Q1 2024 Zeta Global Holdings Corp Earnings Call

Operator: Greetings and welcome to the Zeta First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Scott Schmitz, Senior Vice President of Investor Relations. Thank you. You may begin.

Greetings and welcome to the <unk> first quarter 2024 earnings conference call.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

It is now my ear to introduce Scott Smith Senior Vice President of Investor Relations. Thank you you may begin.

Scott Schmitz: Thank you, Operator. Hello, everyone, and thank you for joining us for Zeta's first quarter 2024 conference call. Today's presentation and earnings release are available on Zeta's Investor Relations website at investors.zetaglobal.com, where you will also find links to our SEC filings, along with other information about Zeta. Joining me on the call today are David Steinberg, Zeta's co-founder, chairman, and chief executive officer, and Chris Greiner, Zeta's chief financial officer.

Scott Smith: Thank you operator, Hello, everyone and thank you for joining us for <unk> first quarter 2024 conference call.

Scott Smith: 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.

David A. Steinberg: Joining me on the call today are David Steinberg Davis, co founder Chairman and Chief Executive Officer, and Chris Greiner Data's, Chief Financial Officer.

Scott Schmitz: 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, business plans and objectives, and other future events and developments, including statements about the market potential of our products, potential competition, revenues of 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.

David A. Steinberg: 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 business plans and objectives and other future events and developments, including statements about the market potential of our products potential competition revenues of our product.

David A. Steinberg: And our goals and strategies.

David A. Steinberg: These statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected.

Scott Schmitz: 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 in managing our business and believe they provide useful information for our investors. Reconciliations of the non-GAAP measures to the corresponding GAAP measures, where appropriate, can be found in the earnings presentation available on our website, as well as in our earnings release and other filings with the SEC. With that, I will now turn the call over to David.

David A. Steinberg: 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.

David A. Steinberg: We use these non-GAAP measures and managing our business and believe they provide useful information for our investors reconciliations of the non-GAAP measures to the corresponding GAAP measures where appropriate can be found in the earnings presentation available on our website as well as our earnings release and other filings with the SEC.

David A. Steinberg: With that I will now turn the call over to David.

David A. Steinberg: Thank you, Scott. Good afternoon, everyone.

David: Thank you Scott good afternoon, everyone and thank you for joining US today 2024 is off to a great start in the first quarter of 2024, we delivered revenue of $195 million up 24% year over year with adjusted EBITDA of <unk>.

David A. Steinberg: And thank you for joining us today. 2024 is off to a great start. In the first quarter of 2024, we delivered revenue of $195 million, up 24% year over year, with adjusted EBITDA of $30.5 million, up 27% year over year, and our adjusted EBITDA margin of 15.6% expanded 40 basis points year over year. Our strong competitive position, combined with the structural forces propelling our momentum, gives us the confidence to raise our 2024 full-year guidance by $25 million to $900 million at the midpoint.

$35 million.

27% year over year, our adjusted EBITA margin.

David: Teen, 6% expanded 40 basis points year over year.

David: Our strong competitive position combined with the structural forces propelling our momentum gives us the confidence to raise our 2020 for full year guidance by $25 million to $900 million at the midpoint this translates into 24% year.

David A. Steinberg: This translates into 24% year-over-year revenue growth, an acceleration from the 23% growth we achieved last year. This accelerated full year growth rate is the result of strong visibility into key revenue drivers, including the marketing cloud replacement cycle, the rebound of the automotive and insurance sectors, the ramp of our agency business, and the hyper growth of our artificial intelligence platform. Behind each of these drivers is the need to make AI more actionable with more relevant personalization, more impactful marketing programs, and more measurable return on investment.

David: Over year revenue growth and acceleration from the 23% growth we achieved last year.

David: This accelerated full year growth rate is the result of strong visibility into key revenue drivers, including the marketing cloud replacement cycle, the rebound of automotive and insurance sectors. The ramp of our agency business and the hyper growth of our artificial intelligence platform.

David: Behind each of these drivers is the need to make AI more actionable with more relevant personalization more impactful marketing programs and more measurable return on investment.

David A. Steinberg: Our AI-powered marketing cloud, the Zeta Marketing Platform, or ZMP, delivers actionable intelligence by seamlessly integrating Zeta's proprietary data cloud with an enterprise's first-party data to uncover consumer attitudes and activities to determine intent and unlock better consumer experiences and, therefore, better results. More importantly, enterprises can transform their data assets into a competitive advantage while protecting their customers' privacy and the integrity of their ecosystem.

David: Our AI powered marketing cloud the Zeta marketing platform for CMP delivers actionable intelligence by seamlessly integrating Adas proprietary data cloud within enterprises first party data to uncover consumer attitudes and activities to determine.

David: Intent and unlock better consumer experiences and therefore better results.

David: More importantly enterprises can transform their data assets into a competitive advantage, while protecting their customers' privacy and the integrity of their ecosystems.

David A. Steinberg: Our value proposition is resonating with chief marketing officers as they seek new tools to capitalize on the power of AI and replace legacy marketing clouds with first-generation CDPs that are not delivering on their promises. Marketers are looking for modern marketing technology platforms like the ZMP that leverage Gen AI to drive top-line growth and improve operational efficiency without sharing their data back to the collective. We're also seeing accelerated growth as we gain greater traction in the broader ecosystem, including our expansion with agencies, systems integrators, and technology alliances.

David: Our value proposition is resonating with chief marketing officers as they seek new tools to capitalize on the power of AI and replace legacy marketing clouds with first generation CVP that are not delivering on their promises.

David: Marketers are looking for modern marketing technology platforms like the <unk> debt leverage Gen AI to drive topline growth and improve operational efficiency with our sharing their data back to the collective.

David: We are also seeing accelerated growth as we gain greater traction in the broader ecosystem, including our expansion with the agencies system integrators and technology alliances.

David A. Steinberg: Each of these provides an incremental source of high-quality demand generation with deals that enter the pipeline pre-qualified and closer to the decision stage. For example, we recently won a seven-figure platform deal with a large financial services company that closed in only four months. We were quickly able to prove that the ZMP will modernize their marketing technology stack, unifying their customer data, and enabling rich segmentation and engagement in one single platform.

David: Each of these provide an incremental source of high quality demand generation with deals that enter the pipeline pre qualified and closer to the decision stage.

David: For example, we recently won a seven figure partner sourced platform deal with a large financial services company that closed in only four months.

David: We were quickly able to prove that the <unk> will modernize their marketing technology stack.

David: Define their customer data and enabling rich segmentation and engagement in one single platform.

David A. Steinberg: Whether a deal is sourced through a partner or directly by our sellers, we are winning because the ZMP delivers marketers more predictable, profitable, and measurable growth. For instance, last year, we implemented a pilot program at a large specialty retailer of high-quality products for the home to help them acquire new customers.

David: Whether a deal was sourced through a partner or directly by ourselves we are winning because the DNP delivers marketers more predictable profitable and measurable growth.

David: Instance, last year, we implemented a pilot program at a large specialty retailer of high quality products for the home to help them acquire new customers, we delivered performance when 30% above the required kpis driven by actionable intelligence in the CMP.

David A. Steinberg: We delivered performance 20% above the required KPIs driven by actionable intelligence in the ZMP, which helped identify new customers with in-market intent signals. Our performance was validated by the brand's internal analytics team, which, in turn, should open additional budget for 2024 with expansion across multiple channels. Let me transition to product updates from our last call. In Q1, we launched our generative intelligent agent composer store. This allows customers to easily build and share agents within the platform across a variety of use cases.

David: Which helped identify new customers with in market intent signals.

David: Our performance was validated by the brand's internal analytics team, which in turn should open additional budget for 2024 with expansion across multiple channels.

Speaker Change: Let me transition to product updates from our last call.

Speaker Change: In Q1, we launched our generalist intelligent agent composer store. This allows customers to easily build and share agents within the platform across a variety of use cases.

David A. Steinberg: In a short amount of time, over 300 virtual agents have already been built and created. In Q2, we're adding more advanced automation, making agents customizable with clear and actionable outcomes. This automation translates agent conversations into platform actions like onboarding data, building audiences, campaigns, reports, and more. One early example is an agent created by an internal team that reduced the campaign workload by 70 percent, saving our team 400 hours of work per month.

Speaker Change: In a short amount of time over 300 virtual agents have already been built and created.

Speaker Change: In Q2, we're adding more advanced automation, making agents configurable with clear and actionable outcomes.

Speaker Change: This automation translates agent conversations to platform actions like Onboarding data building audiences campaigns reports and more.

Speaker Change: One early example is an agent created by an internal team that reduce the campaign workload by 70% shaving our team.

Speaker Change: <unk> hundred hours of work per month.

David A. Steinberg: Our intelligent agents are becoming an enterprise's virtual data scientist, providing better information and driving a better ROI. Security and governance are at the core of these agents, ensuring that customer data is never shared outside of Zeta.

Speaker Change: Our intelligent agents are becoming an enterprise's virtual data scientists.

Speaker Change: Providing better information and driving a better ROI.

Speaker Change: Security and governance are at the core of these agents ensuring that customer data is never shared outside of data.

David A. Steinberg: Switching to mobile, where our vision is to connect the mobile channel to intelligence within our CDP and data cloud. This is where the Zeta ID gives us a strong competitive advantage by allowing us to identify people across the ecosystem. In the near term, we are working to deliver native push and SMS capabilities with a longer-term goal of creating conversational capabilities powered by our Gen-Aid engine, Zoe.

Speaker Change: Switching to mobile where our vision is to connect the mobile channel to intelligence within our CDP and data cloud.

Speaker Change: This is where the data it gives us a strong competitive advantage by allowing us to identify people across the ecosystem.

Speaker Change: In the near term, we are working to deliver native push and SMS capabilities with a longer term goal of creating conversational capabilities powered by our Gen AI engine Zoe.

David A. Steinberg: We believe our mobile capabilities will allow enterprises to take advantage of our master orchestration to enhance their omni-channel strategy. We are continuously working to strengthen our competitive position through internal development and remain opportunistic regarding accretive transactions that can enhance our platform or accelerate our time to market. We look forward to showcasing all our AI and mobile capabilities at our Zeta Live conference scheduled to be held on September 26th later this year in Q1.

Speaker Change: We believe our mobile capabilities will allow enterprises to take advantage of our master orchestration to enhance their omnichannel strategies.

We are continuously working to strengthen our competitive position through internal development and remain opportunistic regarding accretive transactions that can enhance our platform or accelerate our time to market.

Speaker Change: We look forward to showcasing all our AI and mobile capabilities at our <unk> conference scheduled to be held on September 26 later this year.

Speaker Change: In Q1.

David A. Steinberg: I was also incredibly proud that Zeta was certified as a great place to work in both the United States and India. This is the highest form of recognition an employer can achieve globally, and it demonstrates the impact that our investment in our people and our culture has had over the past several years. In summary, we are off to a very strong start in 2024, as we continue to capitalize on the need for more efficient and effective marketing programs and more modern marketing technology that empowers enterprises to capitalize on the transformative power of AI.

Speaker Change: It was also incredibly proud that data was certified as a great place to work in both the United States and India. This.

Speaker Change: This is the highest form of recognition employer can achieve globally and it demonstrates the impact that our investment in our people and our culture has made over the past several years.

In summary, we are off to a very strong start in 2024 as we continue to capitalize on the need for more efficient and effective marketing programs and more modern marketing technology that empowers enterprises to capitalize on the transformative power of AI.

Speaker Change: As always I would sincerely like to thank our customers our partners teams data and all our shareholders for the ongoing support of our vision.

David A. Steinberg: As always, I would sincerely like to thank our customers, our partners, Team Zeta, and all our shareholders for the ongoing support of our vision. Now, I will turn it over to Chris to discuss our results in greater detail. Thank you, David.

Speaker Change: Now, let me turn it over to Chris to discuss our results in greater detail Chris.

