Q1 2022 Zeta Global Holdings Corp Earnings Call
[music].
Thank you for standing by this is the conference operator, welcome Chip Azzato first quarter 2022 earnings conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
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I would now like to turn the conference over to Scott Smith head of Investor Relations. Please go ahead.
Thank you operator, Hello, everyone and thank you for joining us for <unk> first quarter 2022 conference call before we begin I would like to mention that today's presentation and press release are available on <unk> Investor Relations website at investors that data global Dot Com, where you will also find links to our SEC filings.
Along with other information about data.
Joining me on the call today are David Steinberg Davis, co founder, Chairman and Chief Executive Officer, and Chris Trainor.
He was 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 for our products.
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 a substitute for our GAAP results we use.
These non-GAAP measures managing the business and believe they provide useful information for our investors.
Conciliation of the non-GAAP measures to corresponding GAAP measures, where appropriate can be found in the earnings presentation available on our website as well as the earnings release and filings with the SEC with that I will now turn the call over to David.
Thank you Scott good afternoon, everyone and thank you for joining us today.
It is off to a very strong start in 2022 as the efficiency of our platform continues to deliver a greater return on investment for marketers for the quarter, we delivered revenue of $126 million up over 24%, We will review the.
Portion of revenue generated directly on the Zeta marketing platform was at an all time high which led to significant margin expansion and strong cash flow generation, which Chris will elaborate on shortly the market continues to move in our direction with enterprises investing to access.
<unk> digital transformation and capture the full value of their first party data.
As large technology companies continue to battle it out by eliminating their tracking tools data is a direct beneficiary as we are not dependent on apples idea pay or third party cookies to identify individuals and measure business outcomes.
The way in which marketers interact and connect with consumers to deliver individualized experiences is changing at an accelerated pace.
<unk> is an artificial intelligence augmented reality five G and blockchain just to name a few are changing business models and marketers to do not embrace these secular shifts will be left behind.
In the current inflationary environment. It is imperative for marketers to find more accountable ways of acquiring new customers and generating more value from existing customers, even more so than in the pandemic. The last time inflation was equivalent to the current level with 19.
81 <unk>.
There were very few tools or alternatives for marketers to become more efficient.
Today Zebra is all in one solution lowers the total cost of ownership and our first party data enables greater addressable witty and accountability delivering a higher return on investment for marketers to bring the effectiveness of our platform to life. Let me walk you through in recent.
Customer wins.
In the first quarter, we signed a multiyear contract with a large apparel retailer that had several key objectives that no single competitor could meet these objectives included.
One to integrate in store and online activity into a single centralized source of truth too.
To deliver real time insights for strategic targeting and three find one partner to create a system to acquire new customers and better engage their existing customers more efficiently and effectively Veda was the only company that check every box.
Because of our integrated all in one approach, we enable an easier purchase decision implementation and faster time to value with a 10 X expected return on investments.
Not only did <unk> to replace the Salesforce marketing cloud as their cloud, but we also replaced an adequate first generation CDP that did not simplify their ecosystem or improve their business outcomes.
As another example, a large enterprise Fintech company, which started out as a $50000 pilot grew to a multimillion dollar super scaled customer after realizing.
60% to 80% incremental value through increased usage of the data marketing platform.
These are just two examples of our momentum in the market.
We are also being recognized by industry analysts as an encore to the CDP recognition. We received in February we separated ourselves as a leader in the latest Forrester wave for email service providers, which was essentially their study for Omnichannel marketing automation.
While most major competitors fell backwards, we extended our lead and were noted as the company that would quote simplify complex marketing.
We received the highest possible score in the strategic category and the highest possible scores in criteria, including our innovation roadmap.
Market approach and first party data resources.
Lighting, both the depth and breadth of our platform.
And we are investing to widen our competitive lead further innovation and are laser focused on delivering the best possible outcomes for our customers. We have work to enhance the Zeta marketing platform orders E&P into a single pane of glass to make data visualization.
Exploration and activation easier faster and better.
We recently added a new product called agile intelligence, which lays at the intersection between business intelligence and marketing intelligence to our CDP.
It answers the most pressing questions for an enterprise, such as which markets and customer segments represent the most valuable opportunities for investment.
We're also enhancing our data cloud with the recent acquisitions of Optimists, and Arca, Max which added millions of new permission based consumer data and behavioral signals for marketers to engage with high value audiences and.
And we are bolstering our position in high growth channels, such as connected TV with advancements in the audience exploration, scoring cross channel activation and deterministic measurement in the first quarter, our CTV business grew by over 200%.
Developing and delivering cutting edge solutions is also making us an employer of choice.
A key pillar in our Zeta 2025 plants.
I continue to be humbled by the caliber of people, we continue to attract especially and constrained areas such as sales and engineering.
People are truly our most valuable resource and we will continue to make major investments in our team.
