Q3 2022 Zeta Global Holdings Corp Earnings Call
Thank you for standing by this is the conference operator, welcome to those data third quarter 2022 earnings conference call. As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation there'll be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad.
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I would now like to turn the conference over to Scott Schmitz Senior Vice President Investor Relations. Please go ahead.
Thank you operator, Hello, everyone and thank you for joining us for <unk> third quarter 2022 conference call before we begin I would like to mention that today's presentation and earnings 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 Greiner 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 earnings release contain forward looking statements regarding our financial outlook.
<unk> plans and objectives and other future events and developments, including statements about the market potential of our product.
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.
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.
We use these non-GAAP measures and maintaining the business and believe they provide useful information for our investors reconciliations of the non-GAAP measures to the corresponding GAAP measures, where appropriate and be found in the earnings presentation available on our website as well as our earnings release and our 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, our third quarter results were an incredible way to celebrate our 15 year anniversary.
Our year over year revenue growth rate further accelerated to 32% or $152 million with adjusted EBITDA of $22 4 million, which was up 40% year over year.
We generated $19 $5 million in cash from operations up 92% year over year with $9 4 million in free cash flow up 152% year over year.
On the back of this momentum we are once again, increasing our fourth quarter and full year 2022 revenue and adjusted EBITDA guidance, which Chris will discuss in further detail shortly.
Zooming out there is no question that the macro environment is creating more uncertainty and driving more scrutiny on how and where enterprises invest.
The pressure for enterprises to improve their ability to acquire grow and retain customers at a lower cost is greater now more than ever.
In the spirit of never wasting a crisis gmos or looking to emerge with a more efficient and effective solution with a better return on investment which data delivers.
Marketing spend tied to measurable outcomes that delivers a strong verifiable return on investment has shifted from one to many objectives to the primary objective.
That is why enterprises continue to invest in first party data and customer data platforms or CDP.
That is why enterprises continue to invest in digital transformation.
That is why enterprises continue to invest in more addressable and accountable methodologies that deliver greater precision and measurable value.
In short we believe the market is moving even closer to Veda sweet spots, where our value proposition shines.
Because we make sophisticated marketing simple and address the requirements for both revenue generation and cost savings or growth rate has continued to accelerate.
The <unk> marketing platform, whereas the EMP was purpose built to improved marketing efficiency and efficacy, bringing marketers and array of benefits with data.
And activation in a single platform.
Meek advantage that we have over our competitors.
By resolving identity with our data cloud, we reduce waste improve personalization and bring more precision measurement.
By enriching our brand's knowledge of their customers, we uncover new insights and unlock new growth opportunities.
And by leveraging our cutting edge technology that is flexible modular and scalable we can wrap around an existing enterprises tech stack.
Using the time to implementation two days or weeks and establishing a land to expand sales motion.
This allows us to generate new relationships, even when most enterprises are looking to reduce their numbers of partners as evidenced by the record 16, new scaled customers. We added this quarter on the back of record RFP activity.
We're replacing multiple incumbents.
As the broad capabilities of our platform enable enterprises to consolidate multiple point solutions and simplify their environment and further cut cost.
The theme of thriving through times of uncertainty was also front and center at our Zeta Live conference a little over one month ago, When New York City with combined in person and virtual viewers of over 8000 people.
The event generated over 1500, new prospects for the company and continue to raise our profile.
Independents, where fortune 500 brands and many of the largest agency holding companies as well as world renowned entrepreneurs marketers and business leaders.
With over half of the 50, plus guest speakers, representing women and people of color. The events panelists were not only exceptional they were also as diverse as the market segments. They represent.
We were excited to bring many of the conversations data has had with marketing leaders on a daily basis into a broader form to help other brands adapt and strengthened their own approach to marketing.
If you missed any of the remarkable content I would encourage you to view a replay of the panels, which are available on our website at <unk> global Dot com.
A good example of an enterprise that made significant strides this quarter was one of the largest consumer goods companies, which began using our CVP to better identify and understand its existing customers and reduce their reliance on paid media channels.
Our agile intelligence product delivered sharp insights and accelerated their time to revenue and ultimately return on investment.
This case study highlights two themes.
Solid dating vendors and driving more activation to our platform.
