Q1 2025 Zeta Global Holdings Corp Earnings Call

Operator: Greetings and welcome to the Theta First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the theme of the first quarter 2025 earnings Conference call. At this time all participants are in a listen only mode. A brief 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.

Operator: A brief question and answer session will follow the formal presentation.

Operator: 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.

Speaker Change: A reminder, this conference is being recorded it is now my pleasure to introduce your host Matt Fox Senior Vice President.

Matt Fah: It is now my pleasure to introduce your host, Matt Fah, Senior Vice President. of Investor Relations. Thank you, sir.

Speaker Change: The Investor Relations. Thank you Sir you may begin.

Matt Fah: You may begin. Thank you, operator.

Matt Fah: Hello, everyone, and thank you for joining us for Zeta's first quarter 2025 conference. 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 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. 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.

Speaker Change: Thank you operator, Hello, everyone and thank you for joining us for <unk> first quarter 'twenty to 'twenty five conference call.

Speaker Change: Today's presentation and earnings release are available on <unk> Investor Relations website at investors Dot data global Dot Com, where you will also find links to our SEC filings along with other information about data.

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

David 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.

David Steinberg: Competition revenues of our products and our goals and strategies.

Matt Fah: These statements are subject to risks and uncertainty that may cause actual results to differ materially from those. 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.

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

David 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.

Matt Fah: 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 We use these non-GAAP measures in managing our business and believe they provide useful information for our employees.

David Steinberg: In addition, our discussion today will include references to certain supplemental non-GAAP financial measures, which should be considered in addition to and not as a substitute for our GAAP results. We use these non-GAAP measures and managing our business and believe they provide useful information for our investors reconciliations.

David Steinberg: 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 our other filings with the With that, I will now turn the call over to David. Thank you, Matt. Good afternoon, everyone, and thank you for joining us. 2025 began much like 2024. with Zeta exceeding expectations and gaining share in a dynamic This marks our 15th consecutive quarter of beating and raising our guys. reflecting the strength of our innovation, execution, and consistent delivery of customer value. While macro uncertainty has become more pronounced at the start of the second quarter, Zeta's value proposition continues to stand out, particularly in environments where marketers are under pressure to deliver measurable results and do more with less.

David Steinberg: 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 our other filings with the SEC.

Dave: I will now turn the call over to Dave.

Dave: Thank you Matt Good afternoon, everyone and thank you for joining us today.

Dave: 2025, again, much like 2024 ended with veda exceeding expectations and gaining share in a dynamic market.

Dave: This marks our 15th consecutive quarter.

Dave: Beating and raising our guidance, reflecting the strength of our innovation execution and consistent delivery of customer value.

While macro uncertainty has become more pronounced at the start of the second quarter Vedas value proposition continues to stand out.

Dave: Particularly in environments, where marketers are under pressure to deliver measurable results and do more with less.

David Steinberg: Our omni-channel, people-based artificial intelligence platform delivers both scale and precision, enabling marketers to target, personalize, measure, and optimize across owned and paid media more efficiently and effectively than alternative solutions. We proved the strength of our model during COVID-19 and the tech reset of 2022, growing revenue by 20% in 2020 and 29% in 2022, despite challenging macro conditions. Our focus on delivering predictable, profitable and measurable ROI is driving continued market share gains and has contributed to our strong first quarter results. In the first quarter of 2025, we generated revenue of $264 million, up 36% year-over-year, with adjusted EBITDA of $47 million, up 53% year-over-year, both well ahead of our given our first quarter's outperformance.

Dave: Our omni channel people based artificial intelligence platform delivers both scale and precision, enabling marketers to target personalise measure and optimize across owned and paid media more efficiently and effectively than alter.

Dave: And if solutions.

Dave: We proved the strength of our model during COVID-19, and the tech reset of 2022 growing revenue by 20% in 2020 and 29% in 2022, despite challenging macro conditions.

Dave: Our focus on delivering predictable profitable and measurable ROI is driving continued market share gains and has contributed to our strong first quarter results.

Dave: In the first quarter of 2025, we generated revenue of $264 million up 36% year over year with adjusted EBITDA of $47 million.

Dave: 53% year over year.

Dave: Both well ahead of our guidance.

Dave: Given our first quarter's outperformance strong pipeline and second quarter visibility, we are raising our second quarter and full year 2025 guidance, while our momentum supports a larger raise we're taking a disciplined and conservative approach.

David Steinberg: Strong Pipeline and Second Quarter Visibility, we are raising our second quarter and full year 2025. While our momentum supports a larger raise, we're taking a disciplined and conservative approach in light of the ongoing macro uncertainty. We believe one of the key reasons our business has remained resilient is our focus on performance-based outcomes and exposure primarily to lower-funnel Let me share a few examples of existing superscaled customers that illustrate For a large telecommunications customer, we have consistently outperformed their benchmark for new customer acquisition cost, most recently beating their target by 53%. Our ability to be a repeatable, scalable solution has led to an increase in commitments, culminating in the recent signing of a two-year agreement that more than doubles their annual investment with Zeta.

Dave: In light of the ongoing macro uncertainty.

Dave: We believe one of the key reasons. Our business has remained resilient is our focus on performance based outcomes and exposure primarily to lower funnel marketing.

Dave: Let me share a few examples of existing super scaled customers that illustrate this.

Dave: For a large telecommunications customer we have consistently outperformed their benchmark for new customer acquisition cost most recently, beating their target by 53%.

Our ability to be a repeatable scalable solution has led to an increase in commitments, culminating in the recent signing of a two year agreement that more than doubles their annual investment with the data.

David Steinberg: For a major insurance provider, we helped drive 37% lower new customer acquisition cost versus their 2024 target. We expect this success to drive a 50% increase in spend with us this year. For a financial institution, we beat their target new customer acquisition cost by 14% in 2024, and the customer is expected to increase their spend in 2025 by close to 20% after a nearly 150% increase in 2024. Importantly, these results are not self scored. They're validated either directly by our customer or through third party attribution methods.

Dave: For a major insurance provider, we helped drive 37% lower new customer acquisition cost versus their 2024 target.

Dave: We expect this success to drive a 50% increase in spend with us this year.

Dave: For a financial institution, we beat their target new customer acquisition costs by 14% in 2024, and the customer is expected to increase their spend in 2025 by close to 20% after a nearly 150% increase in 'twenty two.

Dave: 24.

Dave: Importantly, these results are not self scored they're validated either directly by our customer or through third party attribution methods.

David Steinberg: Now let's talk about one of our biggest long-term drivers, artificial intelligence. This quarter we launched AI Agent Studio, a suite of generative AI tools that enable users to select and activate pre-built agents. Create custom agents and link them together to execute complex marketing tasks. As a part of AI Agent Studio, we also announced agentic workflows, which were available in beta. Agentic workflows give marketers the ability to build and customize AI agents that work together to complete complex tasks across the entire customer journey. Unlike generic tools, agentic workflows are flexible and adaptive, making AI not only actionable, but also potentially transformational to a marketer's productivity.

Dave: Now, let's talk about one of our biggest long term drivers artificial intelligence.

Dave: This quarter, we launched AI agent studio a suite of generative AI tools that enable users to select and activate.

Dave: He built agents create custom agents and link them together to execute complex marketing tasks.

Dave: As a part of AI agent studio, we also announced a gentex workflows, which were available in beta agenda workflows give marketers the ability to build and customize AI agents that work together to complete complex tasks across the <unk>.

Dave: Entire customer journey.

Dave: Unlike generic tools agenda workflows are flexible and adaptive making AI not only actionable, but also potentially transformational to our marketers productivity.

David Steinberg: Here is a real world example of how a customer uses our agentic workflow. The customer needed a multi agent workflow to identify high value audiences and activate to them across multiple channels. With one prompt, this workflow coordinates intelligent agents to speed up planning and execution. Through this workflow, our insights agent finds target audience segments, the strategy agent crafts the messaging and personas, and the activation agent deploys the marketing to multiple channels. This process streamlines collaboration, reduces time from insight to execution, enhances precision, and creates meaningful return on investment. all within a single AI powered workflow.

Dave: Here is a real World example of how a customer uses our agenda workflows.

Dave: The customer needed in multi agent workflow to identify high value audiences and activate to them across multiple channels with one trumped. This workflow coordinate intelligent agents to speed up planning and execution.

Dave: Through this workflow our insights agent binds target audience segments, the strategy agent crafts, the messaging and personas and the activation agent deploys the marketing to multiple channels.

Dave: This process streamlines collaboration reduces time from insight to execution enhances precision and creates meaningful return on investment.

Dave: All within a single AI powered workflow.

David Steinberg: Now I'd like to provide an update on our agency business, which has seen great momentum to the start of the year. I'll begin with an update on our efforts with independent agencies. We executed and platformed two new independent agencies in the first quarter and are finalizing agreements with two additional ones. Improving early traction in a market with over a thousand potential products. We also experienced solid year-over-year growth with large holding companies in the first quarter. For our holding company customers, we believe Zeta is by far one of their most profitable partners, which is important in good times, but even more important during challenging times.

