that with momentum building across our business.
I have two agenda items for today's call first I want to provide deeper insight into the underlying drivers of our Q4 and full year results.
I will outline our path to date of 2025 and provide more detail on our 2022 guidance.
Round 2021, we remained focus on executing our plan in the fourth quarter was no exception in fact, we exceeded our guidance and internal expectations for each of our major reporting metrics and kpis in the fourth quarter, which can be found on slides four through six in our supplemental deck on our IR web.
Right.
Revenue of $135 million was up 18% year to year or 32% adjusting for the 2020 presidential cycle. Additionally, revenue increased 17% quarter to quarter.
Top line results were driven by the strength in each of our core drivers.
<unk> customer count of 355 expanded by 19 customers year to year and eight quarter to quarter.
Scaled customer or <unk> of 368000 increased 10% year to year and 15% quarter to quarter.
And we generated 77% of our revenue direct on the data marketing platform up from 60% last year and 74% last quarter.
And related to our direct platform mix improvement cost of revenue in the fourth quarter declined by 590 basis points from year to year or 675 basis points, excluding stock based compensation.
On a GAAP basis, our net loss was $61 1 million, which includes 75 million of stock based compensation.
We generated adjusted EBITDA of $22 9 million or 17% of revenue in the fourth quarter.
Our strong fundamentals were evident over the full year's time horizon for the full year 2021, we delivered revenue of $458 million, which was up 25% year to years normalized for the $15 million of 2020 presidential cycle revenue that did not repeat in 2021 growth came in at 30.
<unk> percent year to year.
Our growth is coming in a variety of ways, we're winning across industry verticals against numerous competitors with different products and across channels.
We saw similar number of multiyear deals at a greater T C V than last quarter as a further testament to our sales factories gearing up.
We're seeing deals sourced from many different areas from data lives.
The marketing campaign sales development reps to quota carriers is to partner referrals.
For example, we won a multiyear CDP contract at a large retail company that was sourced fine STR more sales development rep.
We won a multiyear data cloud contract in the financial services vertical sourced by our partner.
We also won a large multi year CDP contract in the health care vertical through an internal cross sell and we continue to compete against and deep legacy competitors, ranging from Adobe Oracle Salesforce and others.
And while these examples highlight new customer wins approximately half of our revenue growth came from existing customers in 2021 for the year. Our total Veda NR was 113% with scaled customer enter are once again above 120%.
Including the retail financial services and health care verticals that I just referenced seven of our top 10 verticals grew greater than 25% in 2021, our revenue remains well diversified with a broad coverage across industries as our largest vertical accounts for only 13% of revenue.
Our cost of revenue percentage was 38, 1% in 2021, representing an improvement of 230 basis points year to year or 290 basis points, excluding stock based compensation significantly outpacing our 2021 annual guidance and at least 150 basis points and long term guidance of a one.
100 basis points.
This was driven by the competitive strength of our platform, our pricing power and our ability to generate more revenue directly on the <unk> marketing platform for.
For 2021, our GAAP net loss was $249 6 million, which includes $259 2 million of accelerated stock based compensation.
The strength of our topline combined with our cost discipline flow through the P&L, expanding our 2021, adjusted EBITDA by 60% year to year to $63 3 million.
This translates to an adjusted EBIT margin of 13, 8%, which is up 300 basis points year to year.
From a cash perspective. It was also a record year cash flow from operating activities was $44 3 million for the full year of 2021 with free cash flow generation of $17 5 million up 73% year to year. We ended 2021 with a cash balance of $104 million after completing our acquisition.
Of Athens.
With 2021 as a backdrop, let me dive into the details behind our 2025 plan with the goal of achieving in excess of $1 billion in revenue and at least 20% adjusted EBITDA margin by 2025.
From a four year CAGR perspective, this would imply 22% topline growth and 33% bottom line growth.
This rate of growth is consistent with our three year CAGR from 2019 to 2021 from a revenue perspective and half the growth rate, we achieved an adjusted EBITDA over the same period of time.
While our broader go to market initiatives product innovation and the need for durable identity data provide the high level catalysts behind data 2025, I wanted to provide simple framework with trackable Kpis to help you monitor our progress. This can be found starting on slide nine of our supplemental deck.