Christopher E. Greiner: As you said, it was a very strong start to the year indeed, highlighted by an increase in visibility from new customer wins and rapid expansion of existing customers, which is leading to a big step up in revenue and adjusted EBITDA guidance. To that end, my remarks today will focus on two key topics. First, a run-through of the results with an update on the green shoots we're seeing from several of 2024's growth catalysts, namely outlining the automotive and insurance verticals' return to growth, and discussing our progress scaling recently signed large agency hold codes.

Christopher E. Greiner: Thank you David.

Christopher E. Greiner: As you said it was a strong start to the year. Indeed highlighted by an increase in visibility from new customer wins and rapid expansion of existing customers, which is leading to a big step up in revenue and adjusted EBITDA guidance.

Christopher E. Greiner: To that in my remarks today will focus on two key topics.

Christopher E. Greiner: First I'll run through the results with an update on the Green shoots we're seeing from several of 2024 as growth catalysts, namely outlining the automotive and insurance verticals returned to growth.

Christopher E. Greiner: Discussing our progress scaling recently signed large agency holdco.

Christopher E. Greiner: Providing an update on political candidate spending and sharing sales productivity and pipeline conversion metrics with large enterprise customers. And then I'll close by detailing the increase in our second quarter and full year guidance along with how our growth drivers are incorporated into the outlook. All right, let's dive in by starting with the results.

Christopher E. Greiner: Providing an update on political candidates spending and sharing sales productivity and pipeline conversion metrics with large enterprise customers.

Christopher E. Greiner: I'll close by detailing the increase in our second quarter and full year guidance, along with our growth drivers are incorporated into the outlook.

Christopher E. Greiner: Let's dive in by starting with the results.

Christopher E. Greiner: In the first quarter, we delivered $195 million in revenue, up 24% year-to-year. The $8 million of upside versus the midpoint of guidance was broad-based. We ended the quarter with 460 scaled cuts, which, as a reminder, account for 98% of total Zeta revenue and spend at least $100,000 on a trailing 12-month basis.

Christopher E. Greiner: In the first quarter, we delivered $195 million in revenue up 24% year to year.

Christopher E. Greiner: The $8 million of upside versus the midpoint of guidance was broad based.

We ended the quarter with 460 scaled customers, which as a reminder account for 98% of total data revenue and spend at least $100000 on a trailing 12 month basis.

Christopher E. Greiner: This was up 8% from 4Q and 49% or 12% from a year ago, at the high end of our 8% to 12% growth model. Taking into consideration typical 4Q to 1Q seasonality, this was consistent with what we added sequentially last year. But what really stood out was the rate at which customers scaled up. The growth rate of our 1 million plus superscaled cohort accelerated 31% year-to-year, an increase from 131 in 4Q23 to 144 in 1Q24. To put this into perspective, the sequential jump of 13 is the highest increase we've ever seen. A couple of data points worth noting on the scooper-scaled income.

Christopher E. Greiner: This was up eight from <unk> 49, or 12% from a year ago at the high end of our 8% to 12% growth model.

Christopher E. Greiner: Taking into consideration typical <unk> seasonality. This was consistent with what we added sequentially last year, but what really stood out was the rate at which customers scaled up.

Christopher E. Greiner: The growth rate above 1 million plus super scaled cohort accelerated 31% year to year and increased from 131, and <unk> 23 to 144 and <unk> 24.

Christopher E. Greiner: To put this into perspective, the sequential jump of 13 is the highest increase we've ever seen.

Christopher E. Greiner: A couple of data points worth, noting on the Super scale increase.

Christopher E. Greiner: First, all 13 customers scaled up from the 100k to 1 million cohort, a strong demonstration of our land, expand and extend sales model, and a good illustration why over 90% of our revenues are generated from customers with us for over a year. And second, while few of those were agencies, most were large enterprise expansions across a breadth of industries, ranging from technology, consumer, and retail, and travel and hospitality. Growth in the superscaled customer count led to double-digit ARPU growth.

Christopher E. Greiner: First all 13 customers scaled up from the 100 K to 1 million cohort a strong demonstration of our land expand extend sales model and a good illustration by over 90% of our revenue is generated from customers with us over a year.

Christopher E. Greiner: And second while a few of those where agencies most for large enterprise expansions across a breadth of industries ranging from technology.

Christopher E. Greiner: <unk> retail and travel and hospitality.

Christopher E. Greiner: Growth in Super scaled customer count led to double digit ARPA growth.

Christopher E. Greiner: Tailed customer ARPU in the first quarter grew 11%, an increase from the 7% year-to-year growth in 4Q23 and at the high end of our 8% to 12% growth model. This was driven by customers using two or more channels, which increased over 30% year-to-year. We also grew our quota carrier count, going from 136 at the end of 2023 to 142 at the end of the first quarter, with a solid pipeline of candidates entering the second quarter as well.

Christopher E. Greiner: Customer <unk> in the first quarter grew 11% an increase from the 7% year to year growth in <unk> 23, and at the high end of our 8% to 12% growth model.

Christopher E. Greiner: This was driven by customers using two or more channels, which increased over 30% year to year.

We also grew our quota carrier count going from 136 at the end of 2023 to 142 at the end of the first quarter with a solid pipeline of candidates entering the second quarter as well.

Christopher E. Greiner: Our established practice of hiring experienced sellers with marketing domain and industry vertical expertise, along with providing comprehensive training curriculum, is leading to increasing sales productivity metrics. Comparing today's group of less than 12-month tenured sellers to the average of the prior three cohorts, so going all the way back to 2021, the most recent classes' average time to close improved by almost a month, or 20% to four months.

Christopher E. Greiner: Our established practice of hiring experienced sellers with marketing domain and industry vertical expertise along with providing comprehensive training curriculum is leading to increasing sales productivity metrics.

Christopher E. Greiner: Comparing today's group of less than 12 months tenured sellers to the average of the prior three cohorts so going all the way back to 2021. The most recent classes average time to close improved by almost a month or 20% to four months at the same time, our greater than 12 months tenured sellers.

Christopher E. Greiner: At the same time, our greater-than-12-month tenured sellers' win rates, signings, and pipeline stats all increased as their tenure gets longer on the platform. Increasing sales productivity is translating to progress in our 2024 growth catalog. First, we saw both the automotive and insurance verticals return to growth in the first quarter, 90 days sooner than we expected.

Christopher E. Greiner: When rates signings and pipeline stat, all increase as their tenure gets longer on the platform.

Christopher E. Greiner: Increasing sales productivity is translating to progress on our 2024 growth catalysts.

Christopher E. Greiner: Their combined growth still trails total Zeta, but we have good visibility to the remainder of the year by virtue of having recently signed contracts and, in other cases, progressing new sales opportunities forward in the pipeline. Our outlook assumes the two combined industries will grow double digits year over year in 2024. Second, we're starting to see the sales pipeline build for political candidate revenue and would anticipate activity picking up later this summer. As we sit here today, we're not making any changes to our Political Candidate Revenue Guidance assumptions of $15 million in 2024, with $2 million in 2Q, $5 million in 3Q, and $8 million in 4Q.

Christopher E. Greiner: We saw both the automotive and insurance verticals returned to growth in the first quarter 90 days sooner than we expected the combined growth still trailed total data, but we have good visibility to the remainder of the year by virtue of having recently signed contracts and in other cases progressing new sales opportunities forward in the pipeline.

Christopher E. Greiner: Our outlook assumes the two combined industry is growing double digits year over year in 2024.

Christopher E. Greiner: Second we're starting to see the sales pipeline build for political candidate revenue and would anticipate activity picking up later this summer as.

As we sit here today, we're not making any changes to our political candidate revenue guidance assumptions of $15 million in 2024 with $2 million and <unk> 5 million in <unk> and $8 million in <unk>. This is detailed on slide 18 in the earnings supplemental presentation. So all of the guidance increase as I'll discuss later exclude.

Christopher E. Greiner: This is detailed on slide 18 in the Earnings Supplemental presentation. So all of the guidance increases I'll discuss later exclude incremental political candidate revenue. Third, while we've talked a lot recently about our expansion with agencies, and I'll do so more in a moment, our first quarter's expansion of ARPU and super-scaled customers was also driven by large enterprise customers. And fourth, our advancement with large agency hold codes. It's still in its early stages, but expanding rapidly. We are now working with the five largest agency hold codes.

Christopher E. Greiner: <unk> incremental political candidate revenue.

Christopher E. Greiner: Third while we've talked a lot recently about our expansion with agencies and we'll do some more in a moment, our first quarter's expansion of RPM and Super scaled customers was also driven by large enterprise customers.

Christopher E. Greiner: And fourth our advancement with large agency hold goes it's still in its early stages, but expanding rapidly.

Christopher E. Greiner: We are now working with the five largest agency holdco.

Christopher E. Greiner: What's so compelling about the opportunity is that this represents dozens of agencies and hundreds to thousands of brands that account for a large portion of the enterprise marketing budget. Agencies are pivoting to this platform for several reasons. First, we help them win new business. Zeta's insights and data intelligence identify new audiences and personas for the agency's clients to target. And Zeta's artificial intelligence recommends intent-driven omni-channel activation strategies, resulting in more efficient and higher ROI campaigns.

Christopher E. Greiner: What's so compelling about the opportunities that this represents dozens of agencies and hundreds to thousands of brands that account for a large portion of enterprise marketing budgets.

Christopher E. Greiner: Agencies are pivoting and status platform for several reasons.

Christopher E. Greiner: Second, we help them offer incremental products like client data enrichment. This enables new cross-selling opportunities for the agency and makes them stickier.

Christopher E. Greiner: We help them win new business.

Christopher E. Greiner: Data insights and data intelligence identifies new audiences and personas for the agencies clients to target <unk> artificial.

Christopher E. Greiner: Official intelligence recommends intent driven omni channel activation strategies, resulting in more efficient and higher ROI campaigns.

Christopher E. Greiner: Second we.

Christopher E. Greiner: We help them offer incremental products like client data enrichment. This enables new cross selling opportunities for the agency and makes them stickier.

Christopher E. Greiner: And third we.

Christopher E. Greiner: We provide deterministic people-based measurement attribution, as opposed to cookie-based. This allows agencies to drive better outcomes and the ability to prove their ROI attribution to clients. Each of our agency hold co-relationships is at different stages, ranging from four years on the platform at a larger scale to those just beginning to rank. We have good visibility into this dynamic going into 2024, which is why on our last earnings call, we said it was prudent to assume a similar revenue mix and percentage of cost of revenue profile in 2024 as we saw exiting 2023. I think that continues to be a good assumption.

Christopher E. Greiner: We provide deterministic people based measurement attribution as opposed to cookie based this allows agencies to drive better outcomes and the ability to prove their ROI attribution to clients.

Each of our agency holdco relationships are at different stages, ranging from 40 years on the platform at a larger scale to those just beginning to ramp.

Christopher E. Greiner: We had good visibility into this dynamic going into 2024, which is why on our last earnings call. We said it was prudent to assume a similar revenue mix and percentage of cost of revenue profile. In 2024. As you saw exiting 2023, I think that continues to be a good assumption.

Christopher E. Greiner: This is because new hold codes on the platform often start with integrated channels, primarily social networks like Facebook, YouTube, and others, which have a lower margin profile in the mid-30s. These newer HOCOs are also using direct channels, and our plan is to grow their direct channel mix, meaning use of Zeta's CDP, email, demand-side platform, and CTB as their spend increases with Zeta. We're simply early in our partnership selling cycle today, as slide 12 in our earnings supplemental illustrates.

Christopher E. Greiner: This is because new holdco is on the platform often start with integrated channels, primarily social networks, like Facebook, Youtube and others, which have a lower margin profile in the mid thirties.

Christopher E. Greiner: These newer holdco as Theyre also using direct channels and our plan is to grow their direct channel mix, meaning use of data CDP email demand side platform and CTV as their spend increases with data.