Dave: Now I'd like to provide an update on our agency business, which has seen great momentum to the start of the year.

Dave: I'll begin with an update on our efforts with independent agencies.

Dave: We executed and platforms to new independent agencies in the first quarter and are finalizing agreements with two additional ones proofing early traction in a market with over a thousand potential prospects.

Dave: We also experienced solid year over year growth with large holding companies in the first quarter.

Dave: For our holding company customers. We believe <unk> is by far one of their most profitable partners, which is important in good times, but.

Dave: Even more important during challenging times.

David Steinberg: Agencies choose to partner and expand with Zeta, not only because we drive efficiencies in their businesses, but also because our platform offers advantages that assist in securing new business. For example, one of the independent agencies we platformed in the first quarter used our retail audience intelligence to support its pitch to a prospective new customer. Zeta's deterministic attribution capabilities were a key differentiator, providing a level of measurement that the agency had not previously been able to offer. These capabilities help the agency secure the customer's business, which in turn creates additional revenue opportunities for Zeta, a true win, win, win.

Dave: Agencies choose to partner and expand let's say that not only because we drive efficiencies in their businesses, but also because our platform offers advantages that assist in securing new business.

Dave: For example, one of the independent agencies, we platform in the first quarter used our retail audience intelligence to support its pitch to a perspective new customer.

Dave: <unk> deterministic attribution capabilities were key differentiator, providing a level of measurement that the agency had not previously been able to offer.

Dave: These capabilities help the agency secure the customers' business, which in turn creates additional revenue opportunities for Zeta.

Dave: True win win win.

David Steinberg: At Zeta, we have faced challenging macro times before and emerged stronger by controlling the controllable, how we think, how we act, how we deliver value for our In the end, execution is the difference between surviving uncertainty and thriving through it.

At Cedar, we have faced challenging macro times before and emerged stronger by controlling the controllable how we think how we act how we deliver value for our customers.

Dave: In the end execution is the difference between surviving uncertainty and thriving through it.

Chris Greiner: As always, I would like to sincerely thank our customers, our partners, Team Zeta, and all our shareholders for the ongoing support of our Now let me turn it over to Chris to discuss our results in greater detail. Chris. Thank you, David. And good afternoon, everyone. Before diving into the details of our quarterly results and updated 2025 guidance, I want to highlight four key takeaways. First, despite global macro uncertainty, we reported a strong quarter with broad-based contribution across all areas of our business. Second, our increased 2025 projections are reflective of our momentum exiting the first quarter and the good visibility we have into the second quarter, while being thoughtfully conservative in the second half, given macroeconomic and policy uncertainties.

Dave: As always I would like to sincerely. Thank our customers our partners teams Ada and all our shareholders for the ongoing support of our vision.

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

Chris: Thank you David and good afternoon, everyone.

Speaker Change: Before diving into the details of our quarterly results and updated 2025 guidance I want to highlight four key takeaways.

Speaker Change: First despite global macro uncertainty, we reported a strong quarter with broad based contributions across all areas of our business.

Speaker Change: Second our increased 2025 projections are reflective of our momentum exiting the first quarter and the good visibility we have into the second quarter, while being thoughtful and conservative in the second half given macroeconomic and policy uncertainty.

Chris Greiner: Third, we've looked at our capital allocation strategy and are taking significant steps to reduce dilution and stock-based compensation. And fourth, our increased focus on free cash flow generation is evident in our first quarter results, with free cash flow growth significantly ahead of revenue and adjusted EBITDA, and a substantial improvement in free cash flow conversion.

Speaker Change: Third we've looked at our capital allocation strategy and are taking significant steps to reduce dilution and stock based compensation expense.

Speaker Change: And fourth our increased focus on free cash flow generation is evident in our first quarter results with free cash flow growth significantly ahead of revenue and adjusted EBITDA and a substantial improvement in free cash flow conversion.

Chris Greiner: Now, let's get into the details of our first quarter results. In Q1, we delivered revenue of $264 million, up 36% year-over-year, or 26% excluding the contribution from live input. Total scaled customer count grew to 548, up 19% year-over-year, and an addition of 21 customers sequentially. We had 159 superscaled customers at the end of the first quarter, an increase of 10% year-over-year, and 11 quarter-to- Scaled Customer Quarterly ARPU of $467,000 increased 12% year-over-year, and Super Scaled Customer Quarterly ARPU of $1.4 million increased 23% year-over-year. From an industry perspective, on a trailing 12-month basis, six of our top 10 verticals grew faster than 20% year-over-year.

Speaker Change: Now, let's get into the details of our first quarter results.

Speaker Change: In Q1, we delivered revenue of $264 million up 36% year over year or 26%, excluding the contribution from life intent.

Speaker Change: Total scale customer count grew to 548 up 19% year over year, and an addition of 21 customers sequentially.

Speaker Change: We had 159 super scaled customers at the end of the first quarter, an increase of 10% year over year and 11 quarter to quarter.

Speaker Change: Scale customer quarterly our pool of $467000 increased 12% year over year and Super scaled customer quarterly <unk> of $1 4 million increased 23% year over year.

Speaker Change: From an industry perspective on a trailing 12 month basis six of our top 10 verticals grew faster than 20% year over year.

Chris Greiner: We ended the quarter with 173 quota carriers, up 22% year over year, and down 7 heads sequentially. The sequential decline was in line with our expectations, and driven by the completion of the live intent integration. Our direct mix in the first quarter was 73%, down from 74% in the fourth quarter of 2024, but up from 67% a year ago, resulting in direct revenue growth of 48% yearly.

Speaker Change: We ended the quarter with 173 quota carriers up 22% year over year and down seven heads sequentially. The sequential decline was in line with our expectations and driven by the completion of the live intent integration.

Speaker Change: Our direct next in the first quarter with 73% down from 74% in the fourth quarter of 2024, but up from 67% a year ago, resulting in direct revenue growth of 48% year over year.

Chris Greiner: Our GAAP cost of revenue in the quarter was $39.1 billion. 90 basis point improvements sequentially and a 30 basis point improvement from the first quarter of 2024. This improvement in cost of revenue, as well as leverage in other areas of our operating expenses, resulted in our 17th straight quarter of expanding adjusted EBITDA margins year over year. In the first quarter, we generated 46.7 million of adjusted EBITDA at a margin of 17.7%, 200 basis points higher year over year, and 2.2 million better than the midpoint of our guidance. And one of the add-backs to adjusted EBITDA was $3 million of restructuring expenses, which were anticipated and primarily related to the integration of LIBIDO.

Speaker Change: Our GAAP cost of revenue in the quarter was 39, 1% in <unk>.

Speaker Change: 90 basis point improvement sequentially, and a 30 basis point improvement from the first quarter of 2024.

Speaker Change: This improvement in cost of revenue as well as leverage in other areas of our operating expenses resulted in our 17th straight quarter of expanding adjusted EBITDA margins year over year.

Speaker Change: In the first quarter, we generated $46 7 million of adjusted EBITDA and a margin of 17, 7% 200 basis points higher year over year, and $2 2 million better than the midpoint of our guidance.

Speaker Change: One of the add backs to adjusted EBITDA was $3 million of restructuring expenses, which were anticipated and primarily related to the integration of life intent.

Chris Greiner: Our gap net loss for the first quarter was $22 million, an improvement from $40 million in the first quarter of 2024. The first quarter net cash provided by operating activities was $34.8 million, up 41% year-over-year, with free cash flow of $28.2 million, up 87%, and representing a margin of 10.7%. This translated to a free cash flow conversion of 60%. Significant improvement from 45% in the fourth quarter of 2024 and 50% in the first quarter. We also repurchased 1.6 million shares for $25 million, accounting for 89% of our free cash flow generated in the quarter. We continue to repurchase shares after the close of the quarter, acquiring an additional 1.8 million shares for $21 million between April 1st and April 25th.

Speaker Change: Our GAAP net loss for the first quarter was 22 million an improvement from $40 million in the first quarter of 2024.

Speaker Change: First quarter net cash provided by operating activities was $34 8 million up 41% year over year with free cash flow of $28 2 million up 87% and representing a margin of 10, 7%. This translated to a free cash flow conversion of 60%.

Speaker Change: Significant improvement from 45% in the fourth quarter of 2024 and 50% in the first quarter of 2024.

Speaker Change: We also repurchased one 6 million shares for $25 million accounting for 89% of our free cash flow generated in the quarter. We continued to repurchase shares after the close of the quarter acquiring an additional one 8 million shares for $21 million between April 1st in April 25th.

Chris Greiner: We have approximately $38 million remaining under our current share repurchase authorization, and upon completion of this authorization, we plan to initiate a new one.

Speaker Change: We have approximately $38 million remaining under our current share repurchase authorization and upon completion of this authorization, we plan to initiate a new one.