At the most basic level achievement of this plan assumes at least 5% annual growth in our scaled customer count and approximately 15% annual growth inner scaled customer RP, both of which are consistent with our prior results.
Expanding our scaled customer count by 5% annually equates to adding approximately 20, new scaled customers per year. This is consistent with what we achieved in 2021. Despite the fact that one third of our sellers with data for less than a year.
We expanded our direct sales force by over 35% in 2021, ending the year with 100 quota carriers.
This exceeded our plan and reflects our ability to attract talent.
Our new hires are coming to us directly from competitors after they experienced the power of our platform.
We'll continue to use a disciplined data driven approach to add sales capacity and maintained strong productivity with the goal to reach approximately 250 quota carriers ending 2025.
A major component of our sales force development is attributable to what we call our sales factories, which we break into three categories. The first factories focused on demand generation. This includes our investment in brand awareness the build out of our demand generation capabilities.
Spansion of our SDR team and the sophistication of the systems, we use to grow the sales pipeline.
Second factories focused on velocity, ensuring a better flow through of deals through our pipeline from early stage to late stage to closure in the third factories focus on sales productivity.
Good evidence of progress here with our strong win percentages and increasing deal sizes, which I'll touch upon shortly.
The expansion of our direct sales force along with our expanding partnerships with companies like Dun <unk> Bradstreet and Snowflake, we believe 20, new scaled customers per year isn't achievable target.
Still only put us at a 5% penetration of our customer centric total addressable market.
In addition to new scaled customers. We also see a large opportunity to extend our <unk> with our existing customer base.
One of the key strengths of the data marketing platform is the ability to generate new learnings insights and signals make.
It more valuable over time, leading to strong loyalty and significant <unk> expansion.
On average we've seen a three X increase in scaled customer rfps from customers with us less than a year versus those with us three years or more.
As customers measure attribution from our platform.
Create stickiness and drive use case and channel expansion as evidenced in 2019, our average channel per scaled customers, one two which improved to one four in 2020, and then to one nine and 2021.
By 2025, we expect this to expand to approximately four as customers realized even higher returns from our multichannel approach and leverage faster growing channels such as CTV.
Further proof of ROI customers experience on our platform is the growth of Super scale of customers, which are customers that have spent more than $1 million with us on a trailing 12 month basis.
From 2020 to 2021 are super scaled customer count increased 43% to 97 customers nearly all of the growth in our super scaled customer count was from existing customers or customers that started small and expanded on our platform.
In total we expect to generate approximately half of our growth from new customers and half from existing customers. We expect total data <unk> to be in the range of 110% to 115% annually with scaled customer enter are slightly higher.
In addition to durable top line growth, we expect to drive strong operating leverage over the next four years.
Specifically, we expect approximately 80% of our revenue to be generated directly on the Zeta marketing platform, which carries about a two times margin profile of our integrated platform revenue.
We expect favorable mix to reduce our cost of revenue by approximately 100 basis points per year. We also expect to drive operating expense leverage most notably in the G&A line as the infrastructure, we put in place over the last two years is highly scalable.
Net we believe the path to greater than $1 billion in revenue and at least 20% adjusted EBIT margin is highly achievable requires consistent execution on our core drivers, which we work to prove every day.
Before wrapping up let me provide details on our outlook for 2022 after all.
<unk> 2025 starts now.
The details of our guidance can be found on slide 21 of our supplemental deck.
Full year 2022, we expect to generate revenue of $540 million to $550 million up 18% to 20% year to year.
We expect to generate adjusted EBITDA in the range of 80 to 83 million, representing an increase of 26% to 31% year over year.
On a quarterly basis, we expect 2022 to follow our three year average revenue linearity, which we outlined on slide 22 of our supplemental deck.
More specifically for the first quarter of 2022, we expect to generate revenue of $118 million to a $121 million up 17% to 19% year to year, we expect to generate adjusted EBITDA in the range of $16 5 million to $17 million, representing a year over year increase of 27% to 31%.
Terms of Kpis, we expect the typical seasonal decrease in scaled customer count from Q4 to Q1, but anticipate growth of 20% to 25 scale customers for the full year.