This starts with a better understanding of an enterprise customers by creating more personalized experiences across channels. Then we're able to help them measure with greater certainty, which continuously makes our AI platform smarter and their results.
<unk> to get better and better.
This is our <unk>.
Realization in action and is what makes our customer relationships sticky with a high degree of visibility.
One of our Fortune 100 customers stated during <unk>.
More data, we put into the CDP the more activation, we deliver through <unk> marketing platform and the better results, we see that.
That same customer identified data is a mission critical partner and expect to allocate more of their spend to us next year.
This virtuous cycle is evidenced in another example.
Leading automotive aftermarket retailer, which was already using status EVP for retention marketing extended their use cases by launching acquisition marketing with audio and CTV channels through the same platform they were able to plan execute.
And measure the efficacy of audio and CTV impressions against in store and online sales.
This is one of the reasons, we saw more than a 250% growth rate in our CTV business this quarter.
And it also highlights the power of our CDP, which was recently identified as one of the largest and fastest growing cdp's.
According to IDC.
As I mentioned in my opening remarks. This past month was our 15th anniversary as a company we celebrated with the day of service across the company as we look to give back to our communities over.
Over the course of this year, we have also begun taking steps towards reducing our carbon footprint. We are working with cloud and technology partners to adhere to GHT standards and make sustainability a business imperative.
I'm incredibly pleased to announce that we are on track to achieve our goal of net carbon neutrality for data in 2022.
I am incredibly proud of the business, we have built and the virtues embraced by our people.
Our founding vision of using data and software to deliver a better and substantially more efficient marketing platform.
<unk> true more than ever in the current environment.
And while we have come a long way as we like to say I'd say that we are just getting started.
I would like to sincerely, thank our <unk> team our customers our partners and all of our shareholders for their ongoing support of our vision.
Now, let me hand, it off to Chris to discuss our results in greater detail Chris.
Thank you David and good afternoon, everyone.
Three themes highlight another very strong set of results all of which we will dive into more deeply.
First we extended our track record of beat and raise execution with accelerating revenue growth and increasing profitability and cash generation.
The third quarter's outperformance was broad based across industries channels and use cases as well as throughout our <unk> 2025 Kpis.
Serving as a powerful demonstration of our ability to execute through a tough macro backdrop, along with demonstrating our business models balance and our value propositions durability.
And third on the back of this momentum we are raising fourth quarter and full year 2022 guidance for revenue and adjusted EBITDA.
With momentum across the business.
Our confidence is increasing we can exceed our target of at least $1 billion in revenue and at least 20% adjusted EBIT margins by 2025.
Now, let's dive into the results.
While our overall business grew 32% this quarter.
Elevated 30% plus growth rate has been evident across multiple areas of our business for many quarters now.
Revenue in the third quarter was up 36%, representing 96% of total data revenue and year to date U S is up 32% year to year.
Scaled customer revenue was up 34% year to year now representing 98% of total data revenue year to date scaled customer revenue was up 30% year to year.
Direct platform revenue was up 33% year to year, representing 74% of data revenue and on a year to date basis direct revenue was up 35% year to year at a mix of 78% and.
And once again.
Six out of our top 10 industries grew 25% or more.
We also executed ahead of plan against our five data 2025 Kpis.
Scaled customer count grew from $373 <unk> to 389% and <unk> and is up 42, compared to <unk> 21, or up 12% year to year.
In fact year to date, we've added three times more scaled customers versus a year ago.
Pacing twice as fast as our <unk> 2025 model of 6% scaled customer count growth year to year.
Digging in a layer deeper provides context into the quality of new customer additions. We continue to make speaking first to their size, we added six new super scaled customers quarter to quarter, bringing our total to 106 greater than 1 million customers.
Our breadth of industry contribution perspective up to 16, new scaled customers. We added nine came from consumer retail three came from technology media, while the remaining four came from advertising and marketing among others.
In terms of new versus existing of the incremental 16 net new scaled customers added five were new to data and 11 were existing customers that became scaled in the quarter as our go to market model working as designed.
And finally in terms of linearity just like in <unk>, you saw steady additions and scaled customers each month of the quarter, adding six in July three in August and seven in September .