Chris Greiner: Before diving into our 2025 guidance, I want to highlight a few key elements of our business model that are especially relevant given the current macro environment and informed how we approached guidance. First, as David discussed earlier, we deliver a clear, measurable ROI to our customers. This value proposition has helped us maintain an annual net revenue retention rate of 111% or higher every year since our IPO in 2021. Second, nearly all of the marketing and advertising spend we support is tied to measurable KPIs, particularly lower funnel conversion rates. We believe this makes our platform more resilient in volatile macro environments.

Speaker Change: Before diving into our 2025 guidance I want to highlight a few key elements of our business model that are especially relevant given the current macro environment and informed how we approach guidance.

Speaker Change: First as David discussed earlier, we deliver a clear measurable ROI to our customers. This value proposition has helped us maintain an annual net revenue retention rate of 111% or higher every year since our IPO in 2021.

Speaker Change: Second nearly all of the marketing and advertising spend we support is tied to measurable kpis, particularly lower funnel conversion metrics. We believe this makes our platform more resilient in a volatile macro environments as lower funnel spend tends to be less discretionary than top of funnel brand awareness effort.

Chris Greiner: As lower funnel spend tends to be less discretionary than top of funnel brand awareness. Third, we primarily address large enterprises whose marketing spend tends to be more stable than small businesses. And fourth, typically more than 90% of our annual revenue comes from customers that have been with us more than a year. These dynamics have contributed to our relative outperformance during challenging periods. For example, in 2022, a year when many tech companies experienced a sharp slowdown in growth amid rising inflation and broader budget rationalization, our revenue growth accelerated by 4%. reaching 29%. Lastly, and relevant in the context of the current macro environment, our direct exposure to federal government and China is minimal.

Speaker Change: Yeah.

Speaker Change: Third we primarily address large enterprises, whose marketing spend tends to be more stable than small businesses in our view.

Speaker Change: And fourth typically more than 90% of our annual revenue comes from customers that had been with us more than a year.

Speaker Change: These dynamics have contributed to our relative outperformance during challenging periods. For example in 2022 a year when many tech companies experienced a sharp slowdown and growth amid rising inflation and broader budget rationalization, our revenue growth accelerated by four percentage points, reaching 29%.

Speaker Change: Kent.

Speaker Change: Lastly, and relevant in the context of the current macro environment, our direct exposure to federal government and China is minimal.

Chris Greiner: Following a strong quarter and considering our current data points, including a robust sales pipeline. We would typically revise our full year guidance upwards by the amount we exceeded the first quarter's expectations, as well as increase our second quarter's expectations. However, we'd all agree, these are not typical circumstances. Because of this, we prefer to adopt a thoughtful approach that blends short-term momentum and visibility with second-half conservative We are increasing our second quarter revenue outlook by $2 million while adjusting our growth expectations for the second half of the year.

Speaker Change: Following a strong quarter and considering our current data points, including a robust sales pipeline positive customer interactions and good visibility into the second quarter, we would typically revise our full year guidance upwards by the amount we exceeded the first quarter's expectations as well as increase.

Our second quarter forecast.

Speaker Change: However, we'd all agree these are not typical circumstances.

Speaker Change: Cause of this we prefer to adopt a thoughtful approach that blends short term momentum and visibility with second half conservatism.

Speaker Change: We are increasing our second quarter revenue outlook by $2 million, while adjusting our growth expectations for the second half of the year.

Chris Greiner: The conservatism in our guidance can be seen through three lenses. First, we are one month into our second quarter and have good visibility for the Second, although we continue to see healthy demand, our guidance assumes a softer macro in the second. Third, to meet our guidance, our four fastest growing industries in the first half of the year only need to grow at half that rate in the second To be clear, our customers have not expressed intentions to decrease their investments with Zeta due to macro uncertainty, nor has there been a pull forward in spending. Our intent is to create buffer by exercising prudent conservatism regarding expectations for the remainder of 2025.

Speaker Change: Conservatism in our guidance can be seen through three lenses.

Speaker Change: First we are one month into our second quarter and a good visibility for this period.

Speaker Change: Second.

We continue to see healthy demand our guidance assumes a softer macro in the second half of the year.

Speaker Change: Third to meet our guidance, our four fastest growing industries in the first half of the year only need to grow at half that rate in the second half.

Speaker Change: To be clear our customers have not expressed intention to decrease their investments with data due to macro uncertainty nor has there been pull forward in spending.

Speaker Change: Our intent is to create buffer by exercising prudent conservatism regarding expectations for the remainder of 2025.

Chris Greiner: Our 2025 revenue guidance is now $1,242,000,000 at the midpoint, an increase of $2,000,000 versus the midpoint of our prior guidance. This represents reported growth of 23% growth of 21% when adjusting for live intent and political candidate revenue in the year of the year. For the second quarter, we now expect revenue of $297 million at the midpoint, $2 million higher than our previous For Adjusted EBA, we're increasing the midpoint of our 2025 guidance to $258.5 million, up $2 million from our prior guidance, and representing a year-over-year increase of 34% at a margin of 21%. In alignment with our conservative approach to revenue projections, we're confident we can achieve our adjusted EBITDA margin target for 2025 just through leverage in sales and marketing, R&D and G&A.

Speaker Change: Our 2025 revenue guidance is now $1.242 billion at the midpoint increase of $2 million versus the midpoint of our prior guidance.

This represents reported growth of 23%.

Speaker Change: Both a 21% when adjusting for life intent and political candidate revenue in a year over year comps.

Speaker Change: For the second quarter, we now expect revenue of $297 million at the mid point $2 million higher than our previous guidance.

Speaker Change: For adjusted EBITDA, we're increasing the midpoint of our 2025 guidance to $258 5 million up $2 million from our prior guidance and representing a year over year increase of 34% and a margin of 21%.

Speaker Change: In alignment with our conservative approach to revenue projections, we're confident we can achieve our adjusted EBIT margin target for 2025, just leverage in sales and marketing R&D and G&A. We have many levers we can pull within operating expenses and are confident we can protect our margins in the event.

Chris Greiner: We have many levers we can pull within operating and are confident we can protect our margins in the event our top line is adversely affected due to macro weakness. For the second quarter of 2025, we now expect adjusted EBITDA of $54.9 million at the midpoint, up from our previous expectation of $54.4 million and representing growth of 42% and a margin of 18.5%. We are increasing the midpoint of our 2025 free cash flow guidance to $131.5 million, up $2 million from the midpoint of our previous guidance, and representing year-over-year growth of 43%.

Speaker Change: Our topline is adversely affected due to macro weakness.

Speaker Change: For the second quarter of 2025, we now expect adjusted EBITDA of $54 9 million at the midpoint up from our previous expectation of $54 4 million and representing growth of 42% and a margin of 18, 5%.

Speaker Change: We are increasing the midpoint of our 2025 free cash flow guidance to $131 5 million up 2 million from the midpoint of our previous guidance and representing year over year growth of 43%.

Chris Greiner: As I mentioned up front, we revisited our capital allocation strategy. In addition to aggressively buying back shares, we have also decided to significantly reduce dilution and stock based compensation. As such, we're introducing a new guidance item this quarter, stock-based compensation expense, which we expect to be $190 million for 2025, lower than the $195 million in 2024. In addition, for 2025, we expect our normal core share count dilution to be 4% to 6%. And for 2026, we expect to improve further to 3% to 4%. This is a significant reduction from 15% total dilution in 2024, which included 8% normal course equity grant dilution.

Speaker Change: As I mentioned upfront.

Speaker Change: Revisited our capital allocation strategy.

Speaker Change: In addition to aggressively buying back shares we have also decided to significantly reduce dilution and stock based compensation.

Speaker Change: As such we're introducing a new guidance item this quarter stock based compensation expense, which we expect to be $190 million for 2025 lower than the $195 million in 2024.

Speaker Change: In addition for 2025, we expect our normal course share count dilution to be 4% to 6% and for 2026, we expect to improve further to 3% to 4%.

Speaker Change: This is a significant reduction from 15% total dilution in 'twenty 'twenty, four which included 8% normal course equity grant dilution.

Chris Greiner: Slide 20 in our Earnings Supplemental outlines how we plan on achieving these goals. Part of the improvement will be driven by David, Steve Gerber, and myself not participating in the annual equity grant process in 2025, and instead, we'll have our compensation tied to longer-term. We recognize that stock-based compensation expense and dilution are important topics for our investors, and we're taking significant steps to improve both.

Speaker Change: Slide 20, and our earnings supplemental outlines how we plan on achieving these targets.

Speaker Change: Part of the improvement will be driven by David <unk>, Gerber and myself not participating in the annual equity grant process in 2025, and instead, we'll have our compensation tied to longer term goals.

Speaker Change: We recognize that stock based compensation expense and dilution are important topics for our investors and we're taking significant steps to improve both.