Overall, we expect the same growth and margin factors laid out in our <unk> 2025 plan to drive our performance in 2022, while maintaining the right balance across growth investment and profitability.
In summary, we believe we are building a culture of high performance and a track record of consistent and predictable execution.
Date of 2025 of galvanizing, our employees, serving as a north star for extending our product leadership and providing a roadmap to ensure execution and investment decisions serve our near and long term goals of emerging as the marketing cloud leader.
Finally, I encourage all of you to download our supplemental earnings presentation on our IR website, which details our multiyear plan.
With that let me hand, the call back to the operator for David and me to take your questions operator.
Thank you.
We will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request.
Using a speakerphone please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.
We will pause for a moment as callers join the queue.
Yes.
The first question is from Richard Baldry from Roth Capital. Please go ahead.
Thanks, and congrats on a great quarter I'm sort of curious in that path to 2025 are there areas you'd be willing to accelerate opportunistically or.
You feel like there is a balanced approach to this so for example, you are.
Much more profitable than most companies grow on your pace. So would you hire faster if the right salespeople came in or does that stress the ability to bring in people in.
The marketing ecosystems et cetera that need to support them.
So rich I'll jump in on that first of all thank you always great to hear from you I would say.
Even with our profitability. We have publicly stated that we've invested over $250 million over the last few years in research and development and our go to market strategy and quite frankly, because of our new sales motion, we're seeing sales reps become profitable with in many cases within <unk>.
Six months of starting work with us.
So I don't see any reason that.
Two in Nevada marketing platform have to not run parallel, meaning we could absolutely bring on more people, we could absolutely accelerate that growth and it would not hurt our current profitability in fact quite frankly, we are budgeting two potentially.
Give ourselves room, because we want to say no to enough, meaning if there is an opportunity to bring in great people, we want to do it. If there is an opportunity to grow faster we want to do it and we're not going to slow that growth. All we're trying to do is put a real benchmark out there.
The interesting thing is just so you know.
This plan started in 2020, it was an internal plan that Steve Gerber and I launched in 2020 to get to $1 billion, a year by 2025, and Chris and the team have helped us to accelerate at a low I will tell you. We are ahead of where we expect it to be at this point when we started in 2020, Chris Yeah I think.
Rich we wanted to be very very mindful of the different kpis. We provided the supplemental deck has all of those laid out our key one that's tied to our investment is around sales capacity. So if you look at what we're counting on to go from a 100 quota carriers that we ended 2021 to the roughly 250 by the end of 2025.
It would imply right around 25% CAGR, whereas over the last couple of years, we've averaged north of 30%. So trying to leave yourself room and all the metrics from what we've traditionally executed two versus what's relied upon but as David said, we believe we can continue to invest in sales and marketing invest in innovation and get efficient on our cost of revenue line as well.
As our G&A line.
Great. Thanks.
Okay.
The next question is trying to do much behind.
From Canaccord Genuity. Please go ahead D J.
Hey, Thanks, guys. Congrats on the strong results here and Super helpful color with the day to 2025 and all of the drivers there Chris So so thanks for doing that.
David One for you just I want to ask about what kind of opportunities you're seeing with agency partners and how they may influence kind of your reach in the go to market model.
Well DJ thanks.
Start by saying that 10 years ago. When we were really building the formation of what was Veda today I had a very very poorly put together thesis on what was going to happen to the agency ecosystem.
And quite frankly for as many things as we call. It right that was one that we called wrong. We have now heavily invested I would say I am spending a disproportionate percentage of my personal time working with the holding companies to help them and it's really interesting because when.
When you look at solving problems, which is ultimately what we're trying to do with our software and our data. What we have found is a lot of the agency holding companies just can't get the people to grow at the rates. They are still growing so we're stepping in and saying listen not only are we on alternative plan.
For them to some of the platforms you are using now we're able to do it in such an efficient and effective way it requires 80% less people to operate the <unk> marketing platform with the <unk> data cloud all put together in one place versus if theyre going to use one of our competitors. So.
We are starting to see some meaningful traction there I think quite frankly it was one of the reasons you saw the sizable beat in the fourth quarter.