Christopher E. Greiner: We're simply early in our partnership selling cycle today at slide 12 in our earnings supplemental illustrates.

Christopher E. Greiner: With this dynamic in mind, our direct revenue mix in 1Q was 67%. Importantly, the margin profile of our direct revenue continues to hold firm in the mid-70s range. Overall, Data's cost of revenue in the quarter was 39.4%, up 490 basis points year-to-year but an improvement of 80 basis points quarter-to-quarter, which was slightly better than our expectation of 40%. Staying on some of our other profit metrics, our first quarter net loss was $40 million, which included $53 million of stock-based compensation. Excluding the accelerated expensing related to our IPO, stock-based compensation would have been $30 million.

Christopher E. Greiner: With this dynamic in mind, our direct revenue mix and <unk> was 67%.

Christopher E. Greiner: Importantly, the margin profile of our direct revenue continues to hold firm in the mid Seventy's range or.

Raul data as cost of revenue in the quarter was 39, 4% up 490 basis points year to year, but an improvement of 80 basis points quarter to quarter, which was slightly better than our expectation of 40%.

Christopher E. Greiner: Staying on some of our other profit metrics, our first quarter GAAP net loss was $40 million, which includes 53 million of stock based compensation.

Excluding the accelerated expenses related to our IPO stock based compensation would have been $30 million.

Christopher E. Greiner: And once you total off X for only 10% of your year, excluding stock-based compensation, and is down 570 basis points as a percentage of revenue. Our disciplined expense management and better sales productivity resulted in continued year-over-year adjusted EBITDA margin expansion, our 13th straight quarter of doing so. In the quarter, we generated $30.5 million of adjusted EBITDA, up 27% year-to-year, with 40 basis points of margin expansion to 15.6%. Cash flow from 1Q operating activities was $25 million, up 23% year-to-year, with free cash flow of $15 million, up 51% year-to-year.

Christopher E. Greiner: And once you total opex were only 10% year year, excluding stock based compensation and is down 570 basis points as a percentage of revenue.

Christopher E. Greiner: Our disciplined expense management and better sales productivity resulted in continued year over year adjusted EBIT margin expansion, our 13th straight quarter of doing so.

Christopher E. Greiner: In the quarter, we generated $35 million of adjusted EBITDA up 27% year to year with 40 basis points of margin expansion to 15, 6%.

Christopher E. Greiner: Cash flow from <unk> operating activities was $25 million up 23% year year with free cash flow of $15 million up 51% year to year.

Christopher E. Greiner: This brings me to my final topic, our Increased 2024 Revenue and Profit Guide. With structural forces driving our momentum, the expansion and visibility we have into the sales pipeline, and the strong productivity of our sellers, we're increasing our revenue and adjusted EBITDA outlook for each quarter in 2024. Details can be found on slide 17 in our earnings supplemental.

Christopher E. Greiner: This brings me to my final topic, our increased 2020 for revenue and profit guidance.

Christopher E. Greiner: With structural forces driving our momentum the expansion and visibility we have into the sales pipeline and strong productivity of our sellers were increasing our revenue and adjusted EBIT outlook for each quarter in 2020 for.

Christopher E. Greiner: Details can be found on slide 17, and our earnings supplemental.

Christopher E. Greiner: For the full year of 2024, we're increasing the midpoint of revenue guidance to $900 million, representing 24% growth year-over-year. This is a $25 million increase from our prior guidance, well above the $8 million upside we achieved in Q1, and represents an acceleration of full-year growth in 2023. As mentioned earlier, none of the increase is attributable to higher political candidate revenue assumptions.

Christopher E. Greiner: For the full year of 2024, we're increasing the midpoint of revenue guidance to $900 million, representing 24% growth year over year.

Christopher E. Greiner: This is a $25 million increase from our prior guidance well above the 8 million upside to be achieved in Q1 and represents an acceleration of full year growth through 2023.

Mentioned earlier, none of the increase was attributable to higher political candidate revenue assumptions those remain constant from our prior guidance of $15 million for the full year.

Christopher E. Greiner: These remain constant from our prior guidance at $15 million for the full year. For the second quarter of 2024, we're increasing the midpoint of revenue guidance by $8 million to $212 million, up 23% year-to-year. In terms of adjusted EBITDA, we're increasing the midpoint of 2024 guidance to $171 million, representing a year-over-year increase of 32% or 19% margin. For the second quarter of 2024, we're increasing the midpoint of 2024 guidance by $1.3 million to $35.5 million, a 32% year-over-year or 16.8% margin.

Christopher E. Greiner: For the second quarter of 2024, we're increasing the midpoint of revenue guidance by $8 million to $212 million up 23% year on year in terms of adjusted EBITDA, We're increasing the midpoint of 2024 guidance to $171 million, representing a year over year increase of 32% or 19.

Christopher E. Greiner: Margin for.

Christopher E. Greiner: For the second quarter of 2024, we're increasing the midpoint of adjusted EBIT guidance by $1 3 million to $35 5 million up 32% year to year or 16, 8% margin.

Christopher E. Greiner: We continue to expect full-year free cash flow in the range of $75 million to $85 million. We started the year with a wide free cash flow range, and with these increases, we can see scenarios where we start to gravitate to the higher end of the range. The gating factor here is simply the timing of collections from newer agency customers, who we've discussed previously have longer payment cycles than our enterprise clients.

Christopher E. Greiner: We continue to expect full year free cash flow in the range of $75 million to $85 million.

Christopher E. Greiner: Started the year with a wide free cash flow range with these increases we can see scenarios, where we start to gravitate to the higher end of the range.

Christopher E. Greiner: <unk> factor here is simply the timing of collections from newer agency customers, who we've discussed previously have longer payment cycles than our enterprise customers.

Christopher E. Greiner: In summary, there's obviously a lot we're happy about. And with the increased visibility, we feel very good about the increased guidance. Our growth panelists are showing green shoots. We're seeing encouraging returns on investments across product development, sales, and marketing. And we're creating deeper and stickier relationships with our enterprise and new agency customers. It's good when all those vectors are pointing upward. Now, let me hand the call back to the operator for me and David to take your questions. Operator?

Christopher E. Greiner: In summary, there's obviously a lot we're happy about and with the increased visibility we feel very good about the increased guidance.

Christopher E. Greiner: Our growth catalysts are showing green shoots we're seeing encouraging returns on investments across product development sales and marketing.

Christopher E. Greiner: And we are creating deeper and stickier relationships with our enterprise and new agency customers.

Speaker Change: It's good when all of those vectors are pointing up now let me hand, the call back to the operator for me and David to take your questions operator.

Operator: Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For the purchase of engineering speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Elizabeth Porter with Morgan Stanley. Please answer your question.

Thank you ladies and gentlemen at this time, we'll be conducting a question and answer session.

Speaker Change: If you'd like to ask a question you May press star one on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in the question queue.

Speaker Change: You May press Star two if you would like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: Our first question comes from the line of Elizabeth quarter with Morgan Stanley. Please proceed with your question.

Elizabeth Mary Elliott Porter: Hi, Thank you so much.

Elizabeth Mary Elliott Porter: Hi, Thank you so much I wanted to ask about the agency side of the business looking at your slide 12, it looks like a tuck with the first relationship about three years to get to 10 brands.

David A. Steinberg: I wanted to ask about the agency side of the business. Looking at your slide 12, it looks like it took with the first relationship about three years to get to 10 brands. But now you're scaling with 10 plus brands already within the first year of some of the newer relationships. So I just wanted to ask, you know, what are some of the factors that you think are helping you now land larger with some of those more brands just off of year one? And second, any go-to-market motions that you're running in terms of helping shift that direct versus integrated mix faster than what you've seen previously? Thank you.

Elizabeth Mary Elliott Porter: But now you're scaling with 10 plus brands already within the first year of some of the newer relationships.

Speaker Change: Just wanted to ask you what are some of the factors that you think are helping you know land larger with some of those.

Speaker Change: More brands just off of year, one and then second any go to market motion that youre running in terms of helping shift that direct versus integrated mix faster than what you've seen previously thank you.

David A. Steinberg: Thank you, Elizabeth. I appreciate the question. First, as it relates to starting bigger, we're just better known. It used to be that we would go into an agency holdco, and we would have to spend a tremendous amount of time educating them on who we are. Now what we're finding is when we go in, and I think, as Chris mentioned in his prepared remarks, we're up to five global agency holdcos, we're seeing them land faster, which, by the way, leads to your second question, right? Because when you get to your second question, it's, "How do we migrate them over?"

Speaker Change: Thank you Elizabeth I appreciate the question first as it relates to starting bigger.

Or just better now it used to be we would go into an agency holdco and we would have to spend a tremendous amount of time educating them on who we are now what we're finding is when we go in and I think as Chris mentioned in his prepared remarks, we're up to five global agency Holdco, we're seeing.

Speaker Change: Land faster, which by the way leads to your second question right because when you get to your second question is how do we migrate them over and the efficacy and efficiency of using our on platform versus integrated platform is substantially higher.

David A. Steinberg: And the efficacy and efficiency of using our on-platform versus integrated platform is substantially higher. We are making sure that we're getting in front of the decision-makers faster as it relates to that. And I would say that the current mix of on-platform versus integrated platform is at its lowest point, and we will begin to see it come up in the next few quarters to where it would traditionally be.

Speaker Change: So.

Speaker Change: We are making sure that we're getting in front of the decision makers faster as it relates to that and I would say that we believe that the current mix of on platform versus integrated platform is at its low point and we will begin to see it come up in.

Speaker Change: In the next few quarters to where it would traditionally be Chris was that it took us in that first large agency holdco.

Christopher E. Greiner: Elizabeth, it took us in that first large agency, Holdco. That first year's direct revenue mix was around 7%, and as you noted, in year three, it was around, you know, north of 70%. Year two was like 40, so it's not as if it's like a hockey stick.

Christopher E. Greiner: Chris? Elizabeth, it took us an

Speaker Change: That first year's direct revenue mix is around 7% and as you noted in year three it was around north of 70% you're too was like 40. So it's not as if it's like a hockey stick. We don't expect we expect the the more recent signings to have that same nice kind of linear pacing to it back to what David said, we help them win new business, we often cross.

Christopher E. Greiner: We don't expect, we expect the more recent signings to have that same nice kind of linear pacing to them. Back to what David said, we helped them win new business, we helped them cross sell, we're now providing them with client data enrichment opportunities, and because we're people-based in our attribution as opposed to cookie-based, they can use Zeta's data to drive a verifiable ROI. In terms of the go-to-market motion, you know, we don't have just social sellers, we don't have just CTV sellers, we don't have just email sellers.

Speaker Change: Cells, we're providing now client data enrichment opportunities and because where people based <unk> as opposed to cookie based they can use adas data to drive verifiable are aligned in terms of the go to market motion.

Speaker Change: We don't have just social sellers, we don't have just CTV sellers, we don't have just email sellers or sellers are selling the platform right theyre selling the intelligence and the insights and an omni channel activation strategy. Just so happens that these agencies as David said at the beginning are starting with social but it's in their clients' best interests to leverage.

Christopher E. Greiner: Our sellers are selling the platform, right? They're selling the intelligence and the insights and an omni-channel activation strategy. It just so happens that these agencies, as David said in the beginning, are starting with social, but it's in their clients' best interest to leverage Zeta's data cloud and Zeta's intelligence on our direct channels, and we expect the similar sales motion that that first agency hold code went through over time to be mimicked by these now, these new four that are starting the ramping process.

Speaker Change: <unk> data cloud and data intelligence on our direct channels and we expect the similar sales motion that that first agency Holdco went through overtime to be mimicked by those now that these new four that are starting to ramping process with us.

David A. Steinberg: Great, thank you so much. And just as a follow-up, I wanted to ask about some of the intelligent agent side. It was really impressive to hear about the 300 agents. You're just curious how you view some of the engagement there. Is a lot of this still kind of in testing and pilot phases? Or is it really being adopted more widely? And what are some of the factors that you think customers need to see in order to drive more meaningful adoption? Yes,

Speaker Change: Great. Thank you so much and just as a follow up I wanted to ask on some of the intelligent agent side really impressive to hear about the 300 agents.