Chris Greiner: Lastly, we remain confident in our Zeta 2028 plan and are reaffirming our long-term targets, which project over $2 billion in annual revenue, at least 25% adjusted EBITDA margin, and 16% plus free cash flow margin in 2028.

Speaker Change: Lastly, we remain confident in our <unk> 2028 plan and are reaffirming our long term targets, which project over 2 billion in annual revenue at least 25% adjusted EBITDA margin and 16% plus free cash flow margin in 2028.

Operator: Now, let me hand the call back over to the Operator for David and me to take your questions. Operator? Thank you.

Speaker Change: Now, let me hand, the call back over to the operator for David and me to take your questions.

Speaker Change: Greater.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question.

Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.

Operator: We ask that analysts limit themselves to one question and a follow up so that others may have an You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star 2.

Speaker Change: We ask that analysts limit themselves to one question and a follow up so that others may have an opportunity to use those as well.

Speaker Change: You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Operator: One moment, please, while we pull for a question.

Speaker Change: One moment, please while we poll for questions.

Terry Tillman: Our first question comes from Terry Tillman with Truist Securities. Please proceed with your question. Yeah, hey, David, Chris and Matt. Bear with me. I've got my own preamble here.

Speaker Change: Our first question comes from Terry Tillman with true Securities. Please proceed with your question.

Terry Tillman: Yeah, Hey, David Kristen that bear with me I've got my own preamble here first of all congrats on the 15th beat and raise quarter and then also on the color on the second half our guidance philosophy, that's actually very helpful.

Terry Tillman: First of all, congrats on the 15th Beat and Raise quarter and then also on the color on the second half guidance philosophy. That's actually very helpful. My first question relates to like progress on OneData, you know, in terms of accelerating the cross-sell and use case expansion. I know y'all brought in some key leaders recently, some talent acquisition, but just maybe an update on OneData and how that's tracking and then add a follow up.

Speaker Change: My first question relates to like progress on one data.

Speaker Change: No in terms of accelerating the cross sell and use case expansion and all your.

Speaker Change: And some of the key leaders recently, some talent acquisition, but just maybe an update on one side and how that's tracking and then I had a follow up thank you.

David Steinberg: Thank Thank you, Terry. I'm losing my voice here a little bit. What? Oh, yes. I get that. What I would tell you is the one Zeta strategy is ahead of schedule. I just got back from the Possible conference, where during the course of the contract, we signed a deal, which will be one of our biggest deals in history around this very same stuff. The concept of wrapping it together, where instead of using one use case and multiple channels, they have multiple use cases and multiple channels, continues to be one of the biggest drivers of the business.

Speaker Change: Well, let me start by saying, Thank you Terry I'm, losing my voice here, a little bit but.

Speaker Change: The one data.

Speaker Change: Yes.

Speaker Change: Yes, yes.

Speaker Change: I get that I get that.

Speaker Change: What I would tell you is the one data strategy is ahead of schedule.

Speaker Change:

Speaker Change: Even even I just got back from the possible conference where.

Speaker Change: During the course of the contract we signed the deal which will be one of our biggest deals in history around this very same stuff.

Speaker Change: The concept of wrapping it together, where instead of using one use case in multiple channels. They have multiple use cases and multiple channels continues to be one of the biggest drivers of the business in the first quarter. Obviously, you saw a 36% year over year growth with 20 <unk>.

David Steinberg: In the first quarter, obviously, you saw 36% year over year growth with 26% of that being organic. A big piece of that was one Zeta and how we're progressing on it. I was sort of joking with someone the other day, I remember a few years ago when our goal was, how do we get five or six customers to five to 10 million a year. We're now looking at how do we get five or six customers to 100 million a year. And we're actually well on our way to that, exiting the first quarter. One, just bringing the data points to life there, Terry, for you.

Speaker Change: 6% of that being organic.

Speaker Change: Big piece of that was one zeta and how we're progressing on it.

Speaker Change: I was sort of joking with someone the other day I remember a few years ago. When our goal was how do we get.

Speaker Change: Five or six customers to $5 million to $10 million a year. We're now looking at how do we get five or six customers to 100 million a year.

Speaker Change: And we're actually well on our way to that exiting the first quarter, one just bringing the data points to life there Terry for you.

David Steinberg: All three of our use cases, the acquire, grow, and retain, all three grew double digits year over year. And our fastest growing cohort in terms of channel expansion were those scaled customers that are using three or more. And that's up 42% year over year. So just to kind of bring the data to David's point. Thank you for that, both of you.

Speaker Change: All three of our use cases, the acquired grown retain all three grew double digits year over year, and our fastest growing cohort in terms of channel expansion or those scaled customers that are using three or more and thats up 42% year over year. So just to kind of bring the data to David's point.

Speaker Change: That's great. Thank you for that the both of you.

Chris Greiner: Just one question is we think about the growth algorithm, you know, kind of excluding live intent, which I'm sure you'll get some questions on. I'm just curious, how are you thinking about the rest of the year as it relates to skilled customers and RPU from skilled customers? I think in line with our model, you know, we did ARPU growth in the quarter was 12% year over year. Our model is 12 to 16%. Scaled customer count grew 19% year over year. You know, interestingly, the scaled customer count growth is obviously aided by live intent, but the ARPU is impacted negatively by live intent, just given, you know, what their average customer size is.

Speaker Change: One question as we think about the growth algorithm, you've kind of excluding live intent, which I'm sure you'll get some questions on I'm. Just curious how are you thinking about the rest of the year as it relates to the scale customers and Arthur from scale customers.

Speaker Change: I think in line with our model.

Speaker Change: We did <unk> growth in the quarter was 12% year over year, our model is 12% to 16%.

Speaker Change: Scaled customer count grew 19% year over year.

Speaker Change: Interestingly the scaled customer count growth is obviously aided by a live intent, but the <unk> is impacted negatively by live intent just given what their average customer sizes, but I would expect us to continue to operate in a similar way as we did in the first quarter through the remainder of the year on the scale of customer count and ARPA.

Chris Greiner: But, you know, I would expect us to continue to operate in a similar way as we did in the first quarter through the remainder of the year on the scaled customer count and ARPU growth side.

Speaker Change: Both side.

Terry Tillman: That's great. Thank you.

Speaker Change: That's great. Thank you.

Jason Kreyer: Our next question came comes from Jason Kreyer with Craig Powell. Please proceed. Wonderful. Thank you. Great job again, guys.

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

Speaker Change: Wonderful. Thank you great job again guys.

Jason Kreyer: Um, David, you'd mentioned in your prepared remarks, just, you know, maybe more pronounced macro uncertainty at the start of Q2. Maybe you can break that down a little bit kind of what what Zeta is seeing or what Zeta customers are seeing versus the broader macro. Thanks, Jason. I appreciate it. At this point, we're not seeing any turbulence inside of Zeta either for Q2 or for the back half of the year. We've not had one client pause, and we have not had one client leave. So we continue to see that.

Speaker Change: David You had mentioned in your prepared remarks, just maybe more pronounced macro uncertainty at the start of Q2, maybe you can break that down a little bit kind of what what data is seeing or what data customers are seeing versus the broader macro.

Jason: Thanks, Jason I appreciate it at this point, we're not seeing any.

Jason: Turbulence inside of data either for Q2 were for the back half of the year, we have not had one client pause and we have not had one client. We've so we continue to see that now at the same time, we're trying to be thoughtful in a world where there there is a law.

David Steinberg: Now at the same time, we're trying to be thoughtful in a world where there's a lot of uncertainty. We just wanted to make sure that we were being conservative in the back half. But as it relates to the Zeta platform itself, at this time, we have seen zero changes. In fact, Jason, April ended just as strong as March did. So the quarter itself is even off to a great start, which gives us the type of confidence we did. We had to have to raise the quarter.

Jason: Lot of uncertainty, we just wanted to make sure that we were being conservative in the back half, but as it relates to the Zeta platform itself. At this time, we have seen zero changes in fact, Jason April.

Jason: And it just as strong as March did so for the.

Jason: The quarter itself is even off to a great start which gives us the type of confidence we did we had to had to raise the quarter.

Jason: Yeah.

David Steinberg: Unknown Speaker I wanted to also just ask about this independent agent opportunity. I'm curious there if the go-to-market, like how the go-to-market with independents is different than holdcos. And then Chris, in the past we've dealt with kind of some headwinds to margin and cash flow as you've seen greater opportunities with holdcos. So just curious if there's anything we need to think about as you deepen that opportunity with independents. So, interestingly enough, you don't have those headwinds with independent agencies. Traditionally, we are platforming the entire independent agency at once, Jason. So you're seeing long-term contracts where you've got a lot more visibility, almost all of it's on platform, and we're getting paid more in line with our normal DSOs than the agency holdcos.

Jason: Perfect good to hear.

Speaker Change: Wanted to I'll also just asked about this independent agent opportunity curious there is the go to market and like how does it go to market with independents is different than hold coast and then Chris.