In summary, we are well aligned with our stated 2025 targets of achieving at least 1 billion year on revenue and greater than 20% adjusted EBITDA margin.
We're off to a fantastic start in 2022, and as we continue to capitalize on the disruption in the market and provide more value than ever to our customers.
I'd like to sincerely, thank our <unk> team cut.
Our customers our partners and all of our stockholders for the ongoing support of our vision.
My hand, it off to Chris to discuss our results in greater detail Chris.
Chris.
Thank you David and good afternoon, everyone.
It would be hard pressed to think of a better way to start 2022 and data 2025, and the results we delivered in Q1 our.
Our sales pipelines are expanding our win rates are robust and most notably we're driving the right balance of revenue growth margin expansion and investments in the business.
This and by Dexterity comes from following date is 2025 long term financial blueprint and in Q1, we executed to that plan exceptionally well delivering profitable growth at scale on today's call I want to dive into three areas. One a brief review of our results.
To the progress, we're making in our sales factories, which fuel our kpis and three the details of our upwardly revised guidance.
With the P&L, we delivered revenue of $126 million up 24% year to year once again exceeding our guidance and internal expectations are.
Our top line strength was driven by strong new customer additions direct platform usage continued <unk> expansion and progress against our go to market investments, 95% of our revenue was derived in the U S with broad based industry contribution and we do not have firsthand revenue while resource.
<unk> in Russia or Ukraine.
As David mentioned, the proportion of revenue generated on our direct platform was at an all time high of 81% versus 74% in the first quarter of 2021 and 77% last quarter.
Our higher direct platform revenue mix combined with our productivity improvements lowered our cost of revenue by 530 basis points year on year to 33% or 32, 1% excluding stock based compensation.
This positions US ahead of our target to reduce our cost of revenue by 100 basis points annually when.
When we take into consideration the platform mix of our sales pipeline opportunities and what we expect from mid term political contribution in the second half of the year, which as a reminder has a lower margin profile than the platform average, we're improving our guidance to lower our cost of revenue by 200 basis points for the full year of 2022.
A testament to the trajectory, we already see our business headed to start the year.
On a GAAP basis, our net loss was $72 million, which includes $73 7 million of stock based compensation.
We generated adjusted EBITDA of $18 8 million up 44% year to year.
This translates to an adjusted EBITDA margin of 14, 9%, which is up 210 basis points year to year. This too was well ahead of guidance.
Our adjusted EBIT upside also converted to cash at a high rate, which is an important element of our data at 2025 plan.
Cash from operating activities was $21 2 million in the quarter with free cash flow generation of $9 7 million.
We ended the quarter with $103 9 million of cash in our balance sheet.
The strength of our topline plus improved revenue mix cemented our conviction to pull forward go to market investments ahead of known sales pipeline demand for the platform.
This investment was most evident in expanding our marketing capabilities and executing on our sales development plans. So let me switch gears and provide more detail on each.
As you've heard me discussed in prior calls.
Ada has been investing and expanding our go to market capabilities and capacity internally, we refer to these as our sales factories and span sales and marketing.
We approach this from a three piece framework.
<unk> sales pipeline creation to sales pipeline progression and three sales productivity.
We're seeing good progress in all three areas, which continues to power our growth and is the fuel for <unk> 2025, Kpis on <unk>.
<unk> customer count <unk>.
<unk> expansion mix shift and net revenue retention.
As I mentioned upfront our sales pipelines are growing nicely accentuated by increased investment in brand awareness and demand generation.
For example, the.
A number of new platform sales opportunities in our pipeline is up 40% year to year with the value of our pipeline up nearly 50%.
This follows observations discussed in the second half of last year, whereby newly hired quota carriers. We are quickly ramping their sales pipelines and in many cases are at levels equivalent to our most experienced sellers.
In terms of pipeline progression, our newly established sales development rep function or str's are creating new opportunities and in the first line of qualification for faster progression through the funnel.
In fact during Q1, our SDR has created more pipeline than in all of 2021.
And they were responsible for sourcing and progressing one of our newly added Q1 scaled customers, resulting in extended figure multiyear win.
It's worth noting we only began to build dysfunction late in 2021.
By continuing to expand our SDR team going from seven at the end of 2021 to 12 at the end of the first quarter were better able to utilize our quota carriers time to progress opportunities and build a career path for future quota carrier succession.
This brings me to the third element of our sales factors sales productivity, where the rubber meets the road.
We measure sales productivity zero landfill cohorts based upon sales rep tenure with data.
This allows us to better tailor recruiting strategies.
And customized training much more prescriptive.
We paced hiring investment based upon detailed productivity metrics and internal kpis and like last year. Many of our newly hired sellers continue to surpass our ramping models by beginning to close opportunities as soon as months four through six.
We're also seeing the average contract value of wins roughly double as you go from sellers with less than 12 months experience to 12 to 24 months to greater than 24 months of experience.
This really highlights the continued progress our training and enablement programs are making to grow seller capabilities.