This acceleration in new customers reflects the growth of our pipeline, which is up 50% year to year, coupled with our strong win rates.
And contributing to pipeline expansion as our growing IP analysts industry recognition from Forrester, Gartner and IDC, which has translated into third quarter RFP activity up 70% year to year.
Scaled customer ARPA grew 19% year to year and <unk> <unk> ahead of the data 2025 model of 14% year to year growth.
<unk> expansion is the continued growth in super scaled customers, whose average annualized ARPA of $4 $5 million is more than 10 times greater than the 100000 to 1 million cohort of 375000 ARPA.
The sales motion moving scaled customers to Super scaled customers is cross selling more channels and use cases.
This quarter, the average channels per super scaled customer increased by 25% year to year to $2 six and the number of scaled customers using more than one use case grew by 36% year to year to 39, and this is a big future opportunity for <unk>.
These data points speak to the strong productivity of our hunters and farmers and the outstanding leadership of our Ciros and their sales leads.
And because we are seeing a strong ROI on our sales and marketing investment we continue to add quota carrying head count consistent with the data 2025 plan we communicated in February .
In that setting from a sales capacity perspective year to date, we have 121 quota carriers pacing to our year end projection of 120 to 130 quota carriers, but it's not just about quantity quality matters, most our sales academy training programs and product certification.
<unk> enable our sales teams to ramp quickly while our sales management systems are in viewing a sales excellence culture.
We continue to experience good stickiness and we are tracking to our full year guidance range for net revenue retention of 110% to 115% for total data.
Third quarter direct revenue mix was 74% with year to date mix of 78%, which compares to 75% year to date in 2021.
This leaves third quarter integrated platform revenue mix of 26% higher than a year ago up 19% due to channel mix and political candidate revenue, which was $3 million in the quarter and $2 million better than what we assumed in our third quarter guidance.
As I spoke about in our second quarter call. We expected the seasonal mix change, which is the driver of our cost of revenue percentage, increasing <unk> by 100 basis points to 37, 8%.
Worth, noting despite the same revenue mix as a year ago, our cost of revenue is better by 90 basis points through better scale and a more favorable mix with indirect channels.
Bringing it altogether, we remain on track to reduce cost of revenue by 200 basis points. This year well ahead of our annual data 2025 model of 60 basis points.
On a GAAP basis, our net loss was $69 million, which includes 75 million of stock based compensation.
Excluding the accelerated expenses related to our IPO stock based compensation would've been $16 million.
From an expense to revenue perspective, we continued to drive strong operating leverage in R&D and G&A, both of which decreased by 120 basis points and 170 basis points year to year, respectively, excluding stock based compensation.
These points of leverage helped to generate $22 4 million of adjusted EBITDA up 40% year to year with 14, 7% adjusted EBITDA margin up 90 basis points year to year.
Finally from a cash perspective. It was also a strong quarter as we remain focused on driving higher conversion rates.
Year to date, 42% of our adjusted EBITDA converted to free cash flow up from 7% through the first three quarters of 2021.
Cash flow from operating activities was $19 $5 million with free cash flow generation of $9 4 million up 152% year to year.
We ended the quarter with a cash balance of $115 million after using $4 3 million for our share repurchase program.
Now I will transition to our increased 2022 guidance.
Based on the strong underlying fundamentals of our business, we are increasing our fourth quarter and full year 2022 guidance, putting us ahead of pace to achieve our data 2025 plan.
And like last quarter, even with this increase we believe guidance continues to have a derisked profile.
Full details including guidance ranges can be found on slide 14 of our earnings supplement.
For the fourth quarter of 2022, we're increasing the midpoint of revenue guidance by 2 million to $160 million up 19% year to year.
And for clarity, we're assuming $4 million a political candidate revenue contribution in the fourth quarter no change from prior guidance assumption.
We're increasing our fourth quarter adjusted EBITDA by 300000 to $29 5 million up 29% year to year, and representing 18, 4% margin at the midpoint of guidance.
Combination of our third quarter upside and higher fourth quarter outlook raises the midpoint of our full year 2022 revenue guidance by $13 million to $576 million, representing 26% growth year on year.
On an adjusted EBIT basis, we're increasing the midpoint of our full year 2022 guidance to $89 3 million up 41% year to year.