Speaker Change: In the past, we've dealt with kind of some headwinds to margin and cash flow as you've seen greater opportunities with hold post. So just curious if there's anything we need to think about as you deepen that opportunity with independent agents.

Speaker Change: So interestingly enough you don't have those headwinds with independent agencies.

Speaker Change: Traditionally we are platforming the entire independent agency at once Jason So youre seeing long term contracts, where you're you've got a lot more visibility almost all of it Tom platform and we're getting paid.

Speaker Change: More in line with our normal dsos than the Dsos from the agency hold coast, Although I will say our largest agency holdco in the first quarter did execute and move to a multi year contract.

Chris Greiner: Although I will say, our largest agency holdco in the first quarter did execute and move to a multi-year contract, and we expect that client to continue to be very, very solid and grow in the years to come. Jason, on the cash flow point, and I'm glad you raised it, throughout the course of the quarter as we were meeting with investors, there were three things that were important to them that we delivered on. The desire to have a clean quarter with clean comps, we clearly delivered that. To address stock-based compensation and dilution, I think we've definitively addressed that as well.

Speaker Change: And we expect that client to continue to be very very solid and grow in the years to come.

Speaker Change: Jason on the cash flow point I'm glad you raised it throughout the course of the quarter as we were meeting with investors. There were three things that were important to them that we delivered on that.

Speaker Change: The desire to have a clean quarter with clean comps, we clearly delivered that.

Speaker Change: To address stock based compensation and dilution I think we've definitively address that as well and then the third was to continue to focus on more and more free cash flow conversion in generation. So to your point this quarter at a 60% conversion from adjusted EBITDA was a record for us on an as reported basis. That's still included a headwind.

Chris Greiner: And then the third was to continue to focus on more and more free cash flow conversion and generation. So to your point, this quarter at a 60% conversion from adjusted EBITDA was a record for us on an as-reported basis. That still included a headwind in terms of working capital by virtue of the growth we're having with the agencies. But I feel like we've more than covered for that in our guidance conservatism for free cash flow conversion, which is right around 50%, again, compared to the 60% that we just generated this quarter.

Speaker Change: In terms of working capital by virtue of the growth, we're having with the agencies but.

Speaker Change: But I feel like we've we've more than covered for that in our guidance conservatism for free cash flow conversion, which is right around 50% again compared to the 60 that we just generated this quarter David and.

David Steinberg: David? And, you know, I would think about it, Jason, that the independent agency space is more like just signing a very large multinational enterprise, where you're looking at comparable margins and comparable term of contracts to those, versus with the agency Holtcoast. In fact, this week, in addition to Promise, we just signed another independent agency this week. Yeah. I mean, we will, I mean, the independent agency ecosystem has over 1,000 potential prospects in it. And, you know, we doubled it in the first quarter over last year. And I think that's a trend. I think, you know, you can't probably double it every quarter, you know, from a cyclical perspective.

Speaker Change: Think about it Jason that the independent agency space is more like just signing a very large multinational enterprise, where youre looking at comparable margins and comparable term of contracts to those versus.

Speaker Change: With the agency Holdco. This week in addition to promise, we just signed another independent agencies.

Speaker Change: I mean, we will I mean that the independent agency ecosystem.

Speaker Change: Has over a thousand potential prospects in it and.

Speaker Change: We doubled it in the first quarter over last year.

Speaker Change: And I think that's a trend I think.

Speaker Change: You can't probably double it every quarter so from.

Speaker Change: From a cyclical perspective, but I would say I would expect that strategy to continue to bear fruit in the form of expanded.

David Steinberg: But I would say, I would expect that strategy to continue to bear fruit in the form of expanded on-platform revenue and expanded conversion of EBITDA to free cash flow from where we originally projected.

Speaker Change: On platform revenue and expanded conversion of EBITDA to free cash flow from where we originally projected.

David Steinberg: Great stuff, guys.

Speaker Change: Alright, great stuff guys. Thanks.

David Steinberg: Thanks.

David Steinberg: Thanks, Jay.

Speaker Change: Thanks Jake.

D.J. Hynes: Our next question comes from D.J. Hynes with Canaccord Group. Please proceed with your question. Hey, guys, congrats on the nice quarter and glad to hear April closed equally as strong. David, you gave us some some great expansion examples in telco and insurance and finance. If we think about some of the verticals that maybe you're keeping a closer eye on today in this, you know, current environment, what are those? And where would the impact show up first? Right? Is it in our pool? Like, what are you paying attention to? And what other verticals? Oh, yeah. Sorry.

Speaker Change: Our next question comes from D. J Hynes with Canaccord Genuity. Please proceed with your question.

Speaker Change: Hey, guys congrats on the nice quarter and glad to hear April closed equally as strong.

Speaker Change: David You gave us some some great expansion examples in telco and insurance and finance.

Speaker Change: If we think about some of the verticals that maybe youre, keeping a closer eye on today and as you know.

Speaker Change: Current environment.

Speaker Change: What are those and where would be impact show up first right is it in our pool like what are you paying attention to and what other verticals.

Speaker Change: Oh, Yeah, sorry, Thank you D. J I would I would say listen I came into April most worried about automotive.

David Steinberg: Thank you, DJ. I would I would say, listen, I came into April, most worried about automotive. We have a bunch of automotive manufacturing clients who are international in addition to manufacturing in the US. But as we all know, I think even organizations in the US that manufacture here are bringing, you know, parts and they have supply chain issues in there. We saw the opposite. We actually saw the automotive space grow a little faster than we started looking with that pull forward. And it does not appear to be because most of the increase came from new contracts and new agreements that were signed for the calendar year or longer.

Speaker Change: We have a bunch of automotive manufacturing clients.

Speaker Change: Who are international in addition to manufacturing in the U S. But as we all know I think even <unk>.

Speaker Change: <unk> in the U S that.

Speaker Change: Manufacturer here are bringing parts and they have supply chain issues and there we saw the opposite we actually saw the automotive space grow a little faster than we started looking was that pull forward and it does not appear to be because most of the increase came from new contracts and new agreements that were signed for the calendar year.

Speaker Change: Year or longer.

David Steinberg: But I would have been most worried about automotive. We're not seeing anything there yet.

Speaker Change: But I would have been most worried about automotive we're not seeing anything there yet and then retail REIT as retailers look at their businesses, how did they perform and very similar.

David Steinberg: And then retail, right? As retailers look at their businesses, how did they perform? And very similar. Through April, we've seen no disruption in the retail space. In fact, it's interesting. One retailer who I met with at the Possible Conference made a comment that because we are by far their most efficient partner, we might see additional growth out of them that we might not have expected as they shifted.

Speaker Change: Through April we've seen no disruption in the retail space in fact, it's interesting.

Speaker Change: One retailer, who I met with at possible conference made a comment that because we are by far their most efficient partner, we might see additional growth out of them that we might not have expected as they shift budget from partners that don't have the type of return.

Speaker Change: On investment and quite frankly, the ability to prove it that we currently have an evidence Chris Yes D. J a few points of color on the industry vertical question is obviously really important as you kind of start to break down your guidance for us and I mentioned in the prepared remarks on a trailing 12 month basis six out of our top 10 verticals grew over 20% and it was well over 20.

Chris Greiner: Yeah, DJ, a few points of color on the industry vertical question, because it's obviously really important as you kind of start to break down your guidance. For us, and I mentioned the preparator marks, on a trailing 12-month basis, six out of our top 10 verticals grew over 20, and it was well over 20. If you look at it on a first quarter basis alone, there were seven out of the 10 that grew north of 20, and it was, you know, well north of 20. But we've even gone to the length in verticals like consumer and retail, where we've gone customer by customer, and we've looked at it through two dimensions.

Speaker Change: If you look at it on a first quarter basis alone. There were seven out of the 10 that grew north of 20, and it was well north of 20.

Speaker Change: As I think about those those verticals and we put in our guidance commentary.

Speaker Change: Our four fastest growing verticals can grow half that rate in the second half and we still get to our guide.

Speaker Change: Again, we're not seeing any data driven reasons as to why that would be the case in our sales pipeline et cetera. It's just our conservatism in the buffer that we're putting in place, but we've even gone to the lengths in verticals like consumer and retail where we've gone customer by customer and we've looked at it through two dimensions, what is their business model sensitivity to China.

Chris Greiner: What is their business model sensitivity to China, and where are they on the curve of discretionary spending? And we walked away from that analysis in consumer retail and other verticals not having, you know, being very comfortable with where we've set guidance in terms of our relative exposure and their exposure. Okay, that's all very helpful color.

Speaker Change: And where are they on the curve of discretionary spending and we walked away from that analysis in consumer retail and other verticals.

Speaker Change: Not having being very comfortable with where we've set guidance in terms of our relative exposure and their exposure.

Speaker Change: Yeah, Okay. That's all very helpful color.

Chris Greiner: Chris, maybe this is probably not a fair question, you know, given the way you're talking about the business and kind of the optimism going forward, but If growth were to slow to sub-20% Is it right to think that the tradeoff would be showing more operating leverage?