And the Great thing is youre simultaneously seeing a pretty material reduction I think the exact percentage was 590 basis points down in cost of goods sold in the quarter. So youre seeing the business firing on all cylinders right now and as the software businesses are growing.
Oster than other businesses and you saw the platform business go from 60% on platform to 77% on platform Youre really starting to see the cost of goods sold go down even in an environment, where we're working very closely and growing rapidly with the agency holding companies.
Yeah, It makes a ton of sense.
Maybe a follow up I don't know if it's better for you David are of course, but just thinking about the 2025 target I mean, clearly you kind of gave us the underpinnings that you can get there organically, but how do you think about <unk>.
M&A, maybe turbocharging those efforts I mean, historically you guys have been pretty acquisitive, so we'd love to just kind of get like a high level philosophy on.
How do you think about that.
Yes, TJ I'll take it and David and certainly add color just given the companys historical expertise on it. So certainly it is an organic plan.
Our focus is on continuing to identify great new pipes of first party data great engineers, great sales talent, which could lead us to small tuck in aqua hire type scenarios.
But nothing transformational by any stretch assumed in our 2025 model or 2022 guidance yes.
And quite frankly, I think that we have as I like to joke. We've done 16 deals in 14 years I think it is highly probable we will do a 17th but.
The deals were doing as you have seen from a size perspective, not only are they really small there are businesses that we believe we can grow rapidly and transform them into products services or data ecosystems for our existing customers. So we feel.
We're really well positioned to continue to do the type of deals we've been really good at but I do want to say again, because I don't want it to be lost the 2025 plan is an organic plan. If we were to do continued M&A, we would get to that $1 billion in revenue sooner.
Understood. Thank you guys congrats.
Thank you.
The next question is from Ryan Macdonald from Needham. Please go ahead.
Alright, Thanks for taking my questions and congrats on a great quarter. David first one for you you've really talked about I guess since the IPO of really improving the market awareness for this data platform in the functionality and you since added partnerships with Dun <unk> Bradstreet and Snowflake and had some some improvements around.
Getting into the Forrester report I'm just curious how how these partnerships in sort of this increased marketing is is translating to sort of more deal visibility and perhaps with the help of the partners, how thats translating to win rates versus what you've historically seen.
First of all thank you and really really good question not that not to be others weren't but the reality is that that's one of the reasons you really saw the fourth quarter beat.
Beat by such a hand at amount and we increased 2022 and felt really comfortable putting out the 2025 plant.
If you look at the big transformational moves to our brand last year.
Whether whether we like the initial outcome or not the IPO was transformational as it related to our brand Veda live was transformational where we have 3000 thought leaders and clients show up.
We're already planning they don't live for later this year and we think it's going to be substantially bigger signing partnerships with Dun <unk> Bradstreet and Snowflake. These are just major moves in the marketplace. We I believe a couple of quarters ago. We publicly said that we closed over 50 per.
<unk> of the engagements, we got invited to participate in from a sales perspective, what I would tell you was.
Frankly, we would have liked to get more at bats, really I'd, rather close 40% of twice the rfps.
And then 50% of where we were in the fourth quarter, we saw more rfps than we've ever seen in any quarter ever by a lot and none of it even translated into revenue in that quarter. So I think once again, we feel like all of these.
Transformational events have led to the numbers and the results and the guidance Chris nothing here.
Chris maybe a follow up for you in terms of how we should think about 2022 guidance for gross margins, obviously, a really strong year of expansion in 'twenty one.
Thank you had talked previously about a cadence of trying to focus on 100 basis points of improvement. Each year is this something that you think is achievable as you think about the 2022 guidance here.
Yes, we do Ryan.
Certainly sticking to that at least 100 on the Cogs line, obviously, we well exceeded that in 2021 the.
The model, even going out further to 2025 would even imply slightly yes, I think its right around 65 ish basis points of expansion. So still very much committed to the 100 basis points of David mentioned continuing to be tied to continuing to drive a positive mix shift to the direct platform.
So just really.
Really pleased with the progress on that front.
Excellent congrats again.
Thanks, Brian .
The next question is from Arjun Bhatia from William Blair. Please go ahead.