At the midpoint of our increased full year guidance adjusted EBITDA margins would expand 170 basis points year to year to 15, 5%.
And as I've stated before where some 19, a culture of high performance and a track record of consistent and predictable execution.
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 Youll hear a tone acknowledging your request.
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Our first question is from Ryan Macdonald with Needham. Please go ahead.
Hey, guys. This is Matt Shea on for Ryan Macdonald. Thank you for taking the question and congrats on a on a really nice quarter here. So first wanted to start with the 16, new scaled customers.
Some strong growth there with the five upsells that seems to be tracking ahead of expectations. So just curious you know what is driving these strong upsells and then our understanding is the upsells are not included in the 2025 outlook.
So given the kind of strong contributions how is that changing your long term vision.
Hey, Matt good to hear from me a couple of data points first on the mix of the net new <unk> added five were actually new to data and 11 were existing customers. So just kind of on the highlights there and I'll go through and hand, it to David on on how we make them bigger and how we bring them in.
Kind of on the go to market motion, but just some stats for you that I think are important that speak to not just the record number of 16 that we added but in our view why it was such a quality number. So I think first starting with the linearity across the quarter.
We added six in the month of July we added three in the month of August and seven in September So really just a nice distribution across the quarter.
The size was great, adding six new super scaled over 1 million customers is.
It really really powerful for us I think it's over 24% growth on that number year over year in.
In terms of.
The industry representation industry is probably you and I would suggest it will be under pressure right now macro nine of the 16 King consumer retail.
There are three came from.
<unk> technology and media another two in advertising marketing and there were a couple of others sprinkled in terms of the other industries. So it was a really good quality results and David will speak to how we make them bigger well I also want to point out that I think that what Chris just pointed out is emblematic of what we're seeing in the marketplace right.
Cmos are under more pressure than ever to focus on the efficiency of their marketing dollars there.
Being their Ceos are coming down every day and saying how do we do more with our existing budget and one of the reasons, we were able to win so many of these clients was our sales motion starts with a pilot that starts with a 50 or $100000 test, where we're testing in the mark.
But when we take their data we put it into with CDP, we match it to our data ecosystem and we're able to really re architect the journey that every one of their existing high quality customers, followed before becoming one of their customers and we're able to then go find others.
In the over 235 million Americans, who are opted into our data cloud today, and we're able to take out of the marketing funnel all of the people who either would not be interested in their products are not currently in market for their product or wouldn't be credit approved for their product in certain cases.
By removing all of that excess youre able to target on the people who are in market qualified for your products and wants your products. So you are able to be substantially more efficient and were able to move through that sales motion of a $50 to $100000 test and we were able to move as we said 16 customers.
Pretty quickly into <unk>.
Scaled customers and I think also as Chris pointed out I'm also really excited we were able to have a.
Very large increase in our super scale customers and we think that we can continue to move from pilots to scaled to super scaled.
As the efficiency of the platform the data and the artificial intelligence get smarter and smarter.
We have case study after case study that the longer a platform and.
In enterprise uses our platform the more efficient the marketing gets the better the return on investment for the enterprise client the more they spend on the <unk> marketing platform, Matt One thing I wanted to point out on your question around being incremental to the model Youre correct in that.
We modeled our approved growth and data 2025 on channels and the addition of channel. So as you heard in the prepared remarks, we grew the average channels per scaled customer by 15%. We're now at $1 94 per and we added another 24% in terms of channel growth for Super scale customers. They are now at an average of two six but to your point.
What's incremental to the model is the expansion of use cases and as I talked about in this quarters call. We now have 39 of our 389 scaled customers, there's still a big big opportunity for us that are now using more than one use case, that's up 36% year over year that is the piece that you are correct is incremental to our approved but the channels is built into it.
Just to be clear clarify.
Yes.
Great. Thanks next question please.
Thanks, Matt.
Okay.
The next question is from Jason <unk> with Craig Hallum. Please go ahead.
Thanks, guys and congrats on just a phenomenal quarter.
I wanted to ask about the Super scale customers are there any metrics you can give on that the timeframe to get to that super scaled level and then any callouts just in terms of the use cases or the channels, where youre seeing some acceleration that's getting to those customer that is helping customers get to that level more rapidly.