The R&D team behind this effort is truly exceptional.
The sales productivity is evident also across our data 2025 kpis.
In the quarter, we added four new scaled customers over the last 90 days and two new Super scaled customers, who are customers generating over $1 million in revenue over a trailing 12 month period.
We ended the first quarter with 359 scaled customers and 99 super scaled customers with the ladder up more than 40% year to year.
We saw continued success driving multiyear multichannel recurring revenue deals with no change in average sales cycles.
Some exciting characteristics of these wins included.
Continued increase in the number of seven figure deals closed year to year.
A lengthening of new contract durations from a year ago now approaching two years on average.
Growing demand <unk>, CDP, plus product, which comprised half of new multiyear wins in the quarter.
In addition, 80% of new PCB was attributable to opportunity explore this quarter, which remains a key door opening as well as an important cross selling tool and finally, we continue to beat legacy cloud vendors like Salesforce Oracle Adobe amongst others.
While this list is just a sample of what we closed in the quarter. Each of these represent alignment with our stated goals of data 2025 and.
And most exciting to teams data.
Secondly, the organizations collaborating with total alignment across marketing sales engineering product and shared services, which of course was the.
Bigger organizational intention on data 2025.
Company wide, we continued to sign larger initial contracts and expand our existing customers on our direct platform.
For the first time more than half of our scaled customers use data to more than one channel.
This led to strong scaled customer ARPA growth, increasing 18% year on year to 341000.
In terms of sales capacity, we're off to a solid start against our hiring goals for the year as our ability to attract and retain data talent remains strong.
We added seven new quota carriers in the quarter and remain well on track to grow our sales head count in the mid two thousands this year.
In summary, we thought it was important to connect ramping up our go to market investments with the Kpis. We are generating will continue to deploy capital in areas of greatest opportunity and highest ROI that are consistent with the data 2025 model.
Wrapping up now with guidance as outlined on slide nine of our supplemental presentation for <unk> 'twenty, two we expect to generate revenue of $128 million to $132 million up 20% to 23% year to year.
We expect to generate adjusted EBITDA in the range of $16 9 million $17 4 million representing year to year expansion of 48% to 52% for.
For the full year of 2022, we're increasing our revenue guidance from a range of $540 million to $550 million to a new range of $553 million to $563 million. This includes approximately $3 5 million from our recent acquisition of architect.
We're also increasing adjusted EBITDA guidance from a range of $80 million to $83 million to a new range of $83 4 million to $86 4 million.
This revised range represents a year to year increase of 32% to 37% and an adjusted EBITDA margin range of 14, 8% to 15, 6%.
As I've stated before we are building a culture of high performance and a track record of consistent and predictable execution. In Q1 was continued evidence of that we're excited about our strong start to 2022, and we're well aligned with our stated 2025 targets.
With that let me hand, the call back to the operator for David and me to take your questions.
Operator.
Thank you.
We'll now begin the question answer session.
Joining the question queue you May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request.
You're using a speaker phone please pick up your handset before pressing any key.
To withdraw your question. Please press Star then two.
Our first question is from Richard Baldry from Roth Capital. Please go ahead.
Thanks Sarah.
So I'm curious about the Super scale customer base, if you could talk a little bit there about where you're winning are there any commonalities across that base.
Any specific momentum verticals.
How large do you think that group can be intermediate term.
Long term because it seems like it could be material to meeting or exceeding your 2025 goals given the impact each one of those can have.
Hey, rich good evening, we saw broad based contribution not just for total scaled customer ARPA expansion, but also the addition of new scaled customers. Then this is obviously the customers that we move from 100 K two 1 million 2 million plus two things I think that our exciting about that as you pointed out.
We've got 250, plus scaled customers that are in that 100, K 2 million cohort all of which could be $1 million a greater super scale customers. It's the same kind of customer. These are fortune 100, fortune 1000 customers spending hundreds of millions to billions of dollars in marketing. It's just a matter of time until we move them over but I think even more.
<unk> to US is the opportunity there is a 10 X <unk> differential and the average revenue for that 100, Kt 1 million customer of about 90 8-K versus almost 1 million 981, K for the Super scaled customers and I think as you heard for the first time more than half of the customer base is now using more than one channel.
Xena.
The other thing I would point out which is what we're seeing in the marketplace.
Is some of the macro issues are driving our clients to move from proof of concept to super scale clients much more rapidly than we've seen in the past so as you know.
Our clients are seeing inflation as theyre seeing a potential downturn.
We are seeing is everybody is far more focused on efficiency of marketing and as they look at efficiency and they look at efficacy. They are seeing the return on investment on our platform.
Literally returning for most of our clients tend to one for every dollar they spend with us the returning $10 in business to themselves. If you take what they're paying us in subscription fees back into their returns and we're.
We're seeing budget budgets that have been traditionally going to linear moving to the Veda marketing platform at an accelerated pace and I think thats a trend that we can expect to continue.