Speaker Change: Chris maybe this is probably not a fair question.

Speaker Change: And the way Youre talking about the business and kind of the optimism going forward, but.

Speaker Change: If growth were to slow to sub 20%.

Speaker Change: Is it right to think that the trade off would be showing more operating leverage maybe you could just talk philosophically with respect to kind of the internal scenario planning that you're doing.

Chris Greiner: Maybe you could just talk philosophically with respect to kind of the internal scenario planning that you're doing. Yeah, I mean, we have our business model is we don't have to sacrifice one for the other. As we've been growing fast, we just talked about our 17th straight quarter of adjusted even a margin expansion to your point, if we were to see a slowdown, we have the levers in our business, when you think about it from a sales and marketing perspective, the amount of variable spend there, obviously, if revenue were to slow, that has an element of commissions expense that you have flexibility on.

Speaker Change: Yeah, I mean, we have our business model is we don't have to sacrifice one for the other.

Speaker Change: As we have been growing fast, we just talked about our 17th straight quarter of adjusted EBITDA margin expansion to your point, if we were to see a slowdown.

Speaker Change: We have the levers in our business when you think about it from a sales and marketing perspective, the amount of variable spend there. Obviously if revenue were to slow that has an element of commissions expense that you have flexibility on and at the same time within G&A and R&D, which we've done for a while we continue to move work where it can be performed best Ann.

Chris Greiner: And at the same time within GNA and R&D, which we've done for a while, we continue to move work where it can be performed best and most effectively. So continuing to use our global distribution would be a lever that we have. But I will point out, even though we didn't fully roll through the revenue beat, we did fully roll through the adjusted even a beat in the first quarter through to the full year as well as free cash flow to the full year. That was an important signal to the street that there's more leverage in our business for us to get for the rest of the year as well.

Speaker Change: And most of most.

Most effectively so continuing to use our global distribution would be a lever that we have but I will point out even though we didn't fully roll through the revenue beat we did fully rolled through the adjusted EBITDA beat in the first quarter through to the full year as well as free cash flow to the full year that was an important.

Speaker Change: Signal to the street that there's more leverage in our business for us to get through the rest of the year as well.

Chris Greiner: Yep.

Chris Greiner: Very helpful.

Chris Greiner: Thank you, guys.

Speaker Change: Yes very helpful. Thank you guys.

Speaker Change: [laughter].

Arjun Bhatia: Our next question comes from Arjun Bhatia, William Blair, please proceed. Perfect. Thank you guys and congrats. on a strong start to the year. David, I think you were kind of right to point out earlier in the call that, you know, you grew through 2020, you grew through the post COVID kind of post Slow down. But if I think about the business, it seems like you're in a very different situation now than you were two years ago or five years ago, just the business has grown, you have a lot more growth avenues. So there is in the back half of the year, some sort of macro slowdown.

Speaker Change: Our next question comes from Archrock platform volume Blair. Please proceed with your question.

Speaker Change: Perfect. Thank you guys and congrats on a strong start to the year.

Speaker Change: David I think you were kind of.

Speaker Change: Right to point out earlier on the call that you grew through 2020, you grew through the post COVID-19 kind of post <unk>.

Speaker Change: A slowdown, but if I think about the business. It seems like youre in a very different situation now than you were two years ago or five years ago. The business has grown a lot more growth avenues. So if there is in the back half of the year or some sort of a macro slowdown I'm curious what strategy.

David Steinberg: I'm curious what strategy you have at your disposal now that you can maybe undertake to protect the growth. Somewhat not suggesting that you'd be immune, but I'm sure there's maybe new products or different use cases or different customer types that you can lean into. But I'm curious what Arjun, as usual, you're totally right. I mean, when you look at our business today, the incremental use cases and the incremental channels that we have available to us, allow us to move things around in a way that we even couldn't in 2020 or 2022. The other thing that has changed is our attribution capabilities are a step function better than they were even two years ago.

Speaker Change: You have at your disposal now that you can maybe undertake to protect the growth rate somewhat not suggesting that you'd be immune but I'm sure there's going to be new products or different use cases with different customer types that you can lean into it at this point, but I'm curious what that looks like.

Speaker Change: Arjun as usual you're totally right I mean, when you look at our business today, the incremental use cases and the incremental channels that we have available to us.

Speaker Change: Low us to move things around in a way that we even could in 2020 or 2022. The other thing that has changed is our attribution capabilities are a step function better than they were even two years ago. When we look at return on investment.

David Steinberg: When we look at return on investment, the return we give clients today is superior to at any point we've ever run this business. So what we believe would happen, even if macro uncertainty went to macro headwinds, which we're not seeing today, we don't believe we will be as affected as others because of that return on investment. We are already out speaking with clients, showing them clear return on investment, wrapping our arms around them. And we're seeing upsells currently that we might not have expected because we're being more proactive in wrapping our arms around our clients than maybe others would be.

Speaker Change: Return, we give clients today is superior to at any point, we've ever run this business. So what we believe would happen even if there were macro.

Speaker Change: If macro uncertainty went to macro headwinds, which we're not seeing today. We don't believe we will be as affected as others because of that return on investment now.

Speaker Change: We are already out speaking with clients showing them clear return on investment wrapping our arms around them and we're seeing upsells currently that we might not have expected because we're being more proactive in.

Speaker Change: Wrapping our arms around our clients than maybe others would be but I do think as Chris said in addition to the levers we have and the EBITDA and free cash flow, we have a number of levers and growth as well the other thing.

David Steinberg: But I do think, as Chris said, in addition to the levers we have in EBITDA and free cash flow, we have a number of levers in growth as well. The other thing that I think people might not understand are our relationships with the holdcos are really help there. Because as they see turbulence, We are so much more profitable than the other partners they work with. They're already bringing us new brands to get started in case they need to really scale those in the back half of the year.

Speaker Change: I think people might not understand.

Speaker Change: Our relationships with the whole COSE or really helped there because.

Speaker Change: As they see turbulence, we are so much more profitable than the other partners. They work with they are already bringing us new brands to get started in case, they need to really scale those in the back half of the year. So.

David Steinberg: So, you know, once again, we don't want anybody to confuse conservatism with any weakness in the business. All right, yeah, perfect. Very helpful.

Speaker Change: Once again, what we.

Speaker Change: We don't want anybody to confuse conservatism with any weakness in the business.

Speaker Change: Alright, perfect very helpful.

Chris Greiner: And then one for for you, Chris, it's encouraging to see the cash flow conversion. get better, you know, obviously something investors have been focused on. But what, what are you doing actually, to drive cash flow conversion higher, and maybe what's still available to get that metric to move higher? Look, something that we have talked about with investors and the street is we fully expected our, if you look at CapEx, let's just kind of drill in on that as an example. Not only do we expect that to continue to be more efficient from an EDR perspective, but you saw a really sizable tick down in CapEx, both software capitalization and data capitalization from the fourth quarter.

Speaker Change: And then one for.

Speaker Change: For you Chris.

Speaker Change: It's encouraging to see the cash flow conversion get better.

Speaker Change: Obviously, something investors have been focused on.

Speaker Change: What are you doing actually to drive cash flow conversion higher and maybe what's still available to get that much I can even higher from here.

Speaker Change: Yeah look something that we have talked about with investors and the street is we fully expected. Our if you look at Capex is just kind of drilling on that as an example, not only do we expect that to continue to be more efficient from an ADR perspective, you saw really sizable tick down in Capex both software cap.

Speaker Change: Utilization in data capitalization from the fourth quarter. So it's it's areas like that that we talked about we expect to see that we're executing on and just.

Chris Greiner: So it's, it's areas like that, that we talked about, we expected to see that we're executing on. And just, you know, more and more of the business is dropping to the bottom line. It's the, the headwind that we have is just pure timing of when the agencies pay us right now. And we're optimistic as to where we ended the first quarter for Castle for sure.

Speaker Change: More and more of the business is dropping to the bottom line. It's.

Speaker Change: The headwind that we have is just pure timing of when the agencies payoffs right now and we're optimistic as to where we ended the first quarter free cash flow for sure.

Arjun Bhatia: All right, perfect. Thank you, guys. Thanks, Arjun.

Speaker Change: Alright, Thank you guys.

Thanks Roger.

Elizabeth Porter: Our next question comes from Elizabeth Porter with Morgan Stanley. Please proceed with your question. Great. Thank you so much for the question.

Speaker Change: Our next question comes from Elizabeth Parker with Morgan Stanley. Please proceed with your question.

Elizabeth Parker: Great. Thank you so much for the question I just wanted to ask on the mix between integrated and direct the direct growth remained really strong and elevated well integrated to slow today. So I wondered if there was anything to call out there as it relates to customer changing their mix or agencies that typically spend more on that integrated platform.