Speaker Change: Just curious how you view some of the engagement. There is a lot of this still kind of in testing and pilot phases or is it billing being adopted more widespread and what are some of the factors that you think can you just customers need to see in order to drive.

Speaker Change: The more meaningful adoption.

David A. Steinberg: Yeah, so first of all, we think we are the first marketing cloud to market with Build Your Own Agent. And quite frankly, we were even surprised by the level of uptake from our clients. And internally, you know, these 300 agents represent thousands of potential use cases. And what we're seeing, I think like a lot of people, is that we're seeing a lot of focus on efficiency to start with the intelligent agency. So how do they build, you know, virtual data scientists using their own data for the first time, using our generative AI platform in the form of the intelligent agent?

Speaker Change: Yes. So first of all we think we are the first marketing cloud to market with build your own agent and.

Speaker Change: Quite frankly, we were even surprised with the level of uptake from our clients and internally.

Speaker Change: These 300 agents represent.

Speaker Change: Thousands of potential use cases, and what we're seeing I think like a lot of people as we're seeing a lot of focus on efficiency to start with the intelligence agencies. So how do they build.

Speaker Change: Virtual data scientists using their own data for the first time, using our generative AI platform in the form of the intelligent agent.

David A. Steinberg: And obviously, that's driving revenue growth for us, as you saw in the results and the rays of guidance. So, we're seeing that uptake, we're seeing the adoption, we think that's going to continue, but I'm very, very excited about the level of uptake and the level of... Utilization. We're seeing clients, Elizabeth, who are using this, really using it. They're not setting it up and using it once. We're seeing it being really used. And we're seeing, you know, a meaningful increase in platform utilization from clients who have done so.

Speaker Change: And obviously, that's driving revenue growth for US is as you saw.

Speaker Change: The results and the raise of guidance.

Speaker Change: So we're seeing that uptake we're seeing the adoption, we think thats going to continue.

Speaker Change: I'm very very excited about the level of uptake in the level of.

Speaker Change: Utilization, we're seeing clients Elisabeth who are using this really using it theyre not setting it up and using it once where we're seeing it being really used.

Speaker Change: We are seeing.

Speaker Change: A meaningful increase in platform utilization from clients, who have done that.

Elizabeth Mary Elliott Porter: Great. Thank you so much. Congratulations on the quarter.

Speaker Change: Great. Thank you so much congrats on the quarter.

Speaker Change: Thank you.

Clark Wright: Our next question comes in the line of Clark Wright with D. A. Davidson. Please continue with your question.

Speaker Change: Our next question comes from the line of Clark right with D. A Davidson. Please proceed with your question.

Clark Wright: Hi there, great quarter. Just wanted to maybe start off.

Clark: Either a great quarter.

Clark: Wanted to maybe start off.

Clark Wright: And if you could possibly just quantify how growth in the agency

Clark: If you could possibly just quantify how growth in the agency business that impacted the direct revenue mix since it was down six points from <unk> and where do you see this trending over the course of the year.

Zachary Cummins: Unknown Executive, Zachary Cummins, Zeta Glo Hldg

Christopher E. Greiner: I think the direct revenue mix in the first quarter, at 67%, is going to be the low point that we see. It's our expectation that the direct revenue mix will look a heck of a lot like how it ended in 2023, and that the percentage cost of revenue profile would also follow how we ended the fourth quarter of 2023, which was around 40% on a cost of revenue basis. You know, our plan is, and this is to Elizabeth's point, if you follow the trajectory of the first large agency, Holco, we started to work with now four plus years ago, in their early time frame, they were around 7% of the mix, and they expanded that to 76%, you know, in that range. So we think the same agencies that have now signed with us, these recently new four, would follow a similar pattern over time.

I think the direct revenue mix in the first quarter at 67% is going to be the low point that we see.

Clark: Our expectation that the direct revenue mix will look a heck of a lot like how it ended in 2023 and that the percentage cost of revenue profile would also follow how we ended the fourth quarter of 2023, which was around 60 40.

Clark: 40% of the cost of revenue basis.

Clark: Sure.

Clark: Our plan is and you know this is too Elizabeth point, if you followed the trajectory of the first large agency Holdco. We started to work with now four plus years ago and their early timeframe. They were around 7% mix and they expanded that to 76% in that range. So we think these same agencies that have now signed with us He's recently new four.

Clark: Would follow a similar pattern over time, and we see indication of that already and quite frankly, even though we saw a slight drop in direct versus integrated you saw that our cost of revenue went down from Q4 into Q1, I think that's because of the integrated platform.

Christopher E. Greiner: And we see indications of that already. And quite frankly, even though we saw a slight drop in direct versus integrated, you saw that our cost of revenue went down from Q4 to Q1. I think that's because the integrated platform, I'm sorry, that's because the direct platform continues to be, you know, very, very solid. And we expect both of those trends to continue as we then move the agencies to on our platform versus integrated.

Clark: Alright, that's because of the direct platform continues to be.

Clark: Very very solid and we expect both of those trends to continue as we then move.

The agencies.

Clark: On our platform versus integrated.

Christopher E. Greiner: Got it. I appreciate that color. Now, if I could hear the second one, could you also talk about the company's initiatives to drive increased channel usage and any trends you were seeing in terms of the way that brands are engaging with prospective and current customers?

Speaker Change: Got it I appreciate that color then if I could here for the second one could you also talk about the company's initiatives to drive increased channel usage and any trends youre seeing in terms of the way the brands are engaging with prospective and current customers.

Christopher E. Greiner: You can actually see it in a couple places this quarter really meaningfully. The first is, you know, the significant increase quarter over quarter in super-scaled customers. So those are customers that spend over a million dollars with us on a trailing 12-month basis. That grew 13.

Christopher E. Greiner: You can actually see it in a couple places.

Speaker Change: With you can you can actually see it in a couple of places this quarter really meaningfully the first is the.

Speaker Change: The significant increase quarter over quarter and Super scale customers. So those are customers that do over $1 million with us on a trailing 12 month basis that grew 13, that's the highest we've ever seen on a sequential basis since we've been tracking the metric now over a number of years and then if you look at the same time, the double digit strong 11% scale customer ARPA growth.

Christopher E. Greiner: It's the highest we've ever seen on a sequential basis since we've been tracking the metric now for a number of years. And then if you look at the same time, the double-digit, strong 11 percent scaled customer ARPU growth, that's an acceleration from the 7. And now you look at the channel usage part, the number of our scaled customers that are using two or more channels grew over 30 percent year-over-year. It had...we had good growth across the channel base. CTV was, you know, in the low 40s; the rest of the channels were in strong double-digits. So we're seeing good adoption across the different channel mix that we offer our customers.

Speaker Change: It's an acceleration from the seven and now you look at the channel usage part the number of our scaled customers that are using two or more channels grew over 30% year over year.

Speaker Change: It had we had good growth across the channel D. C. T V was in the low forties.

Speaker Change: Rest of the channels, we're in strong double digits. So we're seeing good adoption across the different channel mix that we offer our customers.

Speaker Change: I appreciate it thank you.

Speaker Change: Okay.

Richard Kenneth Baldry: Our next question comes from the line of Richard Baldry with Roth. Please proceed with your question.

Speaker Change: Our next question comes from the line of Richard Baldry with Roth. Please proceed with your question.

Richard Kenneth Baldry: Thanks and congrats again on the quarter.

Richard Kenneth Baldry: Thanks, and congrats again on the quarter.

David A. Steinberg: Can you talk about, you know, under what acceleration scenario might you have to increase your rate of internal spending? I mean, it's a broader question about how much, you know, automation and leverage you have sort of in your fixed versus variable as the top line is picking up beyond what we'd expected. So, you know, Rich, first of all, thank you.

Richard Kenneth Baldry: Could you talk about under one acceleration scenario might you have to increase your rate of internal spending.

Richard Kenneth Baldry: It's a broader question about how much.

Richard Kenneth Baldry: Automation and leverage you have sort of in your fixed versus variable as the top line is picking up beyond what we had expected.

Speaker Change: So rich first of all thank you it's interesting because if you look at a lot of the companies that are putting results out obviously, they've massively increase their investment into AI think the differences. We started doing this seven or eight years ago. So we don't see a material step up needed, but it is <unk>.

David A. Steinberg: It's interesting because if you look at a lot of the companies that are putting results out, obviously, they've massively increased their investment in AI. I think the difference is we started doing this seven or eight years ago. So, we don't see a material step-up needed. But it is interesting that in our budget for this year, we will invest more money in innovation than in any prior year. So, we are increasing our investment in innovation, but we're doing it in an environment where our revenue and our gross profit dollars are growing dramatically faster than we are making those investments.

Speaker Change: Interesting in our budget for this year, we will invest more money into innovation than in any prior year. So we are increasing the investment in innovation, but we're doing it in an environment, where our revenue and our gross profit dollars are growing dramatically faster than we're making those IND.

Speaker Change: Investments.

David A. Steinberg: And, you know, as I think I've said before, it really appears as if the bets we made years ago on putting data and artificial intelligence as native to the application layer were not just where the puck was going, so to speak. They are really where the puck is today. And I don't see a material step up as a percentage of revenue. But we are investing heavily, and that's already in what we're forecasting for this year.

Speaker Change: And as I think I've said before.

Speaker Change: It really appears as if the bets we made yeah.

Speaker Change: Years ago on putting data and artificial intelligence is native to the application layer, where not just where the puck was going so to speak they are really where the puck is today and.

Speaker Change: And I don't see a material step up as a percentage of revenue, but we are investing heavily in thats already in what we're forecasting for this year.

Richard Kenneth Baldry: And for those who don't live in the agency ad world, could you talk a little about the

Speaker Change: And for those that don't don't live in the agency AD World you talk a little about sort of the scale of the number of customers that builds would represent and sort of <unk>.

David A. Steinberg: A little about sort of the scale of the number of customers that those would represent and sort of, you know, contrast that with obviously your penetration rate or, and then maybe think about the budget per customer and how far along that curve you think you are with maybe your most mature agency. Yeah, I mean, just to put it in perspective, the five agency holding companies we work with spend over $100 billion a year on marketing.

Speaker Change: Contrast that with obviously your penetration rate or and then maybe think about the budget per customer and how far along that that curve. Do you think you are with maybe your most mature agency customer.

David A. Steinberg: So even with our mature partner, we are just scratching the surface. Now, I think back to Elizabeth's original question; we are focusing on migrating those clients, those agencies, on to being direct versus indirect. But I think that we are just scratching the surface. I mean, to put it in perspective with our largest client, in this ecosystem, I don't think we are 1% of their business. So I think we have a lot of headroom.

Speaker Change: I mean, just to put it in perspective, the five agency Holdco as we work with spend over $100 billion a year in marketing so even with our mature partner. We are just scratching the surface now I think back to Elizabeth <unk> original question, we are focusing on migrating those clients those agencies onto being due.

Speaker Change: Direct versus indirect but I think that we are just scratching the surface I mean to put it in perspective with our largest client.

Speaker Change: In this ecosystem.

Speaker Change: I don't think we are 1% of their business. So.

Speaker Change: I think we have a lot of headroom I think we have meaningful relationships with these agency hold cosan and by the way they see us as part of their solution set as Chris has said they are winning clients with US we are our entire strategy is to make our clients the hero.

David A. Steinberg: I think we have meaningful relationships with these agency hold codes, and by the way, they see us as part of their solution set. As Chris has said, they're winning clients with us. We are, our entire strategy is to make our clients the heroes of their stories. And when you look at the agency hold codes, we are here to support them and help them do a better job with their enterprise clients, and it really appears to be responding. Thanks, congrats.

Speaker Change: Their stories and when you look at the agency whole coast, we are here to support them and help them do a better job with their enterprise clients and it really appears to be resonating.