I think so.
I think you'd probably often see with a superior product one of the things competitor users.
Beer and distortion is there a way to try to defend their positioning.
Same happens in the investment world. So I wouldn't normally ask this but I'm sort of curious if you had any commentary around recent short thesis that emerged which in our view didn't carry a lot of teeth, but.
Now that you've got a clear table attack sort of curious if you had any feedback thanks.
Well rich listen, it's I think as Mark Twain said, the truth is stranger than fiction.
Of course, he said it before bloggers emerge that could effectively make things up as they go along.
We're really focused on writing our own story here, we really believe that if we continue to require I'm, sorry to retain and hire the world's best people build great products and build a great company everything will ultimately take care of itself and Thats really what were focused on.
Thanks, Hey rigs operating in the quarter.
Thank you so much rich we appreciate you.
The next question is from Brian Schwartz with Oppenheimer. Please go ahead.
Yes, hi, thanks for taking my questions. This afternoon.
One for David and then a follow up.
After for Kras, David you mentioned or Chris mentioned that the <unk>.
CDP plus product wasn't half of the big deals that you won in the quarter.
Wonder if you can.
That seems to be a really positive trend and something that we haven't been seeing recently I was wondering if you. If we looked under the covers and you looked at maybe.
Rfps or pilots that you're doing or are you look at the pipeline opportunities that Chris provided color too are you seeing the same sort of trend in terms of.
People looking towards the business for them to run their CDP.
Yes, great Great question, I think we're seeing the CVP business grow at an exponential pace quite frankly, it's really gone from something that people were talking about as a nice to have today marketers are starting to say, it's a <unk>.
To have as they move from sort of older School data repository data lakes data warehouses to focus on deterministic data and really leveraging their own first party data and extrapolating that into how they go to market. There is no better way to do.
That then our CVP what I would tell you is that the rfps that we're receiving on cdp's continue to be greater than half of the Rfps. We are receiving and we are winning them at an even greater rate than our normal above 50% win rate and I think what we're seeing as well.
When we sell our CDP it comes with the data cloud bundled into it which is why we call. It a CDP plus and if you look at all of the analysts over the last few weeks that have come out with new stories, including.
Well, there's one coming next week that I, almost just messed up but there is a bunch of stuff that's come out around our CDP being the top.
In the industry.
A lot of it is not just the architecture of the CDP software, which is we believe superior to anybody else's.
But the ability to do it with the data cloud changes the narrative when we're talking to customers and they're seeing the type of data elements that are coming in the really exciting thing about that is once they start using the blended data and we're matching it great.
The 80% of our data cloud to the average customers first party data as we scale. What we're seeing is they're coming up with incredible audiences that they want a target inside of the data cloud well guess, what they cannot target to those audience.
<unk> because they all synthesize towards Veda IV number in less they use us to activate so not only are we winning cvp's in an accelerated pace. It is truly the Trojan horse.
Into the enterprise because as they use these incredible attributes that we bring to life. There is no way to activate to the consumer in less you are using the GMP.
Thank you and then the one follow up I had for crest.
I really just wanted to make sure I understand the gist. If there is any changes at all with the guidance on your philosophy.
The reason that I ask is we see the results here in Q1, certainly looks really good the business is accelerating.
You guided for that acceleration to continue again in Q2 on the growth and on the margin improvements.
So we all see the headlines and what's what's out there I think you gave us a lot of color into what youre seeing in the confidence in that guidance, but what I wanted to ask you is in your guidance are you incorporating at all any sort of either conservatism or consideration.
For any potential slowdown in enterprise marketing spend that's it thanks.
<unk>.
Thank you Brian .
The short answer is we feel like we have the current macro environment and really good visibility into our pipeline all factored into our guidance as well as we're working hard to build which has a track record of beating and raising I think what stood out to us in the quarter. In particular was if you look at the quality of the revenue and the margins that were delivered structurally.
We're growing in the most durable high margin areas of our business that evidence of that as David mentioned is deal sizes are getting bigger contract durations I think was an important point we made.
In the script, which also goes into the visibility we haven't our revenues contract durations are getting longer now almost approaching two years.
Significant change from even six months ago, all time high direct platform mix of 81% and not surprisingly the gross margins followed so.
We feel like we have at all factored in as well as wanting to make sure that we continue to build upon our track record. We've established now over the last four quarters.
Thank you.
The next question is from Ryan Macdonald with Needham. Please go ahead.
Alright, Thanks for taking my questions and congrats on an excellent quarter, David maybe first for you. It's great to hear about all the direct sales productivity improvements that are that are driving strong.
Wins in activity, but you've done a lot of work in terms of sort of external sources and partnerships to try to drive.
Lead flow and sort of more at bats, notably yet the snowflake partnership in fourth quarter, you are seeing some inclusion on the Forrester report some first quarter just curious what sort of returns you are starting to see if at all.