Thank you very much and congrats on a great quarter guys.
I want to maybe tack on for P. J S earlier question around.
Not necessarily M&A, but maybe how the product and the data platform looks like in 2025 do you feel that you have all the pieces in place to get you to $1 billion. We're looking at.
Hey, additional innovation and additional changes.
The platform.
Not minor changes, but large structural changes that might be needed to get you there or do you feel confident with what you have.
And then Chris I'll follow up for you on the 2025 years and maybe just.
Is there a linearity that we should assume about 2022, CAGR or is it going to be higher growth upfront.
Maybe closer to low Twenty's later on how should we think about that.
Do you want to take the second part first no one I'll take the first the first part first yes.
So hard to affordability.
I am older than you that is true.
Arjun I would tell you that we could put $10 billion in revenue through the Zeta marketing platform. This week. It is infinitely scalable platform that over the last five years.
Fully re architected rolled out and built and as you know were moved from sort of the last I would joke the laggard category to the leader in the leader category with Forrester.
Really putting artificial intelligence and data at the absolute heart as native to the Zeta marketing platform now the.
<unk> of the platform itself is that it is activation agnostic as we rollout new activation methodologies are only criteria is we want to keep them on platform from a margin perspective. Once again, you saw us go from 60% on platform to $70.
7% on platform.
I think we've given long term guidance to get that upwards of 80.
<unk>.
As new activation methodologies are created augmented reality virtual reality.
How the block chain begins to play into marketing, how token <unk> and gamification ultimately begin to change the way the marketing ecosystem operate the Zeta marketing platform is already built to integrate into that which is not to say there might not be little tweaks.
Would have to happen to incorporate blockchain or gamification or crypto, but today, we could turn on augmented reality virtual reality, it's really a question as to how does that market mature and one of the bets. We made when we made the decision to completely re architect the platform.
Was to really stay agnostic and not make an all in bet on one platform or another which is why we chose never to use Apple's IFA and why we chose not to use a third party cookie to identify people or measure marketing campaigns over the internet.
Because I didn't want to be dependent on another company to operate our company and I will tell you that the Zeta marketing platform is fully ready for what comes next Chris origin on the linearity point and the most immediate term. So for 2022, if you haven't had a chance to download the supplemental on the IR website yet.
On slide 22, we actually provide the in year expected linearity of revenue based upon our three year historical average now zooming out which was your question for our model purposes, we've assumed and even rate of growth of right around 22%. So if you look at our top line caviar from 19% to 2021.
It was right at 22%, we modeled the same out for 'twenty, one through 'twenty 'twenty through 'twenty five and on the bottom line, we've actually enjoyed it twice is.
As higher rate of growth of around 61% from 19 to 21 than what we're assuming for the out years and that goes back to the beginning questions. We got from rich was wanting to make sure. We're committed to investing in innovation investing in growth, but we will still able to drive margin expansion.
Perfect. That's very helpful and I appreciate all the detail and the fiber cost.
One quick follow up.
David If I can you mentioned.
Obviously, there's been a lot of change in that broader ecosystem.
Especially with the law bottomed I'm curious to what level of that coming up in customer conversations.
Reason to look through a platform like data not reliant on any of those for marketing efficacy and customer targeting.
I would tell you first of all very intuitive question every conversation we have involves that conversation at this point.
Every RFP, we submit talks about it and every engagement with every existing client really focuses on it.
I know, we talk about going from 347% to 355 scaled customers, but if you look at the revenue per customer that to me is really the interesting story, where youre seeing the <unk> per customer begin to really scale and thats, because theyre moving well.
They have spent with other companies that are not able to do where the puck is going to us and.
That's a trend that we think will continue.
Listen.
Hi.
Don't want to sort of get too focused on what the very large tech platforms are doing but I think it's fairly safe to say they are consolidating their own marketplaces and as they consolidate I think marketers want an open opportunity to work in the Pos.
Of the Internet that is not fully controlled by one player or another which by the way then begins to suck up.
Additional margin from our clients so not only our clients talking to us about our ability to do this they are really excited by the ability to manage their marketing at upwards of a 50% efficiency versus working with other marketers so and a lot of that is directly because we're able to.