Elizabeth Porter: I first just wanted to ask on the mix between integrated and direct. The direct growth remained really strong and elevated. Well, it looks like integrated just slowed a bit. So I was wondering if there was anything to call out there as it relates to customer changing their mix or agencies that typically spend more on that integrated platform.

David Steinberg: No, Elizabeth, we're actually going through the process we expected to go through, right? So we've been saying for a while that we expected the early agencies to follow the same pattern as our first agency client, which started very, very highly on integrated and then moved to direct. We're already seeing the agencies that are scaling very, very rapidly begin to move to direct a little faster than we expected them to. In fact, Elizabeth, amongst our fastest growing channels, CTV is still the fastest, but social grew really nicely. So no, nothing there at all that alarmed us or caused us any concern.

Speaker Change: No Elizabeth we're actually going through the process, we expect it to go through right. So we've been saying for a while that we expected. The early agencies to follow the same pattern as our first agency client, which started very very highly on an integrated and then moved to direct.

Speaker Change: We're already seeing the agencies that are scaling very very rapidly begin to move to direct a little faster than we expected them to in fact.

Speaker Change: Elizabeth are amongst our fastest growing channel CTV is still the fastest but social grew really nicely. So no no nothing nothing there at all that alarmed us or caused us any concern.

Speaker Change: Great and then just as my follow up I wanted to just get more perspective on how youre thinking about the growth opportunity with agencies longer term I think there's about 20% of the business last year and given the move more into the independent side as to could we start to think about the agency business as being.

Speaker Change: Alrighty piece of the business in the not too distant future.

Speaker Change: And then any sort of more of a two year term changes to be thinking it out but as it relates to the cohort in 2025.

David Steinberg: Yeah, so let me say that, you know, in order for that agency business to get to 50%, it would have to grow substantially faster than we're currently growing and what we expect. So I think it's going to continue to grow, it'll continue to inch up as a percentage of revenue. But as they move from indirect to direct, I think we'll continue to see on platform, and cost of goods sold continue to get better. We're just right now we're seeing that as very, very solid. But our direct to enterprise business is still growing very rapidly. So we're not seeing a slowdown there.

Speaker Change: Yes, So let me say that in order for that agency business to get to 50%. It would have to grow substantially faster than we're currently growing and what we expect so I think it's going to continue to grow it will continue to inch up as a percentage of revenue, but as they move from indirect to direct I think we will.

Speaker Change: <unk> see on platform and cost of goods sold continue to get better.

Speaker Change: We're just right now we're seeing that as very very solid.

Speaker Change: But our and our direct to enterprise business is still growing very rapidly. So we're not seeing a slowdown there.

David Steinberg: And I will also point out that I think it's important to note that the independent agencies of which we doubled that business in Q1 over Q4, and we expect to continue to grow that at an accelerated pace, really acts like the enterprise business. You're platforming their, you know, cost of goods sold is very, very low. And we're able to work with them as it relates to cash flow. So I think right now we've got a really good mix. And I think it's going to continue at its current pace. Thank you. Thanks.

Speaker Change: And I will also point out that I think it's important to note that the independent agencies of which we doubled that business in Q1 over Q4, and we expect to continue to grow that in an accelerated pace really acts like the enterprise business.

Speaker Change: <unk> forming their car.

Speaker Change: Cost of goods sold is very very low.

Speaker Change: <unk>.

Speaker Change: We're able to work with them as it relates to cash flow. So I think right now we've got a really good mix and I think it's going to continue at its current pace.

Speaker Change: Thank you.

Speaker Change: Thanks.

Ryan Macdonald: Our next question comes from Ryan MacDonald with Needham & Co. Please proceed with your question. Thanks for taking my question and congrats on a nice quarter.

Yeah.

Speaker Change: Our next question comes from Ryan Macdonald with Needham <unk> Co. Please proceed with your question.

Ryan Macdonald: Hi, Thanks for taking my question and congrats on a nice quarter, David curious to know about sort of how the generative AI adoption continues to trend throughout Q1, particularly with the launch of agent studio and as you think about within this environment are you seeing sort of maybe a tighter budgetary environment if that happens being.

Ryan Macdonald: David, curious to know about sort of how the generative AI adoption Q1, particularly with the launch of AgentStudio. And as you think about within this environment, are you seeing sort of maybe a tighter budgetary environment, if that happens, being a catalyst for faster adoption of sort of AI agents doing more with less? Or do you think this causes maybe more of a pausing on some AI initiatives? What's the sense you're getting from We are not seeing any pausing whatsoever, Ryan, on AI adoption. In fact, if anything, I think the uncertainty is accelerating it. We saw a meaningful step up in adoption in Q1.

Ryan Macdonald: A catalyst for faster adoption of sort of AI agents doing more with less or do you think this causes maybe more of a pausing on on some AI initiatives, what's the sense, you're getting from your customers.

Speaker Change: We are not seeing any pausing whatsoever Ryan on.

Speaker Change: AI adoption in fact, if anything I think the uncertainty is accelerating it.

Speaker Change: We saw a meaningful step up in adoption in Q1, I think that's one of the reasons you saw the numbers flow through.

David Steinberg: I think that's one of the reasons you saw the numbers flow through. Our AI adoption leads to a substantially higher revenue from customers who adopt it. And we continue to invest in it. As Chris said, our percentage of capital investment lowered as a percentage of revenue. We expect that to continue, but that's because revenue is growing so fast. We're still spending more money on innovation, almost exclusively in artificial intelligence, than we've ever spent on innovation in our entire corporate life. So we continue to invest there. We continue to see adoption there. And I believe that's one of the reasons we saw the numbers come in where they did and why we feel very comfortable raising the year.

Speaker Change: Our AI adoption leads to a substantially higher revenue from customers who adopt it.

Speaker Change: And we continue to invest in it as Chris said, our percentage of capital investment lowered as a percentage of revenue we expect that to continue but that's because revenue is growing so fast we're still spending more money on innovation.

Speaker Change: Most exclusively in artificial intelligence than we've ever spent on innovation and our entire corporate law.

Speaker Change: Life so.

Speaker Change: We continue to invest there we continue to see adoption, there and I believe thats one of the reasons, we saw the numbers come in.

Speaker Change: They did and why we feel very comfortable raising the year.

Chris Greiner: Chris, maybe for you as a follow-up, I noticed that in the updated guidance that the expectation for live intent didn't really change much. I know it's obviously a small portion of the business relative to the overall size, but is there any reason to believe that that business acts differently or would be more or less resilient than the core business to the extent you have that visibility given how new it is? Look, it performed right in line with what we expected it to do. I think it did like $19.5 million compared to the $20 million guide that we had in place.

Speaker Change: Super helpful color, Chris maybe for you as a follow up noticed that in the updated guidance that the expectation for <unk> didn't really change much I know, it's obviously small portion of the business relative to the overall size, but is there any reason to believe that that business acts differently or would be more.

Speaker Change: More or less resilient than the core business to the extent you have that visibility given how new it is.

Speaker Change: Look at it performed right right in line with what we expected it to do think it does like $19 5 million compared to the 20 million guide that we had in place. So it's right on the trajectory for the year that we expected to beyond what youre not necessarily seeing show up in live intent because that's kind of their standalone businesses performance are all in.

Chris Greiner: So it's right on the trajectory for the year that we expected to be on. You're not necessarily seeing show up in live intent, because that's kind of their standalone business's performance, are all of the synergies and the products that we're creating, that it's actually benefiting the organic side of the business to some degree. But combined, the standalone capabilities in the business model of live intent has added new channels for us to sell, which is additive to the business model. And then the products that we're jointly developing with them that are in market are actively being sold and contributing to the overall performance of the company.

Speaker Change: The synergies and the products that we're creating that thats actually thats benefiting the organic side of the business to some degree, but combined the standalone capabilities and the business model of live in 10 has added new channels for us to sell which is additive to the business model.

Speaker Change: And then the products that were jointly developing with them that are in market or.

Speaker Change: Are actively being sold in contributing to the overall performance of the company. So very very happy with how a lot of intense performing out of the gate.

Ryan Macdonald: So very, very happy with how live intent's performing out of the gate. I appreciate the color. Thanks, Ryan.

Speaker Change: I appreciate the color and congrats again.

Speaker Change: Thanks, Ryan Thanks, Ron.

Richard Baldry: Our next question comes from Richard Baldry with Roth Capital Partners. Please proceed with your question. Thanks. So you're seeing the agencies mix, you know, move overall from indirect to direct. I'm sort of curious, is that because some of their brands are maturing and moving along that? Or as they're onboarding new brands, are they bringing them on also more direct given they've the experiences they've had, you know, with initial Thanks, Rich.

Speaker Change: Our next question comes from Richard Baldry with Roth Capital Partners. Please proceed with your question.

Speaker Change: Thanks.

Richard Baldry: You're saying that agencies next move overall from indirect to direct I'm sort of curious is that because some of their brands are maturing and moving along that or as they're onboarding new brands are they bringing them on also more direct given the experiences they've had with initial clients.