Some of those external sources, not just obviously, the direct sales productivity, which looks great today. Thanks.
Well first thank you. We appreciate it second great question third it's been incredibly additive right. I mean, I think that there are very few really big conversations that we're having nowadays that don't involve somebody like snowflake or other partners that we have.
A sort of third party to the agreement and it's been it's been really game changing for us to be able to bring their products to bear fully integrated into the <unk> now the Forrester stock was really.
As an accelerator to Rfps, we're seeing more RFP flow then I think we haven't ever seen by a lot. So not only did we make the decision to pull forward some of our hiring because we saw we had so much incremental margin being 81% on platform versus.
Is the 75 that I think a lot of people expected it allowed us to bring in the people that we needed to handle all of the RFP velocity that we're seeing.
Filling out some of these rfps can be can be arduous. So we were we were super Super pleased to be in a position to be able to pull forward some of that hiring.
What I would tell you is that the GMP stands alone and is winning on its own we're seeing the market come to us.
And in a lot of ways first and foremost great partners in companies like Snowflake.
Being named the leader in the Forrester report was was a very big deal. It happened in an environment, where most of our competitors fell backwards.
And we propelled ourselves forward.
And the thing we love is Foster's really basing a lot of that on our clients' opinions of us its something thats very important and something that we think of and once again our goal is to deliver the world's greatest products and services to our clients and when you get the.
Type of validation that comes out of forest or that is really the entry point to most rfps for most large enterprises and.
Companies that might have been saying, whose data a year or two ago are now knowing who we are.
The IPO date alive doing deals with companies like Snowflake being named the leader in Forrester report.
When a company like Forrester says that we are exceptional at simplifying complex marketing that is exactly what cmo's water here in today's world and.
Quite frankly, our entire pitch around efficiency and efficacy of marketing resonates even higher in a market where people are nervous about where the economy is going about what's happening with inflation a number of our clients are thinking of.
Where is the consumers' disposable income growing as it relates to our focus on higher energy cost higher food cost higher housing cost and they are trying to figure out how to help.
Help consumers to understand that their products are have to have not a want to have in this current environment. The ability to use the data marketing platform and focus of people who are actively in market for their products and become top of mind for them has never been more important than it is.
Today, and I think thats back to what Chris said I think it is.
Why are we so handedly beat the first quarter. That's why we feel so highly confident in the second quarter and it's why we want to continue to focus on being a company that can.
Beat our estimates and raise from there that we've always said, that's our goal and Thats our goal to continue.
Thanks, David I appreciate the great color there, Chris maybe just a quick follow up for you.
On the direct platform revenue, obviously, 81% in the quarter very strong can you just provide an update in terms of your expectations.
You should think about that trajectory through the remainder of the year I think sort of heading into Q1 here you were thinking mid seventy's for the year, how does the 81% in the first quarter impact that and then how does this translate I guess into your ability to expand gross margins.
For the remainder of the year.
I think we definitely with the fast start that we had.
It was at the higher end of what even we were expecting internally I would now expect the direct platform mix to be north of the mid Seventy's now.
Not going out of limb to say that but why that's given us more confidence is included in the script. You also heard us increase our cost of revenue percentage or should say decrease our cost of revenue percentage for the full year from a 100 basis points of guidance to 200 basis points. So as you see the <unk>.
<unk> platform mix go North of 75, you should expect to see the gross margins followed but certainly are.
Perfect.
<unk> increased.
The one item to note there Ryan and then for your peers on the phone call part of what would not keep it at 81% leased as we're thinking about it based upon history being a predictor of the future is political spend in September October and to some small extent November could and has traditionally been off platform.
So there is also some conservatism built into that and when I talk about being in just north of 75%.
Although we do feel it will be higher for the year then mid seventies, we increased we feel like we're at a very good place I think we're just nervous staffing an eight handle on the front today I think I think we feel good about where we are as a company and I think when Chris talked about the scale of the new deals we are signing the.
<unk> of the new deals we are signing we've always said our goal was to continue to grow gross margin, we're saying we're going to grow it faster than we originally expected.
We've also said that our goal our goal was always to get to 80 20 platform Wise I think I think in the out years, we'll be able to even do much better than that but I think right now we're feeling very good about the metrics.
Okay.
Thanks for the color Congrats again.
Thanks, Brian Thank you.
Yes.
The next question is from Koji Ikeda with Bank of America. Please go ahead.
Hey, David Hey, Chris Thanks for taking my questions.
Just a couple from me so it sure sounds like and look at all the metrics and all the commentary I mean is your it sounds like the sales execution is good and definitely heading in the right direction and I think it was Chris you kind of mentioned on the sales capacity you added seven in the quarter Youre trying to grow mid <unk>.
<unk> as a target for this year, so how should we be thinking about the ability for the business two to potentially increase or maybe accelerate the number of net new scaled customers. I think you added for the first quarter. So what does it take from a sales capacity or go to market standpoint for this number.