Richard Kenneth Baldry: Thanks, and congrats on the momentum.

Speaker Change: Thanks, Congrats on the momentum.

Speaker Change: Yes.

Speaker Change: Thank you rich.

Ryan Michael MacDonald: Our next question comes from the line of Ryan MacDonald with Needham. Please proceed with your question.

Speaker Change: Our next question comes from the line of Ryan Macdonald with Needham. Please proceed with your question.

Ryan Michael MacDonald: Thanks for taking my questions and congrats on a great quarter. I wanted to focus on the large seven-figure financial services win and sort of the interesting aspect of that being a partner-driven deal and sort of a quick time to close. As you think about the pipeline where it stands today, maybe versus six to 12 months ago, what's the mix of pipeline that's coming sort of direct versus partner-driven, and are the initiatives that you have to sort of build out relationships with SIs sort of accelerating that makeshift at all? How should we think about that?

Ryan Michael MacDonald: Alright, Thanks for taking my questions and congrats on a great quarter I wanted to focus on the large seven figure a financial services win in and sort of the interesting aspect of that being partner driven deal and sort of quick time to close as you think about the pipeline where it stands today, maybe versus six to 12 months ago, what's the.

Ryan Michael MacDonald: The mix of pipeline versus that's coming sort of direct versus partner driven and are the initiatives that you have to sort of build out relationships with <unk>.

Ryan Michael MacDonald: Sort of accelerating that mix shifted at all how should we think about that.

David A. Steinberg: So thank you, Ryan. I appreciate it. Today, 100% of our sales effectively are direct. I mean, whether we're selling direct to the agency Holdco, or we're selling direct to the enterprise. We are in integration with, quite frankly, more than one SI at this point. We believe that it will be a big driver of the business, but in the future years. It is not contemplated in our current guidance. You know, we continue to focus on building our sales force. And as Chris has said, and I think he should touch on again, the productivity of our sales force just continues to climb as we hire more and more senior people.

Speaker Change: So thank you Ryan appreciate it today, 100% of our sales effectively our direct I mean, whether we're selling direct to the agency holdco or we're selling direct to the enterprise.

Speaker Change: We are in.

Speaker Change: Integration with.

Speaker Change: Quite frankly more than one <unk> at this point, we believe that will be a big driver of the business, but in the out years. It is not contemplated in our current guidance.

Speaker Change: We continue to focus on.

Speaker Change: Building, our sales force and as Chris has said and I think you should touch on again the productivity of our sales force just continues to climb as we hire more and more senior people yes.

Christopher E. Greiner: Ryan, I would say, I don't have the exact numbers, but greater than 90% of the sales pipeline today, which is growing very nicely, is generated directly from our sellers. We are, though, starting to see, as the benefit of working with more and more in the partner ecosystem, starting to see deals enter our sales pipeline that were created by those sellers, that then will ultimately be taken on and help Dooley Shepherd to close.

Christopher E. Greiner: Ryan I would say I don't have the exact numbers, but greater than 90% of the sales pipeline today, which is growing very nicely is generated directly from our sellers.

Christopher E. Greiner: We are those starting to see as the benefit of working with more and more in the partner ecosystem starting to see deals enter our sales pipeline that were created by those sellers that then will ultimately take on and help duly shepherd to close as David mentioned, what's really exciting and if you think about what helped deliver the upside in the quarter you can almost think.

Christopher E. Greiner: As David mentioned, what's really exciting, and if you think about what helped deliver the upside in the quarter, you could almost think about it as a third, a third, a third. Auto and insurance coming back to growth was great, and came in faster than we thought. We flowed that through the outlook and the guide, as you can see. About another third came from more rapid agency expansions than we were counting on in our guidance. We've now flowed some of that through.

Christopher E. Greiner: About it as a third a third a third.

Christopher E. Greiner: Auto and insurance coming back to growth was great. It came in faster than we thought we flowed that through the outlook and the guidance you can see about another third was from more rapid agency expansion than we were counting on our guidance. We've now flow some of that through and then sales productivity, we're seeing on the enterprise side.

David A. Steinberg: And then sales productivity we're seeing on the enterprise side, from our direct sellers. And I think the best evidence point that we continue to talk about in these calls is what is this most recent cohort of sellers, those that are still in their first year with Zeta, and how does their sales productivity compare to the classes before them, before them, before them? So now, going back three plus years, there are some pretty good data points there.

Christopher E. Greiner: From our direct sellers and if you I think the best evidence point that we continue to talk about in these calls is what is this most recent cohorts of sellers those that are still in their first year with data and how does their sales productivity compared to the classes. Before then before then for them. So now going back three plus years. So there's some pretty good data points there.

Christopher E. Greiner: Those sellers time to close in the most recent classes hired is now at four months time to close their first deals with 20% better than what the average three years had been and then as they get more tenured senior more experienced more deals under their belt, they're number of deals. They carry at the same time the average value of the deals go up there when rates go up and their pipelines expand so we are seeing.

David A. Steinberg: Those sellers' time to close, in the most recent class we hired, is now at four months to close their first deal, so 20% better than what the average three years was. And then as they get more tenure with Zeta, more experience, more deals under their belts, the number of deals they carry at the same time, the average value of the deals goes up, their win rates go up, and their pipelines expand, so we're seeing really nice sales productivity. It's an enormous credit to the business unit sales leaders and our training and development team.

Christopher E. Greiner: Really nice sales productivity.

Christopher E. Greiner: Enormous credit to the unit sales leaders and our training and development team and by the way it might be 20% above the three year running average, it's 100% above where we were three years ago, So where we're really seeing that and of course going from Veda who'd as Ada why bringing the right people in having made the investments.

Ryan Michael MacDonald: And by the way, even if it might be 20% above the three-year running average, it's 100% above where we were three years ago. So we're really seeing that. And of course, going from Zeta Who to Zeta Why, bringing the right people in, having made the investment seven to eight years ago into data and AI as native to the application layer. You know, it's funny because you look at the sort of AI landscape today, there are a lot of organizations talking about it, but they're not a lot of organizations that are utilizing it to drive meaningful revenue growth. It is a direct contributor to the results that we just put up for the first quarter and the way we are re-forecasting our raised guidance for this year.

Christopher E. Greiner: Seven to eight years ago into data and AI is native to the application layer.

Christopher E. Greiner: Funny, because you look at the sort of AI landscape today, there are a lot of organizations talking about it but they're not a lot of organizations that are utilizing it to drive meaningful revenue growth. It is a direct contributor in the results that we just put up for the first quarter and the way we are re forecasting our raised guidance.

Christopher E. Greiner: <unk> for this year.

David A. Steinberg: Yeah, super helpful color there. Maybe as a follow-up, great to see sort of the guidance increase for the full year being sort of fully driven by the core business and the strength there. But I did want to ask about politics and expectations there. You know, I think as we are getting closer and closer to the election, we're hearing more conversations about, you know, perhaps funding going more towards legal fees from one party than the other, which is forcing sort of the Biden administration to, you know, maybe not spend as aggressively, or maybe they don't need to. How is this factoring in, if at all, into your expectations for political ad spend as we look into the second half of the year?

Speaker Change: That's super helpful color, there, maybe as a follow up great to see sort of the guidance increase for the full year being sort of fully driven by the core business and the strength there, but I did want to ask about political and expectations. There I think as we're getting closer and closer to the election was hearing more conversations about perhaps funding goes.

Speaker Change: More towards legal fees from one party then the other which is forcing sort of.

Speaker Change: But by the administration to maybe not spend as aggressively or maybe they don't need to Howard. This factoring in if at all into your expectations for political AD spend as we look into the second half of the year.

Ryan Michael MacDonald: So, let me be totally clear, there will be more money spent on marketing in this election than any election in the history of the United States. And that will be, I believe, a statistical fact when people look back on this cycle. What I can tell you is, yes, there is a percentage of revenue for one of the candidates that is currently being utilized for legal fees. But the candidates are raising very large amounts of money, and they're going to spend it.

Speaker Change: So let me be totally clear there will be more money spent on marketing in this election than any election in the history of the United States of America and that will be I believe a statistical fact, when people look back on this cycle. What I can tell you is yes. There is a percentage of revenue for one of the candidates that is currently being utilized for legal fees.

Speaker Change: The candidates are raising very large amounts of money and theyre going to spend it as Chris said, our current guidance I think does does not include an increase in what we believe to be political and if you look at our historical levels, we feel that we've put a good placeholder in for.

Ryan Michael MacDonald: As Chris said, our current guidance, I think, does not include an increase in what we believe to be political. And if you look at our historical levels, we feel that we've put a good placeholder in for where we think it's going to be. But I would not expect it to be down from there.

Speaker Change: Where we think it's going to be but I would not expect it to be down from there.

Speaker Change: Yeah.

Ryan Michael MacDonald: Thanks again, and congratulations on a great quarter.

Speaker Change: Thanks, again, and congrats on a great quarter.

Speaker Change: Thank you.

Jason Michael Kreyer: Our next question comes from the line of Jason Kreyer with Craig Hallam. Please proceed with your question.

Speaker Change: Our next question comes from the line of Jason <unk> with Craig Hallum. Please proceed with your question.

Jason Michael Kreyer: Great, thank you guys, and congrats for me as well. Great quarter. Um, David, just wondering if you can maybe frame the importance of AI in your pipeline conversations. Like, it seems like you've always won more than your fair share, but maybe now you're winning even more than your fair share because of AI. But curious if you can kind of parse that out.

Great. Thank you guys and congrats from me as well great quarter.

Jason: David just wondering if you could maybe frame the importance of AI in your pipeline conversations it seems like you've always one more than your fair share, but maybe now that you are winning even more than your fair share because of AI, but curious if you can kind of parse that out.

David A. Steinberg: Well, first of all, thank you, Jason. I appreciate it. You know, it's funny. Before I got here today, out on the West Coast, I literally moderated the artificial intelligence panel for the Milken Global Conference from 11.50 to 12.45. And then we put out a result at 1.05.

David: Well first of all thank you Jason I. Appreciate it you know it's funny before I got here today, we're out on the West Coast I literally moderated the artificial intelligence panel for the Milken Global conference from $11 50 to $12 45, and then we put out our results at 105, and then I sort of rushed over here to do this with.

David A. Steinberg: And then I sort of rushed over here to do this with Chris and the team. It is, I'm telling you, there is not an organization out there today that is not looking at how to solve their AI problem. And one of the panelists was really interesting. He said, you know, you've got the Fortune 5000; they are not going to be able to do this on their own; they are going to need vendors and partners who bring artificial intelligence to the table for them.

David: Chris and the team is it I'm, telling you there is not an organization out there today that is not looking at how to solve their AI problem and one of the panelists was really interesting he said.

David: You've got the Fortune 5000, they are not going to be able to do this on their own they are going to need vendors and partners, who bring artificial intelligence to the table for them and one of the big consensus seas of the panel I'm not sure I said that right, but one of the big consensus sees of the panel was.

David A. Steinberg: And one of the big consensuses of the panel, I'm not sure I said that right, but one of the big consensuses of the panel was, if you are not focused on AI right now, they're going to find partners who are. And I can tell you that from all of our conversations, this is the issue.

David: If you are not focused on AI right now they're going to find partners, who are and I can tell you that from all of our conversations. This is the issue. It's what people are focused on and it's starting with efficiency, which as you know.

David A. Steinberg: It's what people are focused on, and it's starting with efficiency, which is, you know, very logical. And if you look at how technologies have evolved through the ages, so to speak, they start with efficiency, and then they move to meaningful revenue generation. It just so happens that our AI platform can do both. It can help enterprises to more efficiently run their platforms. By better utilizing their existing data, expanding out, building agents internally, so they can build their own virtual data scientists using our agent building program, which, by the way, then generates meaningful revenue for us, which, once again, is why I think we posted the first quarter we did and why we feel so comfortable raising our guidance for the year. But it is, Jason, the conversation that starts every conversation that we have.