Yes, so what I would say is it really does differ by customer Jason how quickly they scale.
We have said and what I'll continue to say it.
Is.
We're seeing faster growth from <unk>.
Pilots.
Okay.
First to super scaled customers than we've ever seen before and I think that is.
As you know.
Shown in the record scaled client growth.
I don't know if we can say that this was a super scaled client.
Both record, but I can't remember ever adding this many before but the reality is that.
What's happening today is in.
This sort of time of uncertainty, we are seeing clients grow faster than ever as they're consolidating from multiple vendors to a one point solution, which quite frankly I think we're the only company I know of that can be that true single point solution and we are seeing.
Them consolidate those spends onto our platform faster than they have in the past. The other thing. We've said is we continue to be at record RFP.
Request and I think a lot of that is also what's going on in the market. So.
Listen as Machivelli, one said never waste a crisis and we are investing heavily into our sales team our sales motion and we are making sure that we're getting the word out I think <unk> alive.
I want to reiterate again.
Not only did we have over 8000 people attend either in person or virtually but we generated over 1500 high quality leads for the company to have our sales team go really get after so we're really seeing at a really exciting time right now at <unk> Chris.
Yes.
Jason on the.
Kind of some color around the channel growth and use case growth CTV continues to be a great stand out.
It's incredible a year ago. It was in that low single digits percentage of usage on the platform. It's now gotten into double digits, which is great. Its growth was 250%, but back to kind of the broad based strength in the quarter all of our channels grew very strong double digits. So it was it was a nice distributed performance even setting aside CTV is outstanding.
In terms of use cases.
All grew year over year, which is I think another testament to the balance.
The acquiring grow use cases are really firing so thats.
And that continues to be a good thing thats, just a bit more color to your question.
Yeah.
That's great. Thank you.
The next thanks, Jason.
Pardon me. The next question is from Elizabeth <unk> with Morgan Stanley . Please go ahead.
Hi, great. Thank you so much.
Just a question.
Our guidance implies about.
In 2019 growth year over year compared to.
Just over 30 that you did in Q3, so just wanted to figure out what sort of conservatism have you baked in for macro just given that usually Q4 is a pretty strong quarter.
The assumptions that you are including into the outlook. Thank you.
Hi, Elizabeth always great to hear from you I think that.
What we're focused on right now is executing and we're seeing the business executing extremely well at the same time, we're trying to make sure that we put out as conservative our guidance as we possibly can we now I think Chris will correct me, if I'm wrong, but we beat and raised.
Six quarters in a row as a public company.
And we want to make sure that we continue to put ourselves in a position that we can do so we're not seeing anything in the business today that is quote unquote slowing down.
You would also look at the fact, we are seeing.
Sizable growth in the business, we had a pretty big fourth quarter last year. So we're putting ourselves in a position where we can continue to be successful, but we're not seeing.
Quote deceleration in the business.
Got it and then I just had a quick follow up on the impressive kind of new customer adds.
I know that the partnership with AWS and Snowflake has an opportunity to kind of introduced to new customers.
Is that starting to have a benefit or is that still a separate opportunity that we should kind of look forward to in the future that hasn't yet shown up in results.
That's actually a great question Elizabeth the answer is that we're seeing more deal flow from strategic partners than we've ever seen before but.
Quite frankly, it has not resulted in what youre seeing in the current results I think it's going to continue to fuel the business going into next year.
And we will help us continue to grow the business at a sizable pace what I would tell you is that a number of clients that we have engaged.
Have been.
Because we're integrated into AWS and because we're integrated into snowflake. They havent come in through those channels, Although I would say that a big part of the record Rfps that we're seeing are now coming through those channels. If you know what I'm, saying, so I think they are.
Been incredibly important partners from a credibility and a technology perspective to date I think they will be incredibly important clients from a new scaled customer adds going into the foreseeable future. Chris does that makes sense, yeah, yeah, Tony Thanks, a lot.
Thank you.
The next question is from Arjun Bhatia with William Blair. Please go ahead.
Perfect.
And congrats on a.