Four to maybe become six or eight or even 10 10, plus in any given quarter.
That's the design.
That's exactly the design as to why we're adding scale head count it's the design as to why we spend so much time measuring and even being very transparent with our investor base as to how those quota carriers are ramping in productivity one new function that we've added that should help us continue not just add new scaled customers but.
You graduate those from $181 million of Super scale is the combination of what we believe we are building a world class demand generation engine married with an SDR function that just should make those quota carriers more productive. So we don't want to get ahead of ourselves, but it is certainly designed for why we're adding sales head count and why we believe.
And the date of 2025 should be at least a $1 billion number and.
And not just not just sitting at the <unk>, David Yes encourage it just I mean I think it is.
Note that seasonally we expected our scaled customer count to shrink into Q1. So the fact that not only did it not shrink but it grew it was an incredible sign of how the businesses performing.
And and we're very excited about the prospects to continue to grow that scaled customer number the other the other number that I think is really exciting is the super scale customer number right.
You saw that go up fairly dramatically year over year and that's a number that's as I said earlier, we're seeing proof of concepts skip the scaled customer metric and go right to Super scaled contract are super scale customer in this current business environment.
Got it got it no thanks for that and my follow up is it.
Actually on the acquisitions that you announced I did see a press release for one of them Arca Max.
So I guess for that one specifically, how do we think about that acquisition and its ability to drive.
New or maybe enhanced <unk> profiles.
And then I missed the second one maybe I missed the press release or could you talk a little bit more about the other one.
What does that bring to to the data platform and then just lastly on the acquisitions and any sort of contribution from the acquisitions.
And then 'twenty two guys. Thanks, guys for taking my questions.
Yeah, So great great questions first let's start with Arca, Max which is the one we closed in this quarter. We did say although it was it was brief that it'll add $3 $3 $5 million to the estimates this year, which we are bringing up to 553% to $563 million. So it is not.
Really adding a tremendous amount the other one I think you're thinking of <unk> was in Q4, which was aptness.
Those deals.
What I would consider tuck ins at this was a similar size to <unk>. What I would tell you is that we were able to pick up millions of double opted in consumers in some very interesting verticals to our data cloud and what we're really trying to do is continue.
To build that out.
That data cloud around new categories, and additional customers and both of these platforms do exactly that we also were really excited about the management teams in both of those companies just really really great people that we were very excited to bring.
Onto the team so.
I just feel like.
It's important to note that they're not adding a lot of revenue, but they are adding great data they are adding great technology, and they're adding great people and theyre going to be very.
Additive to the data cloud as we extend into new verticals and we wanted to offer additional datasets to existing customers.
Got it thanks, guys. Thanks for taking my questions.
Thank you Koji.
The next question is from Arjun Bhatia with William Blair. Please go ahead.
Perfect. Thank you and congrats on a great Q1, guys.
I wanted to touch on the new scaled customers and actually the Super scale customers. It certainly seems like there's a lot of momentum there.
When you look at these new customers do you get the sense that more and more customers are making platform decisions and buying decisions.
For <unk> as a whole upfront as opposed to saying, Hey, maybe I'll wait a year, maybe two years. It certainly seems like there's a lot of momentum, but we would love to get your perspective and I'm curious.
If theres anything on the product side that you would attribute that strength to whether it's the data cloud and more advanced like you said are the headwinds from the market in terms of third party data.
Any color there would be helpful.
Yes, I think I think you just really nailed it right. So as we're seeing the large tech companies really battling it out right <unk> got all of these guys removing all of their identifiers that is sort of hurting other people in the marketplace. It is causing marketers to me.
Need to make decisions faster and as they look at the efficacy of our platform, which as we have said until we are blue in the face does not require the idea FAA and does not require a third party cookie to measure or identified people.
We're seeing sales cycle timing.
Drink dramatically because they are losing efficacy on a number of platforms. They are looking for platforms that continue to deliver that and I think that's created a little bit of a crisis in the ecosystem and as I was sort of joking the.
Other day as the tide has gone out our ship stayed right where.
All the other ship seem to have gone down and that has played very very well. So when we can sit down with the CMO.
Able to talk about that efficacy compound that with the efficiency right our ability to deliver 10 to one on our software and data sales to them on a return on investment. They are just not able to really get that anywhere else.
Yes.
Then you've got the data is becoming more of a known brand.
And quite frankly, we've spent a tremendous amount of time and a tremendous amount of energy focusing on making data part of the narrative and wind Foster names you number one when the company now trades on the New York Stock Exchange.
We hosted data wise and had some of the worlds marketing luminaries comments speak and work with us.
Those are things that allow enterprises to make faster decisions around their platform purchasing and we're not just seeing more rfps, we're still closing.
At last count over half of the Rfps and engagements, we're being invited into we're doing it faster and I think thats one of the reasons, you're seeing the growth rate, where it is and why we feel so confident that we can raise guidance for the quarter and for the year.