Work in the open web and quite frankly, we're able to work in many of the walled gardens as well and like most of US we cooperate with them as often as we do not.
Okay.
That's very helpful. Thank you origin and congrats again.
Thank you Roger.
The next question is from Shan Latzke from Morgan Stanley . Please go ahead.
Hi, This is Elizabeth <unk> congrats on the quarter I had a question on the 2025 plan and that 355 scaled customers. This year with 100 sales heads implies about three and a half accounts.
And in fiscal 'twenty, one and when we fast forward to fiscal 'twenty five.
<unk> implies about one eight so.
So my question is what drives that contraction is it any sort of increased complexity and requiring more sales heads to support.
Customers are or is that just the level of conservatism.
Well Elizabeth Youre, assuming we closed every customer we've ever worked with this year, which is a pretty poor assumption.
So when you look at the average customer tenure the average customer has been with us for over three years. So you can't just take that one screenshot and then extrapolate it and divided by the number of sales reps I would also point out we doubled our number of sales reps throughout the year.
So I don't I don't see it as a contraction I see it as quite frankly conservatism as we look at the model and we fully believe that we will be able to continue our strategy of putting out results that we feel that we can beat and then raise from Elizabeth just from a model perspective I think it is.
<unk> to take into consideration that about half of our sellers today and you could assume a similar mix going out to 2025, our hunters and farmers. So obviously, it's the hunters that are going out and closing new scaled customers and as the farmers that are the ones that are charged with starting small and getting bigger.
And if you had a chance to kind of dig through the transcript or look at some of the supplemental earnings materials I think one of the areas that the company has excelled since we put the focus of a hunter farmer is growing those large customers. So for example, we mentioned in the call of 43% increase now up to 97 scaled customers doing <unk>.
$1 million per year in revenue with us that's the manifestation of growing the number of channels per so we've gone from one two to one four at the end of 2020 to now one nine in fact, if you look even deeper within that metric in 2019, 80% of our scale of.
<unk> were.
We're using one channel we've now gotten that down to about half. So all of this is leading to the <unk> growth, which is I think the other part of the date of 2025, so while the count assumes about a 5% CAGR over the next four years, we're assuming about a 15% CAGR on ARPA both.
Below what we've been driving so back to David's kind of last point that he closed with look we want to be conservative that holds true for our model. It also holds true by the way for 2022 building that track record of consistent execution.
Thank you Elizabeth.
The next question please.
Next question is from Koji Ikeda from Bank of America. Please go ahead.
Yes.
Hey, guys. Thanks for taking my questions.
Wanted to ask another question on the 2025 Rev target you know the $1 billion here doing the math 450 customers $2 1 million in annual <unk> I guess that is a pretty big increase in the annual ARPA from where we see where we are today I mean, I guess, what gives you the confidence in that sort of.
ARPA or expand from here.
Yes. So if you look at the <unk> rate of growth right. So as you pointed out we'd be at $2 1 million per <unk> in 2025 compared to the $1. Two were at today, that's about a 14% CAGR we've grown.
North of almost 20% from a on a CAGR basis over the last couple of years. So we see ourselves continuing to drive the number of channels used per scale customer. We're at about one nine today are super scaled customers those that are greater than $1 million already north of two and we see that getting to four so I think the combination of adding more.
Farmers can.
<unk> to be able to drive more of our scaled customers using the larger number of channels and by the way still 90% of our scaled customers are only using data for one of the three use cases that we offer today. So a significant amount of white space, even from that dimension of growing our existing customer set.
That on top of the newest deals we've been signing have been coming in at a much larger average revenue per <unk> as a combination of them being multi year deals, but also added the gate selling more channels on the platform.
Got it got it thanks, Chris and then just one follow up.
Kind of adding on to a previous question on the on the <unk> here. So maybe help us understand the sales motion here and understanding why do you guys need to add so many sales reps.
But not that many new scaled customers right, it's kind of gone from $3 55 to maybe 450 plus to get to that $1 billion target.
But really increasing the sales reps.
Two five times here over the next few years so.
Could you help us understand why so many reps or are those mostly farmers here or why do you need so many reps to just add kind of only 100 customers from here.