David: Very logical and if you look at how technologies have evolved through the ages so to speak.

David: They start with efficiency and then they move to meaningful generate meaningful revenue generation. It just so happens that our AI platform can do both it can help enterprises to more efficiently run their platforms by better utilizing their existing data expanding out building agents internally.

David: So they can build their own virtual data scientists using our agent building program, which by the way then generates meaningful revenue increments to us which once again is why I think we posted the first quarter, we did and why we feel so comfortable raising our guidance for the year, but it is Jason the conversation that starts.

David: Every conversation that we have today.

David A. Steinberg: Thank you. Just one more, I wanted to pivot over to the build out of this mobile platform; just maybe if you could give us kind of an idea and the progression there, you know, because we've seen products like CTV that have kicked in and become a growth accelerant for Zeta. And so I'm curious, you know, at what point mobile could achieve that critical mass and contribute more to results? Yeah, so I mean, listen. We believe

Jason: Thank you just one more I wanted to pivot over to the build out of this mobile platform. Just maybe if you can give us kind of an idea of the progression there because we've seen products like CTV that has kicked in and become a growth accelerant for <unk>. So I'm curious at what point mobile could achieve that critical mass in <unk>.

Jason: Contribute more to results.

David A. Steinberg: Yeah, so I mean, listen, we believe that the Zeta ID gives us an unfair advantage in the mobile ecosystem because, much like we don't use a third-party cookie to identify people and build attribution models, we never used Apple's IDFA. So when they eliminated it, it sort of created a bit of a Wild West out there.

Jason: Yes, so I mean listen we believe that this data I D gives us an unfair advantage in the mobile ecosystem because much like we don't use a third party cookie do identified people and build attribution models, we never used apples idea face when they eliminated it.

Jason: Sort of created a bit of a wild west out there some organizations like meta had been able to get enough of a percentage of their user base to opt in to be receiving the tracking pixel that theyre able to build very comprehensive models and go from there we've been able to identify more.

David A. Steinberg: Some organizations, like Meta, have been able to get enough of a percentage of their user base to opt in to receiving the tracking pixel that they're able to build very comprehensive models and go from there. We've been able to identify many multiples as a percentage of what Meta has opting in in the mobile ecosystem already. So we feel like we're in a very good place to expand into that. I believe we'll have our product in production and ready to roll by mid this year.

Jason: Many multiples as a percentage of what meta has opting in in the mobile ecosystem already so we feel like we're in a very good place to expand into that I believe we will have our product into production and ready to roll by mid this year and we expect.

David A. Steinberg: And we expect to start driving, you know, meaningful revenue next year. I will reiterate again, we don't have mobile as a meaningful component of the increased guidance we're putting out this year, but there is upside. And I think it really is going to kick in next year. I have publicly said, Jason, and I believe that mobile will be our next hundred million dollar business as we continue to scale CTV. And I think that'll be.

Jason: To start driving meaningful revenue next year I will reiterate again, we don't have mobile is a meaningful component of the increased guidance, we're putting out this year.

Jason: But it is upside and I think it really is going to kick in for next year I have publicly said, Jason and I believe that mobile will be our next $100 million business.

Jason: As we continue to scale CTV and I think that'll be next.

Speaker Change: Great. Thank you.

Speaker Change: Okay.

Koji Ikeda: Our next question comes from the line of Koji Ikeda with Bank of America. Please proceed with your question.

Speaker Change: Our next question comes from the line of Koji Ikeda with Bank of America. Please proceed with your question.

Koji Ikeda: Yeah, hey guys, thanks for taking the questions here. I wanted to ask about the...

Koji Ikeda: Yeah, Hey, guys. Thanks for taking the questions here.

Koji Ikeda: Wanted to ask about the Super scaled customer screening the net New addition strength there and thanks for all the color in the prepared remarks, and a couple of questions that were asked prior.

Koji Ikeda: Super Scaled Customer Strength, you know, the net new addition strength there. And thanks for all the color and the prepared remarks.

Koji Ikeda: a couple of questions that were asked prior, but I did want to focus again on the agency's customer strength. So the question is around

Koji Ikeda: But I did want to focus again on the agency customer strength. So question is around you know how is the data really gaining mind share with them.

Koji Ikeda: How is Zeta really gaining mindshare within the agency? Does Zeta need like an internal champion within these agencies for each client relationship? So is it really focused on targeting these relationship owners, or is it adoption?

Koji Ikeda: Within the agencies does data you'd like an internal champion.

Koji Ikeda: Agencies for each client relationship so really focused on targeting these relationship owners, whereas the adoption of the data within these agencies being more top down driven.

Koji Ikeda: How is the adoption of Zeta within these agencies being more top-down?

Christopher E. Greiner: Koji, Chris, I'll go first on a couple of super-scaled data points, and I'll pass it over to David. Yeah, so as you mentioned, the up 13 record for us, all 13, by the way, scaled up from that 100K to a $1 million cohort, so a really good demonstration of the land-expand-extend strategy working and then the benefit of now having over 90% of our revenue from customers with us beyond a year.

Koji Ikeda: Koji, It's Chris I'll go first on the.

Christopher E. Greiner: A couple of Super scale data points and I'll pass it over to David Yes. So as you mentioned that the up 13 record for us.

Christopher E. Greiner: All 13 by the way scaled up from that 100, caito and $1 million of cohorts. So a really good demonstration of the land expand and extend strategy working and then the benefit of now having over 90% of our revenue with customers with us beyond a year.

Christopher E. Greiner: What was also great about those expansions is that they were primarily driven by And they came from various industries, ranging from technology to consumer retail, even travel and hospitality. And as you saw on the ARPU side, use of more than two channels up 30% is also a very strong data point for us. David? And Koji, thank you again.

David: What was also great about those expansions as they were primarily driven by enterprise relationships rather than just agencies in.

David: And it came from.

David: Various industries range from technology to get some retail even through travel and hospitality and as you saw on the <unk> side.

David: Use of more than two channels up 30% is also a very strong data point for us David and Koji. Thank you again, what I would tell you as it relates to the agency relationships. If you asked us a top down or bottoms up the answer is yes. Its both.

David A. Steinberg: What I would tell you is it relates to agency relationships. If you asked me if it was top-down or bottoms-up, the answer is yes, it's both. We come in, in many cases, as the CEO or global chairman of the holding corporation, and we're simultaneously working from the ground up. We have a team now that is fully integrated into the five agencies we work with. Quite frankly, over the last three years, we've invested very heavily in that team.

David: We're coming in in many cases at the CEO or global Chairman of the holding Corporation and we're simultaneously working from the ground up we have a team now that is fully integrated into the five agencies, we work with.

David: You know quite frankly over the last three years, we've invested very heavily in that team. The other thing is we're going where the agencies are right. So we had a presence at the consumer electronics show. This year, we had a presence at the possible conference and we will have a meaningful presence at Cannes Lion This year and.

David A. Steinberg: The other thing is we're going where the agencies are, right? The relationships with these agencies are mission critical that you work on both sides, but more than anything, you have to make them the hero.

David: As we think about the relationships with these agencies. It's mission critical that you work both sides, but more than anything.

David: You have to make them. The hero you have to be able to come in and make sure that the client knows that the agency is the hero and we are servicing them and Thats mission critical to how we make this work long term so I I.

David A. Steinberg: You have to be able to come in and make sure that the client knows that the agency is the hero and we are serving them. And that's mission critical to how we make this work long-term. So I will tell you, I feel very good about the relationships we have at the absolute top. And, as you can imagine, I spend a lot of personal time on that. And we have an incredible team that's integrated. And then we have another team that's farming, that's in there working with them on a day-to-day basis.

David: I will tell you I feel very good about the relationships we have at the absolute top and as you can imagine I spend a lot of personal time on that.

David: And we.

David: We have an incredible team that is integrated and then we have another team that's farm. It that's in there working with them on a day to day basis.

Koji Ikeda: Got it. No, thank you for that. And just to follow up here, I wanted to ask a question on the guidance. I appreciate the raise in revenue and also the raise in EBITDA. But when I look at the flow through from revenue to EBITDA, it looks a little bit less on the EBITDA raise versus the revenue.

Speaker Change: Got it no. Thank you for that and just a follow up here wanted to ask a question on the guidance.

Speaker Change: Appreciate the raise in the revenue and also the raising the EBITDA.

Speaker Change: But when I look at the flow through from revenue to EBITDA looks a little bit less on the EBITDA raise versus the revenue raised so just wanted to understand some of the puts and takes there and then also just on the free cash flow. It looks like that wasn't raised at all on the guidance. So just wondering can help help us bridge from revenue to EBITDA and free cash flow. Thank you.

Koji Ikeda: I just wanted to understand some of the puts and takes there, and then also just, you know, on free cash flow. It looks like that wasn't raised at all in the guidance. Just wondering, you know, to help us bridge from revenue to EBITDA and then free cash flow. Thank you.

Christopher E. Greiner: Yeah, so Free Cash Flow and the Preparator Marks, we had a pretty wide range entering the year to begin with, at 75 to 85. And, you know, one of the comments I made in the Preparator Marks was, you know, there's definitely a scenario where we're at the higher end of that range now after this raise, but it was more a reflection of kind of how wide that range was to start the year.

Speaker Change: Yeah on the.

Speaker Change: So free cash flow in the prepared remarks, we had a pretty wide range entering the year to begin with at 75 to 85 and one of the comments I made in the prepared remarks was.

Speaker Change: There is definitely a scenario where we are at the higher end of that range now after this race, but it was more a reflection of kind of how wide that range was to start the year. The only gating factor. There is just the timing with these new agencies that we've been signing with in collections. It theres really anything fundamentally beyond that that would drive the conversion ratio to be lower.

Christopher E. Greiner: The only gating factor there is just the timing with these new agencies that we've been signing with and the collections. There isn't really anything fundamentally beyond that that would drive the conversion ratio to be lower. In terms of the leverage in the model, I appreciate the point. If you look at the amount that we raised, and grew our revenue, full year revenue year over year in the updated guide in relation to EBITDA's growth from the prior guide to the current guide, I think it drops at a 24% EBITDA margin. The, on just a pure guidance increase basis, you're right, it drops at around 20. I think that's a reflection of what David talked about.

Speaker Change: In terms of deleverage in the model I appreciate the point if you look at the amount that we raised grew our revenue full year revenue year over year in the updated guide in relation to EBITDA growth.

Growth from the prior guide to the current guide I think it drops like a 24% EBIT margin.

Speaker Change: The on a just a pure guidance increase basis youre right. It drops around 'twenty I think that's a reflection of David talked about youre going to see us. This year look we're running ahead of our plan we want to make continued investments in marketing just last week, we held a regional based Zeta alive in Dallas can anticipate doing more of those given the success that we saw from that program. So maher.

Christopher E. Greiner: You're going to see us this year; look, we're running ahead of our plan. We want to make continued investments in marketing. Just last week, we held a regional-based ZetaLive event in Dallas.

Christopher E. Greiner: We can anticipate doing more of those given the success that we saw from that program. So marketing, getting more incremental dollars. And then R&D. I mean, the progress we've made in just 90 days with the launch of these hundreds of intelligent agents, the progress we're making on mobile, and the progress we're making in building out our partnership ecosystem. In fact, just today, we made a very exciting new sales leader hire in the partner network for Zeta.

Speaker Change: And getting more incremental dollars and then R&D I mean, the progress you've made in just 90 days with the launch of these hundreds of intelligent agents the progress, we're making on mobile and the progress we're making in building out our partnership ecosystem fact, just today, we made a very exciting new sales leader higher in the partner network for Xena, so putting putting some more.

Christopher E. Greiner: So putting, you know, putting some more investment in the business, we will continue to get adjusted EBITDA margin expansion. This is our 13th straight quarter of doing that. We don't anticipate that changing. So I don't want that message to be taken away either. And, Koji, I also want to point out that we are now guided.