Yes, perfect that's very helpful.
And then one more if I can on the Dun <unk> Bradstreet partnership I was just wondering if theres any.
That you can provide on the traction that youre seeing on the BBW side.
With that partnership.
In particular.
Dnb, which is an incredible company a great partner, we're really excited about the partnership there we're not actually at Liberty to sort of talk specifics there because of the non disclosure agreement with them, but what I can say is we're seeing a lot of deal velocity.
City through them and they've just been they've been an incredible partner so.
Our ability to talk to their customers has been very powerful and back to one of the earlier questions right. So you've got snowflake on one side.
Got forest or on another side and then you have great channel partners like Dnb on the other one.
Okay.
Understood perfect. Thank you and congrats again.
Thank you so much.
Yes.
The next question is from Elizabeth <unk> with Morgan Stanley . Please go ahead.
Hi, Thank you so much for the question I wanted to follow up on your comments about extending the data cloud into new verticals. How do you guys think about the opportunity to drive vertical kind of cloud approach with solutions specific to these verticals and if thats something that youre, considering and then second as a follow up.
Nice uptick into our bill just hoping to get some color on how much is broadening use cases versus increasing usage in existing channels or just landing with larger logos now that youre, having momentum in the Super scale Battle. Thank you.
Two amazing questions Elizabeth let me start with the data cloud vertical integration I think that what we've seen and I think we've said publicly that no vertical makes up greater than 13% of our revenue I'm sure somebody in the room, we've got a cast of thousands here will keep me honest on that but.
We've really found and what we really believe is the ability to stand up vertically focused data clouds is a game changer for the clients and.
The ability to build out vertical integration not just of signals and attributes but of consumers who are directly interested in those verticals over long periods of time.
Is a.
The next step level in what we're thinking about doing.
And we've got some big news coming soon around that we're very focused on it and it's something that we believe will allow us to continue to accelerate growth as we focus on the vertical evasion of the data cloud Chris do you want to jump in on ARPA, Yes, So really quickly.
ARPA Elizabeth really driven by two different factors first as we noted upfront the difference in <unk> between the 100 K two 1 million to the Super scale that 1 million plus is about <unk> 90, 8-K versus 981 K. So as we continue to move those customers to the right that is naturally lifting the <unk> two other elements.
Are also driving it first signing initial contracts at a larger value and we've seen that now for three straight quarters, but also to your question around is it more use cases more utilization of our channels. This quarter in particular, I would highlight as being more channels and we talked about for the first time more than half of the customers using more than one channel. If you look at that to channel.
Cohort, it's now almost a third of all of our all of our scale customers Thats up from mid twenties last quarter, So really happy with the channel expansion, but really big opportunity still in front of us on just growing more of what's flowing through the existing pipes and adding more use cases.
Great. Thank you so much.
Thanks Elizabeth.
The next question is from Ryan Macwilliams with Barclays. Please go ahead.
Thanks for taking the question so with Cookie deprecation from Google coming in the second half of 2023. This has been appointed convention for marketers and our conversations.
Beyond <unk> changes.
With the longer sales cycles in the data business I'm sure seeing RFP activity today on this but David would you expect as we get closer to the deadline, you could potentially see stronger RFP activity for <unk> as we get towards the end of this year.
Yes, I mean, we.
We totally agree.
The truth of the matter is there are some clients moving quickly on this and I do think sort of the elimination of the IV FAA and the sort of.
Efficacy issues a number of the larger platforms are dealing with has led to some accelerated RFP opportunities, but to your point I think the closer we get to the elimination of the third party cookie, which is going to be a game changer from an efficacy.
C perspective.
The higher we will see our RFP velocity go.
As you know right, there's always a big difference between knowing something is coming in a year or two and knowing something is coming in a few months.
And we feel like our platform is really well positioned and we continue to make major investments into innovation around making sure. We stay the leader in this category because we believe it's going to be a very big one yet to come.
Perfect Yeah, nothing drive spend like a deadline.
And then Chris just on guidance you had a larger raise to your full year revenue guide compared to your first quarter beat that kind of makes sense given a lot of the <unk> you talked about.
Just as you've had more conversations with customers any update on your commentary from last quarter on what midterm election revenues look like for <unk> at this point.
No we continue to hold to the 25% to 30% of what we did in 2020 and again.
Mostly directed in the third quarter latter half of third quarter, beginning of fourth quarter, So that would imply right around $1 million or so in the third quarter and three ish and change in the fourth.
Yes.
Yes.
Yes.
We're all playing around with the mute button.
All I was going to say is that we continue to believe the political will be a strong tailwind going into the back half of the year.
I appreciate that if I could squeeze in one more Chris just any seasonality, we should watch out for in the second quarter.
No I think.