Well first of all I want to say I think we're going to add a lot more customers on that just so we're all on the same pitch, but but.
We are in a position now where if we can get a sales rep to breakeven in the first six to 12 months, we want to add as many of them as we possibly can and we want to scale the business as fast as we can so I think that yes on paper it looks like we're adding a lot of bodies to not specifically add a lot of enterprise.
Customers, but I think what youre going to see in reality is probably more customers.
And the.
<unk>.
In a similar place, but I think a lot of it is right now we want we've got the margin to invest.
We believe we can hit our operating margin expansion plans with this head count increase.
And I think with the amount we want to continue to grow it's a good investment to do that Chris the other thing I would add.
Koji is that we want to continue to be data driven likely been right. We've been very transparent in our sales productivity metrics, which had continued to be very strong, but just to bring it to life. Why we believe we need incremental sales capacity not only are we investing more in brand awareness not only are we investing more in demand generation our quota carrier.
Orders have been significantly adding to the pipeline because of our investment in the sales development rep functions. So if you zoom out our hunters are carrying roughly 20 deals per in their pipeline today, that's too many.
It's just way too many deals for one individual to chase at the same time. So I think we wanted to strike a good balance of again investment profitability, but making sure that our quota carriers have the right amount of opportunity that they can go close.
<unk> not to get everything in their pipeline.
Thank you.
All right next question please.
Thanks, guys.
The next question is from Phil Winslow from Credit Suisse. Please go ahead.
Thanks for taking my question Congrats on a strong quarter I just wanted to focus on the channels per scaled customer as you mentioned you went it went up to $1 nine from one point to just a couple of years ago.
Could you just give us a sense or sort of whats inflicting whats the feedback youre getting from customers and then obviously.
Pat You gave 2000 22025 is approximately four just kind of help us what's been inflicting and then how are you thinking about that in the context of 2025.
Yeah, Great question, Phil Good to hear from me for Us to kind of look at the revenue growth by major channels. So I think about major channel. Its messaging, it's social it's site optimization CTV, all growing double digits and had been growing double digits. What we've been successful at is leading with the first channel and that could be email.
It could be something in the programmatic universe.
Very quickly following on with connected television with display video we've accelerated our sales motion from the time for the first channel and the ability to attribute our work to an ROI and then a very fast follow and kind of going back to that the growth we've seen.
You look at the slide in the supplemental you'll see that those customers that are still with us in that first year. There is an average revenue per around 700, K our ability to get them to three <unk>. So if you kind of zoom out those and the scale customer universe that are three or more years with us have an average revenue per $1. Seven so I think it is us continuing to hone the farming sales most.
The Upselling and the cross selling which we're doing great. We just think we can we can do even better and getting to four but all channels are resonating well I think it more points back to the time to show the ROI in a very fast follow on the second sale.
Got it and then just one follow up to that there've been some recent surveys and factor just one from Gardner today about pretty distinct changes and shifts in just the efficacy of different marketing channels. So the fact that to your point that does great.
<unk> offers multiple that you can consolidate on are you starting to hear that resonate with customers. Just as you look as you mentioned with idea pay et cetera, Youre, just seeing sort of variability in the efficacy of different channels.
Yes, I Couldnt I Couldnt agree with you more.
It's I think some of it is what's going on in the wider ecosystem. Some of it is the changes that are coming and some of it is just the focus on efficiency as clients move from analog to digital but what I really want to make clear Phil is that the Zeta I D number can identify in India.
Visual across any digital channels, so our ability to have a high level of efficiency in messaging social mobile display online video CTV addressable TV goes across the entire methodology.
And it is without question one of the reasons you saw over perform in the fourth quarter and why we felt comfortable raising the goals for 2022 and out I think I think to your point, it's becoming table stakes, whereas two years or three years ago. It was just becoming a.
Asian now, it's everybody wants to talk about it and it's really where the puck is going.
Its almost where the puck is and at the same time, so it's been.
It's Ben.
Barry.
Impactful to our business.
Thank you Phil Thanks, Steve I appreciate it.
And your next question is from Ryan Macwilliams from Barclays. Please go ahead.