Speaker Change: The business, we will continue to get adjusted EBIT margin expansion. This is our 13th straight quarter of doing that we don't anticipate that changing so I don't want that message to be taken away either and go Jay also want to point out we are now guiding to the rule of 43.

David A. Steinberg: And Koji, I also want to point out that we are now guiding to the rule of 43 at the end of the first quarter of the year. So I think if you take our 19% operating margin plus our projected 24% growth rate, we feel like we're doing a pretty good job of sort of projecting forward as an organization.

Speaker Change: At the end of the first quarter of the year. So.

I think we if you take our 19% operating margin plus our projected 24% growth rate, we feel like we're doing a pretty good job of.

Projecting forward.

Speaker Change: As an organization.

Jay: Thanks Cody.

Zachary Cummins: Our next question comes from the line of Zach Cummins with B. Reilly. Please proceed with your question.

Jay: Our next question comes from the line of Zach Cummins with B Riley. Please proceed with your question.

Zachary Cummins: Hi, good afternoon. David and Chris, congratulations on the strong results.

Zachary Cummins: Yeah, Hi, good afternoon, David and Chris Congrats on the strong results.

Zachary Cummins: I'm not sure if somebody has already asked. I apologize. I had to hop from another call, but...

Zachary Cummins: Not sure if somebody already asked I apologize from another call but.

Zachary Cummins: Can you give us a little more sense of the recovery in the insurance vertical specifically? I mean, we've seen many of the lead gen players really see a big recovery in demand in the first half of this year. So just curious what you're seeing on that side and what's really being built into your guidance for the rest of the year.

Zachary Cummins: Can you give us a little more sense of the recovery and in the insurance vertical specifically.

Speaker Change: <unk> seen many of the lead Gen players really see.

Speaker Change: Big recovery in demand in the first half of this year. So just curious what youre seeing on that side and what's really being built into your guidance for the rest of the year of the year within that vertical.

Zachary Cummins: of the year within that vertical.

Christopher E. Greiner: Thanks, Zach. You know, we anticipated going into 2024 that we would see insurance and automotive, the two distinct industries, both return to growth closer to the second quarter. So both of them growing, albeit combined not at the rate of Zeta's total growth but kind of getting to grow faster, we were pleasantly surprised. It also wouldn't surprise us that over the course of the year, insurance would become a faster grower than automotive, but we think both are going to grow.

Speaker Change: Yeah.

Thanks Zack.

Speaker Change: Aren't we anticipated going into 2024 that we would see insurance and automotive so two distinct industries, both returned to growth closer to the second quarter. So.

Speaker Change: Both of them growing, albeit combined not at the rate of the data's total growth, but kind of getting to grow faster.

We were pleasantly surprised by also wouldn't surprise us that over the course of the year insurance becomes a faster grower than automotive, but we think both are going to grow we've embedded double digit growth for those combined.

Speaker Change: Industries in our growth outlook, but by virtue of having signed contracts in hand, and very late stage deals in each of those industries in our pipeline gave us the confidence to roll through what was about a third of our first quarter's beat.

Christopher E. Greiner: We've embedded double-digit growth for those combined industries in our growth outlook. But by virtue of having signed contracts in hand, and very late stage deals in each of those industries in our pipeline, gave us the confidence to roll through what was about a third of our first quarter's beat through the rest of the outlook and still feel very comfortable with that.

Speaker Change: Through the rest of the outlook and feeling still very comfortable with that number.

David A. Steinberg: Understandable, and I apologize if maybe you address it in the script, but any sort of update on how you're thinking about your 2025 targets, or is that fair to think about that as a future date, potentially? I will, I'll point out again, everything we say about 2025, Zach, is at least. So I do think at some point we'll have to update it as we're now at a projected 900 million in the middle of the range for this year.

Speaker Change: Understood and I apologize, if maybe you addressed it in the script, but any sort of update on how youre thinking about your 2025 targets or is that fair to think about that as a future date potentially I will Oh I'll point out again, everything we say about 2025 Zach is at least.

Speaker Change: I do think at some point, we'll have to update it as we're now at a projected 900 million in the middle of the range for this year.

David A. Steinberg: But we're, you know, we don't want to get ahead of ourselves. We're feeling very good about the business. We want to continue to execute. We believe we've got the right products, the right people in the right place at the right time. And, you know, when it's logically time, we'll start to think about it.

Speaker Change: But where we.

Speaker Change: We don't want to get ahead of ourselves, we're feeling very good about the business.

Speaker Change: We want to continue to execute we believe we've got the right products the right people in the right place at the right time and when it's logically time, we'll start to give thoughts about 2020, I was getting ready kicky because I thought you were going to go somewhere different but are you thought I was going to say $2 billion.

David A. Steinberg: I was getting ready to kick you because I thought you were going to go. Oh, you thought I was going to say $2 billion in 2025. That's a joke. I was kidding. Thank you, Zach.

Speaker Change: It's a joke I was kidding.

Speaker Change: You bet.

Ryan Schwartz: Our next question comes from the line of Ryan MacWilliams with Barclays.

Speaker Change: Our next question comes from the line of Ryan Macwilliams with Barclays. Please proceed with your question.

David A. Steinberg: David, that would be great, but I totally get it. I was kidding, Ryan.

Ryan Patrick MacWilliams: David that would be great, but I I totally get it.

Ryan Patrick MacWilliams: I was kidding Ryan.

Ryan Patrick MacWilliams: Uh huh.

Ryan Schwartz: I don't want to hold you to that. No worries.

Speaker Change: No worries.

So good improvement in ARPA growth from retail customers in the quarter now that we're further along into the year.

Larger customers feel better about where they stand compared to where they started the year in terms of their marketing spend I'm just from the macro side or are they just waiting to see the outcome of the election and interest rates that we're getting more involved here.

David A. Steinberg: So great to see the improvement in ARPU growth from scale customers in the quarter. Now that we're further along into the year, do your larger customers feel better about where they stand compared to where they started the year in terms of their marketing spend, just from the macro side? Or are they just waiting to see the outcome of the election and interest rates before getting more involved? Now, we're seeing marketers spend.

Speaker Change: No we are.

Speaker Change: Seeing marketers spec I mean.

Speaker Change: I would say that.

Speaker Change: This is as bullish of marketing environment as I have seen in the last few years.

Speaker Change: <unk>.

David A. Steinberg: I mean, you know, I would say that this is as bullish a marketing environment as I have seen in the last few years. And I'm not seeing people affected by interest rates as it relates to marketing. And I have not seen, and when I say people, I mean organizations.

Speaker Change: And I'm not seeing people affected by interest rates as it relates to marketing and I have not seen and when I say people I mean organizations and I have not seen organizations worried about the election as it relates to spending now what will happen as you get into the election cycle is this math.

David A. Steinberg: And I've not seen organizations worried about the election as it relates to spending. Now, what will happen as you get into the election cycle is this massive flood of dollars will begin to come in, and you'll see marketing get more expensive in some of the channels. But quite frankly, we are a big beneficiary of that in our political business. So I'm not seeing any issues there right now.

Speaker Change: A flood of dollars will begin to come in and you will see.

Speaker Change: You'll see marketing get more expensive in some of the channels, but quite frankly, we are a big.

Big beneficiary of that on our political business. So.

Speaker Change: I'm not I'm not seeing any any issues there right now and even even if you look at it right from an industry vertical perspective like I think it was half of our top 10 verticals grew over 30%. So it's really.

Christopher E. Greiner: If you look at it, Ryan, from an industry vertical perspective, like, I think half of our top ten verticals grew over 30%, so it's really... Seems to be very healthy out there.

Speaker Change: Seems to be very healthy out there.

Ryan Schwartz: Appreciate it. And two part questions. One for David, one for Chris. David, do you guys have any credibility since IPO?

Speaker Change: Okay.

Speaker Change: Question, maybe one for David Welcome Chris.

Okay.

David A. Steinberg: with the organic results, but any updates here on your thoughts around M&A and maybe how they can provide additional

David: With your organic results, but any update on the thoughts around M&A and maybe how they can provide additional selling two of your customers.

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Speaker Change: Just like a quick housekeeping item any update on how we can think about modeling gross margins for this year.

David A. Steinberg: You know, Ryan, we continue to focus on being a high-quality organic growth company. But at the same time, we're always looking for organizations we could merge with that have incredible human capital, great technology, great data, and or great people. And we continue to look, you know, until we find something that we think could be incredibly accretive. We will continue to look and not pull the trigger, but it is a good environment for M&A from the purchase side perspective, which is the side we're on. And we look at a lot. We just haven't pulled the trigger yet because we haven't seen anything we thought could be accretive with all of the things we really need in an acquisition.

Christopher E. Greiner: You know Ryan we continue to focus on being a high quality organic growth company, but at the same time.

Christopher E. Greiner: We're always looking for organizations, we could merging that have incredible human capital great technology, great data <unk> great people.

And we continue to look.

Christopher E. Greiner: Until we find something that we think could be incredibly accretive we will continue to look and not pulled the trigger but you know it is a it is a good environment for M&A from the purchase side perspective, which is the side we're on.

We look at a lot.

Christopher E. Greiner: Just haven't pulled the trigger because we haven't seen anything we thought could be accretive with all of the things, we really need in an acquisition and just hitting quickly a second question Ryan.

Christopher E. Greiner: And just hitting quickly on the second question, Ryan, I think it's the same as what we said back in February. I would assume a similar direct revenue mix profile that we saw exiting 2023, the so-called low 70s, and a similar percentage cost of revenue on a gap basis that we saw exiting 2023, which was around 40%. We did a little bit better this quarter, about 60 bps, but I think that's a good operating assumption for the rest of the year. That's where our heads are at anyway, just given where our large agency hold codes are in their early ramping process.

Christopher E. Greiner: And just hitting on the second question, Ryan.

Speaker Change: I think it's the same as what we said back in February I would assume it's similar.

Speaker Change: Revenue mix profile that we saw exiting 2023, so called low seventy's and a similar percentage cost of revenue on a GAAP basis that we saw exiting 2023, which was around 40% we did a little bit better this quarter about 60 bps, but I think that's a good operating assumption for the rest of year, that's where our heads are at anyway, just given where our large agency holdco are in their early ramping.

Speaker Change: Process.

Arjun Rohit Bhatia: Our next question comes from the line of Arjun Bhatia with William Blair.

Speaker Change: Our next question comes from the line of John <unk> with William Blair. Please proceed with your question.

Chris: Hi, this is Chris on behalf of Arjun. I'll extend my congratulations on a great quarter. The first question for me was, what are some of the main factors behind the success that you're seeing with enterprise customers, in particular? Is this primarily channel expansion that's driving the accelerated growth?

Speaker Change: Hi, This is Chris on for hours and semi congrats on a great quarter.

Christopher E. Greiner: Question for me.

Christopher E. Greiner: The main factors behind the success that youre seeing with enterprise customers in particular.

Christopher E. Greiner: This primarily channel expansion, that's driving the accelerated scaling you've seen or are there other levers that customers are using them to grow their spend as well.

David A. Steinberg: Scaling you've seen, or are there other levers that customers are using to grow their spend as well?

Chris: Are there other libraries that customers are using to grow their business? Well, thank you, Chris. You know, I think AI is a major one, and I don't want to downplay what an important component of why enterprises are choosing Zeta at this point it is. You know, it's, you know, once again, a lot of organizations have been talking about AI for a number of months. But we've been building it for now for seven or eight years. And we continue to see enterprises looking for that from an adoption perspective.

Speaker Change: Well. Thank you Chris I think AI is a major one and I don't want to downplay what an important component of why enterprises are choosing data at this point it is it.

Speaker Change: Once again, a lot of organizations have been talking about AI for a number of months we've been building. It for now seven or eight years and we continue to see enterprises looking for that from an adoption perspective, Chris.

Speaker Change: Perfect Okay.

Speaker Change: Okay.