The last earnings call in one of our supplemental as maybe like 522 or something like that we showed the distribution of three years of history of how much revenue appears in each quarter, that's probably a pretty safe bet to follow again.
I appreciate the color. Thank you guys. Thanks, a lot Ryan.
The next question is from Jason <unk> with Craig Hallum. Please go ahead.
Thank you guys just one from me so as we look out to the macro it seems there's some increasing concern over the durability of things like programmatic advertising, we've obviously talked about that as a channel you participate and so curious if we see a pullback there do you what would be the fundamental exposure and then what other channels.
Our opportunities can be created where you can offset that.
So great question, Jason Let me, let me say that we don't generally just run programmatic, we're using our data cloud to targeted so we've seen an acceleration to our programmatic business. We also have seen a massive acceleration.
Two our CTV business, so think about the fact that most people running linear TV continue to run their ads alongside of a show that they think might have the demographics that theyre interested in but a very large percentage of the people watching that show some people would estimate 90% or more.
More are not actively in market for those products, we can on a deterministic basis.
Target our CTV AD in the exact same television show that somebody is watching on linear and CTV or OTT, and you're taking 70 or 80% of the expense out of the targeting so as I think I've said, a few times, we truly fee.
Feel that the current environment, where we're seeing greater inflation, we're seeing the very large tech companies sort of battling it out and we're seeing the worry of slowdown is driving customers to use our platform at an accelerated pace because theyre looking at the efficiency.
And the efficacy of that platform that includes our programmatic platform, which is heavily focused on deterministic targeting Chris did you want to ask again, Jason. We also wanted to make sure that we are preparing our guidance and being responsive to the one of the earlier questions around.
Confidence in the numbers, we look deep into sales cycles.
On the multiple solutions and use cases that we give not only do we not see a change from the last quarter to two quarters ago, three quarters, four quarters ago, and four quarters ago, but even quarter to quarter over the last 90 days no change in sales cycles durations and as we talked about in the commentary upfront more and more of the revenue continues to be recurring in nature.
And that's again the outcome of the fact that we're signing more multi year seven figure deals with longer contract durations. So we feel really good about the visibility and the durability of that revenue right now.
Okay.
Alright I appreciate it thank you.
The next question is from DJ Hynes with Canaccord Genuity. Please go ahead.
Hey, Thanks, guys.
Chris you sit here today and you look at kind of how quickly direct revenue has scaled does it make you think like a 20.
20% plus EBITDA margins in 2025 could be 25 or is it early to jump there and maybe like.
Hey, these gross margin savings now, we're going to be kind of funnel than to go to market efforts. How do you think about kind of how quickly that's transpired and how it feeds into long term targets.
Yes, 90 days and to date of 2025, it's tempting to be more optimistic than for the first time, David is probably kicking me under the table that gives us two and a half years of the 20th fabrication.
90 days since we announced it.
Look it is the reason why we say at least but without a doubt we're ahead of pace.
Yes, yes, okay.
One of the questions I get a lot from folks who are doing work on the story for the first time is around this.
Discussed right.
It's an important part of the data asset that Youre building to can you give us any color on operating metrics for that business is growing how do you take it to market what our retention dynamics look like.
I get it a lot so I figured I'd give it to you guys.
Yeah, no. It's a great question I mean, I don't I don't have the exact operating metrics in front of me I can tell you. It is growing nicely, which was the reason the last quarter, we were able to say that our opted in data in the United States went from $225 million to $235 million.
That infers that discussed is growing and we're seeing discussed not just grow we're seeing a continue on at greater than 90% of global market share for commenting and publishing platforms.
I also think it's really important to note because this is one of the things that I get an aha moment, when I say to somebody looking at the story D. J.
One of the $5 2 million and publishers, who use our platform makes up even 110th of 1% of the traffic that is driven to the day to day to cloud.
It's really well distributed and by the way it's simply the anchor tenant of what is greater than 20 data assets that sit in the day to day to Clap. If you look at Arca Max by way of example, you look at Atmos, we're driving millions of opted.
In consumers through those platforms and as we look at growing the data cloud will continue to look for additional sources of data, but discuss has no concentration discuss.
Discuss is growing nicely it is evidenced by the growing of the opted in.
Consumer group from $2 25 to $2 35 in the U S and from $2 40 to $2 55 globally and that is a trend that we really expect will continue and as you think about content on the internet. It continues to grow at an exponential pace.
We are literally embedded into almost every publishing tool for every new website that stands itself up it's just check a button would you like commenting with that.
So literally it drives engagement for the publisher, whether they are a top global <unk>.
Publisher of which 70% you've discussed or they are a block operating out of somebody's basement.
The reality is millions and millions of sites sign up for discuss every single year.
Super helpful color. Thank you guys congrats on the quarter.
Thanks, a lot yes, thanks, everyone for joining the call today, operator, we will turn it back over to you.
Thank you as there are no further questions. This concludes today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
Okay.
Yeah.
Yeah.