On another great quarter, guys I wanted to maybe just continuing on this theme of the customer additions I mean, it's not just customer additions right I think youre seeing pretty good ARPA growth youre seeing large customers youre seeing your super scaled customers add.
Add to your cohorts, but when you just think about the business for 2023, we know we're entering a little bit more of an uncertain macro here.
Does that do what does this traction that youre seeing today with new customers do for your confidence in your 2023 growth growth plans and then.
What does it do Chris for visibility into your future revenue stream now that you have a more.
A larger and more established base of customers that you can sell into alright, if things do get tougher.
Youre right I mean, what we've said is that our confidence is increasing that we can exceed the 2025 plant and we think it's why it was so important for us to not just throw the javelin on the revenue and were profit could be but to give you and our investors the mile markers along the way of scale customer count of <unk> <unk>.
Mix of net revenue retention, so that we have the same yard stick for the type of progress Youre, making we'll talk about 2023 and February .
But you should leave this call feeling like our confidence has only been increasing with the quarters that we're putting up.
And Youre right in terms of the Super scaled customers. They have a higher net revenue retention rate than those that are $102 million, which makes them very sticky easier to predict.
And rely upon but also theres, a 10 X difference in the <unk> for greater than 1 million customer versus a 100 K $10 million as David said, the faster and faster, we're getting them to that million plus.
You can almost see the moving as fast past that million dollars to the average of what is now over 4 million per David without touching on 2023, because obviously, we have not given guidance on that I think we'll do that in February right right Chris.
We believe that the times of uncertainty and the potential of a downturn is a net benefit to our firm I don't want us insinuate, where counter cyclical what I wanted to insinuate is that as times get tougher.
Marketers inside of companies look for new methodologies to cut cost.
We are the single most efficient marketing platform that I'm aware of in the marketplace and when you think about that at scale.
We're seeing and what we have publicly said is we currently are dealing with record RFP requests in fact, we're hiring people to try to respond to all of the Rfps that we're getting.
And then you couple that with Zain alive coming out with 8000 people attending.
1500 high quality leads which for US of course is a big chunk and you look at where the business is executing.
I'd actually argue that that as things get more turbulent it's actually a net benefit to us and we don't want to waste. This crisis, we are continuing to add great salespeople.
To reiterate again, we said we'd get to 120 to 130 by the end of the year. We said were above 120 now that's quality, we're still pruning the ones that are not exceptional and we would've had a much higher number had we not pruned what I would also tell you is that.
As times get uncertain.
We get better flow of potential salespeople and engineers, so as we're seeing the marketplace.
We're beating other companies on Rfps, the salespeople, who were working for those other companies are calling us and saying we want to come over here one of the metrics, we didn't get into today that Chris and you can't get into every metric on every call is how incredibly fast our new salespeople or getting to their first <unk>.
<unk> I know, it's faster than we've ever seen in the past and a lot of that is the quality of people. We're on boarding the sales motion our sales University and in a downturn I think we'll be able to accelerate hiring of great people and I think we'll see more enterprises willing to take the risk on a pilot.
When we can come in and say, we can cut your cost to create maintain and monetize customers by up to 50%.
Perfect.
That's super helpful. And then maybe just the lag.
Last one for me and David you kind of touched on it a little bit there, but I was hoping to put a finer point on it is when you think about investing not just in the go to market motion, but also in and developers and product. How are you approaching that at this time should we expect.
A balance between growth profitability are you leaning one way or another as the market evolves here.
I think one of the great things about our budgeting process and how flexible we are as we build our robo budget. So we sort of look at the first quarter before we make all of our investment decisions for Q2 with Q2 for Q3, So we don't take any meaningful risk there although.
Before I throw it over to Chris to give better detail on that I've been speaking and I regularly speak to a lot of business leaders and.
It's funny I continue to hear from a lot of other business leaders my business is executing incredibly well I'm seeing my pipeline full I'm seeing more requests than I've seen in the past, but I'm really nervous because of all of the noise out there and everybody talking about it I think we'd be naive.
If we werent at least thinking about how we would roll forward that investment, but we're prepared to make the investments we need to execute on the business that we're closing we can do it on a rolling basis, which I think gives us a lot of flexibility, Chris and origin, we'll do what we said we would do and the date of 2025.