David A. Steinberg: Great, thank you. And then the second one for me was, so you've rolled out a number of new products over the past year. So how are you seeing these products play out?

Speaker Change: Great. Thank you and then the second one for me was you've rolled out a number of new products.

Speaker Change: Last year. So how are you seeing these products play out in terms of go to market is having a role in some of the success you've seen in terms of seller productivity.

David A. Steinberg: In terms of going-to-market, is this playing a role in some of the success you've seen in terms of seller productivity? Yeah, I mean, listen. It's always good when there's another quiver in the arsenal of the salespeople to be able to get out there and sell. And, you know, we continue to focus on additional channels and additional use cases. Bruce. Yeah.

Speaker Change: Yeah, I mean listen it's always good when theres another quiver in the Arsenal of the salespeople to be able to get out there and sell and we can continue to focus on additional channels and additional use cases.

Christopher E. Greiner: Chris, and what I think our customers appreciate in the early sales meetings that we have, we're not pitching PowerPoints. We're literally going to them with the data cloud, telling them oftentimes more than they know, certainly about their prospects, but even sometimes about their existing customers. So it's a very much, very real sale from meeting number one. It's highly visualized, which I think also helps sales productivity to your point. Thanks, Chris.

Speaker Change: Yeah.

Chris If you and what our I think our customers appreciate and the early sales meetings that we have we're not pitching powerpoints, we're literally going to them with the data cloud.

Telling them oftentimes more than they know certainly about their prospects, but even sometimes about their existing customers. So it's a very much very real sale from meeting number one it's highly visualize which I think also helps sales productivity year. Thanks.

Speaker Change: Thanks, Chris.

Dan Reagan: Our next question comes from the line of Dan Reagan with Canaccord. Please proceed with your question. Hey guys, this is Dan Reagan on for DJ Hynes.

Speaker Change: Our next question comes from the line of Dan Reagan with Canaccord. Please proceed with your question.

Speaker Change: Hey, guys. This is Dan Reagan on for DJ Hynes.

Dan Reagan: I just want to say congrats on another solid quarter of consistent execution; love to see the guidance raised too. So you guys touched on this a little bit, but revenue growth has been pretty materially outpacing sales headcount growth.

Dan Reagan: Just wanted to say congrats on another solid quarter consistent execution.

Dan Reagan: To see the guidance raised too.

Dan Reagan: So you guys touched on this a little bit, but our revenue growth.

Dan Reagan: Then pretty materially outpacing sales head count growth for several quarters.

Dan Reagan: That productivity gain is great to see, but I want to play devil's advocate with two questions. First, do you think you could grow faster with more sales capacity?

Dan Reagan: That productivity gain is great to see but I want to play Devil's advocate with two questions. First you know or do you think you could grow faster with more sales capacity and then secondly.

Dan Reagan: And then secondly,

David A. Steinberg: You know, what signals would inform you that it's time to step up the pace of hiring? Or is it more dependent on the availability of experienced sellers that you're looking for? Yeah, you know, it's interesting. There's a lot. It's like a little bit of a duck below the surface.

Dan Reagan: What signals would inform you.

Dan Reagan: That it's time to step up the pace of hiring.

Dan Reagan: Or is it more dependent on.

Dan Reagan: The availability of experience sellers that youre looking for.

Dan Reagan: Yes, it's interesting there's a lot it's like a little bit of a duck below the surface. We've hired a lot of people. We just also let go some of the earlier cohorts who are not as productive I think we've gone through the vast majority of that cycle and you'll now see head count begin to grow again as it relates to salespeople, but.

David A. Steinberg: We've hired a lot of people. We've also let go some of the earlier cohorts who were not as productive. I think we've gone through the vast majority of that cycle, and you'll now see headcount begin to grow again as it relates to salespeople. But, you know, we continue to really win a disproportionate percentage, greater than 50% of the RFPs and engagements we get invited to participate in, and I think that will continue. Yeah, we made it. We made a nice step up.

Dan Reagan: We continue to really win a disproportionate percentage greater than 50% of the Rfps and engagements we get invited to participate in and I think that will continue yes. We made it we made nice step up coming out of the fourth quarter. We had 136 got to $1 42, I think we'll be at $1 50 range in the third quarter.

Christopher E. Greiner: Yeah, we made a nice step up coming out of the fourth quarter. We had 136, and got to 142. I think we'll be in the 150 range in the third quarter.

Christopher E. Greiner: Sales productivity plays into it. Quality over quantity is big. The gates that we use to evaluate talent, marketing domain expertise, specific vertical expertise, many years of experience. So it kind of narrows the pool down to a high-quality number of people that we're going after. So I really like the sales productivity we're seeing. I appreciate the point, but right now, we feel like we've got the right balance.

Dan Reagan: Sales for activity plays into it quality over quantity is big.

Dan Reagan: The gates that we use to evaluate talent marketing domain expertise specific vertical expertise.

Dan Reagan: Many years of experience so it kind of narrows the pull down too.

High quality number of people that.

Dan Reagan: That we're going after so.

Dan Reagan: Really like sales productivity, we're seeing I appreciate the point, but right now we feel like we've got the right balance.

Dan Reagan: Awesome.

unknown: And then many agencies have them.

Dan Reagan: Many agencies have existing relationships with data and platform providers and also.

unknown: have existing relationships with data and platform providers and also

David A. Steinberg: What makes Zeta's approach unique enough to incentivize these agencies to shift their

Speaker Change: This question is also for the old Kos.

Speaker Change: What makes Adas you.

Kos: Broach unique enough to incentivize agencies the shifts.

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Kos: Significant portions of their of their budgets over to you.

Speaker Change: And how how.

Speaker Change: How how is your approach different than what other guys. In this space are doing.

David A. Steinberg: Transcribed by https://otter.ai Well, truthfully, a lot of people talk about doing what we do, but they can't really do it. They come in with PowerPoint presentations, and they're taking a third-party data set, a third-party AI algorithm, different activation methodologies, and building attribution and building targeting is almost impossible at scale in that world. So yes, obviously, the agency, Hope Co., has other partners that they are moving meaningful dollars from them to us, but it's because by putting data and artificial intelligence native to the application layer, meaning it's native to the marketing cloud itself, we're able to better target, better activate, and better build attribution models to prove it. And like Chris has said multiple times, they're not waking up and saying, let's move 50, 100 million dollars to you.

Speaker Change: Well truthfully a lot of people talk about doing what we do but they can't really do they come in with Powerpoint presentations and Theyre, taking a third party dataset of third party AI algorithm different attribute I am sorry different activation methodologies and building attribution and building targeting is almost impossible.

Speaker Change: At scale in that World. So yes, the obviously the agency Holdco as have other partners that they are.

Speaker Change: Moving meaningful dollars from them to us, but its because by putting data and artificial intelligence is native to the application layer, meaning its native to the marketing cloud itself, we're able to better target better active you I'm, sorry, better target better <unk>.

Debate and better build attribution models to improve it and like Chris has said multiple times, they're not waking up and saying, let's move $50 million to $100 million to you. They are starting with a test and then expand now what we've seen is is the testing that we've been doing over the last.

David A. Steinberg: They're starting with a test and then expanding. Now, what we've seen is the testing that we've been doing over the last year, where we said we went from one to three, now we've gone to five holding companies. What's happened is the two that went from one to three are scaling very, very rapidly because our product—we don't say that our product is superior. Thank you very much. Thanks, Dan.

Speaker Change: Year, where we said we went from one to three now we've gone to five holding companies. What's happened is the two that went from one to three are scaling very very rapidly because our product. We don't we don't see that our product is superior we proved that our product is superior.

Speaker Change: Which is why they start on the test and then they move meaningful additional budget to us. Thank you very much.

Speaker Change: Ed.

Ryan Schwartz: Our last question comes from the line of Ryan Schwartz with Hoffenheimer. Please answer your question.

Speaker Change: Our last question comes from the line of Ryan Schwartz with Oppenheimer. Please proceed with your question.

Ari Friedman: Hey, this is Ari Friedman sipping in for Brian Schwartz. Thanks for taking my question. I wanted to double-click on the marketing buying environment. And I was wondering, has there been a reprioritization since last year of, like this time last year, of what marketers want to buy in terms of their marketing stack and marketing solutions and what they're prioritizing? Or is it kind of the same? And then same with the scrutiny under budgets. Is it the same as last year, or is it better?

Hey, this is already a friedman sitting in for Brian Schwartz. Thanks for taking my question I wanted to double click on like the marketing a buying environment and I was wondering kind of has there been a re prioritization since last year of like this time last year of what marketers want to buy it.

Speaker Change: In terms of like the marketing stock in marketing solutions and what they are prioritizing or is it kind of the same and then same with like the scrutiny under budget. The same as last year or is it better.

Ari Friedman: Yeah, Ari, first of all, you know, the answer is we're seeing an upswing in marketing itself. So, you've got a rising tide there.

David A. Steinberg: Yeah, so, all right, first of all...

Speaker Change: Yes, so our a first of all the answer is we're seeing a upswing in marketing itself. So you've got a rising tide there second.

David A. Steinberg: Second, we really are seeing marketers want artificial intelligence and data as native to the application layer. So, when we start the conversations, the interesting thing is we go into a lot of presentations where, you know, other people have promised them the same thing. One of the things Chris talks about that I think is so important is our test, land, and expand strategy. Because our entire strategy is that other people will tell you they can do this, and we will prove it.

Speaker Change: We really are seeing marketers want artificial intelligence and data data is native to the application layer. So when we start the conversations that the interesting thing as we go into a lot of presentations, where you know other people have promised them. The same thing one of the things Chris talks about that I think is so important.

Speaker Change: As our test land and expand strategy because our entire strategy is other people will tell you. They can do this we will prove it and we come in and we prove it again and again.

David A. Steinberg: And we come in, and we prove it again and again, sort of any sort of shift in strategy as it relates to market purchasing. We're seeing agencies and enterprises want the best possible solution with the best technology and the best data to deliver the best results to either their enterprises or their clients.

Speaker Change: So as it relates to that we're not seeing sort.

Speaker Change: Sort of any sort of shift in strategy as it relates to market purchasing we're seeing.

Speaker Change: Agencies and enterprises want the best possible solution with the best technology, the best data to deliver the best results to either their enterprise or their clients and so far as data is proving that we are the case as per your second question I feel like we're seeing a very robust mark.

David A. Steinberg: And so far, Zeta is proving that we are the best. As per your second question, I feel like we're seeing a very robust marketing environment, and it's one of the reasons we feel so comfortable increasing our guidance for this. So I've been told to wrap up.

Speaker Change: Fitting environment and it's one of the reasons, we feel so comfortable increasing our guidance for this year.

Speaker Change: Okay.

Speaker Change: So I've been told to wrap up I appreciate everybody attending what I can tell you is I could not be more proud of the <unk> team. The team is executing and the decisions that we've made over the last seven or eight years as it related to investment into artificial intelligence into data into.

David A. Steinberg: I appreciate everybody attending. What I can tell you is I could not be more proud of the Zeta team. The team is executing, and the decisions that we have made over the last seven or eight years, as related to investment in artificial intelligence, data, our marketing platform, and bringing in some of the world's greatest people to Zeta, are really paying off. And we expect it to continue to pay off.

Speaker Change: Our marketing platform into bringing in some of the world's greatest people to Zeta is really paying off and we expect it to continue to pay off we are incredibly bullish about our business about our market and about where we sit in it. So as I've said before we don't believe were just were.

David A. Steinberg: We are incredibly bullish about our business, about our market, and about where we sit in it. So, as I've said before, we don't believe we're just where the puck is going. We believe where the puck is today and where it's going is perfectly positioned for Zeta. I hope you have a wonderful day, and I appreciate your attendance. Bye.

Speaker Change: The puck is going we believe where the puck is today and where it's going is perfectly positioned for Zelda I Hope you have a wonderful day and I appreciate your attending.

Operator: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

Speaker Change: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.