Thanks for taking my question and happy to hear about the strong EBITDA margin margin guidance through 2025, I think that message of profitability focus growth.
Now resonating with investors more than ever.
You just called out kind of your growth rates year over year against the president of presidential election.
Chris just going forward for this year's guidance anything baked in for the midterm elections in your revenue guidance.
Yes, we think of it in around 20% to 30% of what we saw in 2020 is how we have it factored in and you would expect kind of a heavy part of that being again in September and in October of this year, but I want to be clear. The mid terms are not any where near as impactful. It's almost like just adding a few.
Extra customers.
Excellent and then David I know you expect to close every customer that you come into contact within a quarter, maybe we will hold you at the next year, but last.
Last quarter, you mentioned, some strong initial wins with opportunity to explore anything to call out there or are you seeing continuing meant some of that product.
Yes so.
I am disappointed Ryan if I don't close everybody I pitch that is true.
What I would say as we publicly announced two quarters ago that we had closed over half of the initiatives. We were invited to be and I would tell you that we closed even greater than that last quarter.
So where we're starting to really see the messaging back to one of the earlier questions.
It used to be when we would talk about what we could do people would sort of look at us like how can you do that there was a bit of disbelief now when they hear the 34% of the fortune 100 use us and they see that we're a publicly traded company on the New York stock exchange and they see the logos that are associated.
<unk> with.
Chris Greiner and I'm occasionally trotted out when they need somebody to close normally.
Normally if I'm doing 1% theirs.
To joke, there's a lot of wine a lot a stake and a lot of revenue involved but the reality is that the factories themselves or what are driving the business and we've really made a very successful shift from what was an entrepreneur will lead sales motion to what is today a more factory drift.
<unk> sales motion and as I look out three years to getting to that billion plus and revenue I feel like we've never been better positioned to do that I think Ryan something that has held true from last quarter, which was new but we called it out is opportunity explorer has been and continues to be a very effective land tool typically in a <unk>.
Eyelet, but more often than not that opportunity explore can be a seven figure leader of a sales process that in addition to the fact that of the deals be closer Lee we continued to hold to about a third of them being cross selling upsell and the balance being with new customers. So those data points to be highly in the last quarter continue to hold true in.
You would expect it to be true over the next several quarters in years.
Thank you Ron operator, I think we have time for.
All right all right I think we have time for one more question.
Certainly the next question at last question is from Brian Schwartz from Oppenheimer. Please go ahead.
Hi, This is already Friedman subbing in for Brian towards.
Thanks for taking my question and congrats on the corner.
I was wondering if you could talk a little bit about the competitive landscape and what you've seen.
Going into 2022, and if you ever see experienced management vendors when you go out priority. Thanks.
Well thanks for joining R.
So.
As as I like to say in 100% of the wins, we had last quarter, we either beep or displaced salesforce Oracle Adobe or Epsilon. So we feel pretty good about our position in the competitive landscape now these are large.
Companies, they have very formidable teams and they have incredible core products.
In fact, all four of them have three.
Three of the four have incredible core products, but the reality is that as they built their marketing clouds, they've really been more of a container where they're effectively putting different businesses into that container and sort of trying to consolidate HR legal accounting and sales to the top of that that silo.
As we've gone to market.
As really the largest independent marketing cloud out there today.
Fully bespoke for what we do with artificial intelligence and data native to the platform, which none of our competitors can say.
I think I think it's the reason we win.
It is also important to note that an average of 17 companies are invited to participate in most of the rfps that we win over half of so it's not like we're going up against one or two.
As it relates to experienced managers, we don't really bump into them.
Because we're still out there selling software.
We really are bump in more to sort of the Oracle Adobe Salesforce Epsilon and others that are focused heavily on marketing automation and being a marketing cloud.
Chris.
Thank you David just as as we wrap up I know, we're past time. So appreciated raise patients date is really excited about attending two conferences. This quarter on March 8th will be with Morgan Stanley in San Francisco would love to be meeting with folks and then on March 14th and 15th will be attending the wrath conference here in la.
California's so looking forward to that and is always very grateful for your time and the questions and look forward to staying in touch with everyone. Thank you again.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and having a pleasant day.
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