Plan, So as David mentioned earlier, we will continue to invest in sales and marketing.
We've said it will grow on an absolute dollars basis, as fast or slightly faster than revenue growth and on R&D and G&A like you saw this quarter, where the R&D or was that a 120 basis points in the G&A ETR was better 170 with similar mix last quarter and <unk>, we will get efficiencies.
What the team has done exceptionally well continue to utilize our global footprint for both R&D and G&A. So we can add people at a very compelling cost point.
And we've done so I think thats something we will continue to focus on.
Thanks, Alright, very quick question from me you guys.
Thank you.
The next question is from Richard Baldry with Roth Capital. Please go ahead.
Thanks could you talk a little bit about the competitive win rates I'm sort of curious as the RFP percentage our growth in Rfps goes up so much are those more competitive or are you seeing sort of the same people involved are they somehow less competitive because they are only targeting a limited number of vendors that they invited.
That's a great question as usual rich.
So I would expect the percentage of Rfps, we close to.
To actually lower as a percentage from a win win rate perspective, like you can't quadruple the number of Rfps and still win 50 plus percent of them right, but what we're seeing as we continue to win a disproportionately high percentage of them substantially higher than our.
Our market share.
Yes.
As we get a bigger reputation we're just naturally going to start to get some rfps that the company literally just has to go out to RFP and doesn't want to change our existing vendor.
And we used to not even bother to respond to those because we didn't have the bandwidth to respond to them. We're now responded because we want to show those companies, even if they're not seriously considering leaving our RFP response might be we could sit alongside of them because to remind you as <unk>.
No.
One of the great things about our platform is we can wrap around an existing tech stack. So if another company is the CRM of record we can become the customer acquisition platform. If another company is using a particular agency for their customer acquisition versus a software platform like ours and doing it internally it is very easy.
For us to plug into the CRM.
So I think we're going to we haven't really tabulated I think we actually did win over half last quarter, but at the end of the day I would expect that percentage to trail down to the thirty's or forty's.
But if you've got four times as many rfps in your closing 33% of them, that's better than closing, 50% of that that 25% number and we're trying to keep our eye on the ball here, where we are coming up against them and to answer the second part of your question, we're not seeing any new <unk>.
Trends into our ecosystem right. There's only so many companies that can handle the type of scale enterprise that we can handle.
And we're seeing a couple of the very large incumbents fall off the map almost completely and we're seeing a couple of the very large incumbents continue to win as enterprises look at their total suite of products, which does which includes many products we don't sell.
We're not in the Salesforce automation play and we're not in the publishing world, but as we are even seeing companies that centralize on those guys come back to us and say Hey can you wrap around this and help us with this component.
Then one for Chris.
Good to see the buybacks or startup you would.
Talked about using more on a cash flow than drawing down the balance sheet, but it was still under half of what your free cash flow was this quarter. So sort of curious your thought process around how aggressive you expect to be on that either finishing up the year on a go forward basis overall thanks.
Yes, you are right, we devoted $4 3 million towards the programs. What we said is that we we've kind of earmarked in our own.
<unk>, if you will anywhere around 50%, maybe as high as 75%, but probably more likely 50% of the free cash flow. We generated so we're kind of right on plan for this quarter I remember 99694, and free cash flow of $4, two and buyback we were slightly below that.
But I think we'll continue to target around 50%.
Thanks Rich great. Thanks.
The next question is from DJ Hynes with Canaccord Genuity. Please go ahead.
Hey, guys. Congrats on the results and nice to hear the continued pipeline strengths I have two questions for Chris So.
I'm often asked by investors.
About visibility into variable or usage based revenue can you just quantify how much that accounts for how you think about forecasting that part of the business.
Any color on kind of the commitments that are made to you on that front that would be helpful.
Yes, I think the simplest way to think about it and one of our customers said this satellite which is the more data they run through our CDP. It results in the more they want to activate and it's that activation that happens that's the point of ROI realization and Thats what <unk>.
Tells them to continue to double down and spend more.
On that part of our revenue stream. So as long as we continue to tie our result to the ROI that they see and they get it in a very fast time to value that revenue becomes very easy to predict it's frankly, when working with my team on the planning side.
It's one of the fastest models they are able to pull together because theres. So many customers.
With so much predictable replenishment.
And for many of our contracts since we've said are getting longer in duration.
Has only added to our ability to predict it forecasted and rely on it as a solid revenue stream.
Yes, Okay, that's helpful and good to hear.
And then the follow up would be look we have year to date of 2025 targets 200 million plus in EBITDA Youre clearly tracking ahead of that for now what do you think free cash flow conversion on that $200 million in EBITDA might look like have you put any thought to that.
We get the question a lot from.
The analyst community and investors, it's certainly something that we're considering updating as part of our 2023 and an update on the date of 2025 in February .
But I think the progression that you've seen from where we are today versus where we were a year ago. We've got 42% conversion year to date that compares to 7% year to date last year.
The way that we're running the business is we're driving very profitable contracts and we're having more and more of a drop to the free cash flow line, but I would expect that to be something we comment on in more detail. When we are in February .
Yes that sounds like a plan well congrats on the results. Thanks guys.
Thank you. Thank you.
Once again, if you have a question. Please press Star then one.
The next question is from Ryan Macwilliams with Barclays. Please go ahead.
Thanks for taking the question, we'd see re straight quarters of accelerating top line.
Given your improving market opportunity any additional interest in adding new features to acquisition, maybe any areas in particular that might make sense there.
Yes, so thank you Ryan I think listen we.
Ben I think over the years incredibly opportunistic as it relates to M&A and.
We're going into a period of time, where I think.
You could see some opportunities that are out there.
We.
Feel like we have developed internally the vast majority of the sort of features and functions we need in the platform, but as you know we're always looking to add additional great people. We're always looking to add additional data that is proprietary and differentiated.
Rated in the marketplace.
And we continue to believe that.
The future of marketing is going to be with Cdp's and CTV and as we look out onto the landscape. We think there are some interesting potential opportunities, but I want to reiterate again and I want to be super clear about this.
Data has never done a transformative acquisition and we have none currently on the road map right. We continue to focus on smaller businesses, where we can pick up great people and great products and wrap them into our platform and now rolled them out to our.
<unk> thousand plus global enterprise clients, and we will continue to look at that.
But.
We're always sort of on the lookout for deals and.
No.
Always looking to do interesting tuck ins.
Appreciate the color there and it's also nice to see that the scaled customers are using more than one use case, that's up 36% year over year and a use case in particular, that's particularly resonating with these scale customers, maybe CDP or opportunity explore a little more color there.
Yes.
Yes, CTV and CDP with David said.
As we see as our.
Big Big future growth products or the products being most added by super scale customers and scale customers.
Sure thing, we debuted at <unk> alive, which I am Super excited about is our agile intelligence product, which it's really the evolution of the opportunity explore Orion.
That does is not only does it put all of the data at the fingertips of the marketer. It puts all of the data at the fingertips of the business intelligence assets inside our enterprise clients. So they are able to use that data to figure out everything from where should they put their next.
Physical location to where should they be investing the next best marketing dollar.
And as we evolve Internet I'm sorry.
We have evolved our explore product to the agile intelligence product I think it just is going to go to the next level now I am old that I talked about internet explorer instead of opportunity explore but.
I Hope you all know what I've.
I have met [laughter].
So we got to make sure I appreciate the color. Thanks, so much guys.
Thanks Ryan.
This concludes the question and answer session I would like to turn the conference back over to David Steinberg for any closing remarks.
We feel like.
We did an exceptional job this quarter it really comes down to the people that we haven't data we have some of the most amazing people I've ever had the honor of working with and you are seeing People's grit Youre seeing their focus and you're seeing it first.
Through a global pandemic now youre seeing it through probably the first rising interest rate environment that the vast majority of them have ever experienced in their careers. Most of them are not sort of old like me.
And youre seeing it in an environment, where competition is as tough as ever our people continue to be what drives us to the next level grit hard work and wanting to win is really the culture that we focus on here and I will tell you I.
Could not be more proud of this quarter I could not be more proud of this team and I could not be more proud to be the leader of <unk> Global and I Hope everybody has a great day week and month take care bye.
This concludes today's conference call you may disconnect your lines.
You for participating and have a pleasant day.
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