Speaker Change: Thanks Rich.

David Steinberg: The answer is yes to both. Because we're able to evidence that the on-platform business delivers a higher return on investment than the integrated component of the business, we're just seeing the agency hold codes move clients over faster. Some are starting there. A big chunk of them are migrating from integrated to direct. But both of those are tailwinds right now for that part of the business.

Richard Baldry: The answer is yes to both.

Richard Baldry: Because we're able to evidence that the on platform business delivers a higher return on investment.

Richard Baldry: The integrated component of the business, we're just seeing the agency holdco as move clients over faster.

Richard Baldry: Some are starting there.

Richard Baldry: Big chunk of them are migrating from integrated to direct but both of those are <unk> right now for that part of the business.

David Steinberg: And, you know, given the strength strategically of the live in 10 acquisitions, sort of curious your thoughts overall on M&A as you go forward, you've been using a lot of free cash flow to do buybacks, but you know, are there other tuck in technologies or channels that you'd still, you know, like to be adding to the suite of offers? Yeah, I mean, Rich, as you know, we'll continue to look at our M&A pillars. And we have a very, very strong balance sheet. And we're currently spending free cash flow on share buybacks.

Richard Baldry: Okay and.

Richard Baldry: Given the strength strategically of the live in 10 acquisitions sort of curious your thoughts overall on M&A as you go forward using a lot of free cash flow to do buybacks, but.

Richard Baldry: Are there other tuck in technologies.

Richard Baldry: Our channels that you'd still like to be adding to the suite of offerings.

Richard Baldry: Yes, I mean rich as you know we will continue to look at our M&A pillars, and we have a very very strong balance sheet and we're currently spending free cash flow on share buybacks, but quite frankly I have been spending a disproportionate percentage of my time, taking calls from people trying to buy us. So the last few weeks.

David Steinberg: But quite frankly, I've been spending a disproportionate percentage of my time taking calls from people trying to buy us over the last few weeks. And that's, that's been keeping us busy. Great, thanks.

Richard Baldry: And that's that's been keeping us busy.

Richard Baldry: Okay. Thanks.

Matt Swanson: Our next question comes from Matt Swanson with RBC Capital Markets. Please proceed with your question. Yeah, thank you and all. And my congrats on the quarter.

Speaker Change: Our next question comes from Matt Swanson with RBC capital markets. Please proceed with your question.

Speaker Change: Yes, Thank you and I'll add my congrats on the quarter.

Matt Swanson: It's not too much trouble, another macro one. I guess, typically in a macro downturn, we see the expand motion come easier than land, right? Because your existing customers already kind of get the ROI joke and story. Throughout those 2020 and 2022 periods, did you see any kind of difference in mix where maybe it was easier to focus on ARPU than the new land? interesting, Matt, if you look at our net revenue retention range, it's been like 111 to 114 since, you know, from 2021 to 2024. And if you look at our growth rate, it's more or less half what the growth rate has been over that period as well.

Speaker Change: It's not too much trouble another macro one I guess typically in a macro downturn, we see the expand motion come easier than land right because of your existing customers already kind of get the ROI Jochen story.

Speaker Change: Welcome to <unk> 2020 in 2022 periods did you see any kind of difference in mix, where maybe it was easier to focus on our plan and the new lands.

Speaker Change: It's interesting that if you look at our net revenue retention range. It's been like 111 to $1 14 since from 2021 to 2024, and if you look at our growth rate, it's more or less half what the growth rate has been over that period as well so half from existing half from new and it's been it's been very consistent and that's also what our expectation.

David Steinberg: So half from existing half from new, and it's been it's been very consistent.

David Steinberg: And that's also what our expectation is going to be for 2025 is about half the growth comes from the base, half from new, I think it's an interesting point, David, Yeah, I was gonna, I'll answer the question a little more towards what I think you were asking. No, we didn't see an increase in retain or grow versus new customer acquisition from a use case perspective, as it related to 22 or 20. But what I would say, and Chris is, of course, right, When you've got 111 to 114% of your revenue becomes your net retention rate, that often is how do we move from one use case to two.

Speaker Change: It's going to be for 2025 is about half the growth comes from the base have from you I think it's an interesting point, David you were going to add yes, I was going to I will answer the question a little more towards what I think you were asking no. We didn't see an increase in retain or grow versus new customer acquisition from a use.

Speaker Change: Case perspective, as it related to 'twenty, two where 'twenty, but what I would say in Christmas of course right.

Speaker Change: When you've got a 111% to 114% of your revenue.

Speaker Change: Becomes your net retention rate.

Speaker Change: That often is how do we move from one use case to two and I would say that customers that are traditionally doing new acquisition, which is what I think Chris was trying to get across will often expand into retention and monetization in a downturn.

David Steinberg: And I would say that customers that are traditionally doing new acquisition, which is what I think Chris was trying to get across, will often expand into retention and monetization in a downturn faster than they will when things are not uncertain. So, you know, listen, it's good to have all three use cases. It's good that they all grew really, really well in the first quarter. It's really good that they all grew really well through April. And, you know, we think that's a trend that's going to continue.

Speaker Change: Faster than they will when things are not uncertain. So listen it's good to have all three use cases, it's good that they all grew really really well in the first quarter. It's really good that they all grew really well through April and.

Speaker Change: We think thats a trend thats going to continue.

Speaker Change: Yes.

Speaker Change: Okay.

David Steinberg: That's, that's really helpful.

Koji Ikeda: And then I know, most previously, when you've talked about guidance, you've mentioned the Zeta Economic Index is something that you guys look at as kind of a barometer of health. Is that still a good way to think about, or for us to kind of keep an eye on to think about the overall, I guess, macro environment as it relates to your business throughout Yeah, so we definitely look at the ZEI. And I would tell you, even in the most recent ZEI, we're seeing more concern from customers than slowing spend. And I think that's a trend that continues, which is one of the reasons I think that enterprises that we work with, at least have not cut back, I would not if there were to be an unexpected downturn in the ZEI, look at that as an unexpected downturn in Zeta.

Speaker Change: That's really helpful and then I know previously.

Speaker Change: Previously when you've talked about guidance, you've mentioned, let's say the economic indexes something that you guys look at as kind of a barometer of health.

Speaker Change: Is that still a good way to think about for us to kind of keep an eye on to think about.

Speaker Change: The overall I guess macro environment as it relates to your business throughout the year.

Speaker Change: Yes, so we definitely look at the Cei and I would tell you even in the most recent cei, we're seeing more concern from customers than slowing spend.

Speaker Change: And I think that's a trend that continues which is one of the reasons I think that enterprises that we work with at least have not cut back I would not if.

Speaker Change: If there were to be an unexpected downturn in the Z I look at that as an unexpected downturn in <unk>.

David Steinberg: I would simply say it is a good indicator of what is happening behind the scenes with the economy. I will further say, and I'll point out, that what we often see is in times of uncertainty, Zeta has grown faster than we expected it to because of our ability to return on investment that other enterprises we compete with do not do. And that to me would be the better thing to look at.

Speaker Change: I would simply say it is a good indicator of what is happening behind the scenes with the economy.

Speaker Change: I will further saying I'll point out that what we often see is in times of uncertainty Veda has grown faster than we expected it to because of our ability to drive return on investment.

Speaker Change: Other enterprises, we compete with do not do.

Speaker Change: And that to me would be the better thing to look at and listen there's not a lot of companies that are raising annual guidance right now raising the quarter, we wouldn't be doing that if we didn't feel we were in a position to do it after obviously, beating guidance and raising guidance 15 consecutive quarters as a public company.

David Steinberg: And listen, there's not a lot of companies that are raising annual guidance right now, raising the quarter. We wouldn't be doing that if we didn't feel we were in a position to do it after obviously beating guidance and raising guidance 15 consecutive quarters as a public company. Thank you.

Speaker Change: Yes.

Speaker Change: Thank you.

Jackson Ader: Our next question comes from Jackson Ader with KeyBank. Please proceed with your question. Great, thanks. Hey, good evening, guys.

Speaker Change: Our next question comes from Jackson Ader with Keybanc. Please proceed with your question.

Jackson Ader: Great. Thanks, Hey, good evening guys. David can I just confirm did you say that you have been fielding calls from people interested in buying data the company or buying zito's software.

David Steinberg: David, can I just confirm, did you say that you've been fielding calls from people interested in buying Zeta the company or buying Zeta's software? No, it was the prior, but I probably shouldn't have said it. It was a Yeah, but it's neither here nor there. The reality is, right now we are executing the company we, as we continue to grow and take massive market share, we're just getting a lot of attention on that side that we hadn't gotten in the past.

Speaker Change: No. It was the prior but I probably shouldn't have said it was.

Jackson Ader: Yes.

Jackson Ader: Neither here nor there the reality is.

Jackson Ader: Right now we are executing the company.

Jackson Ader: As we continue to grow when take massive market share. We're just getting a lot of attention on that side that we haven't gotten in the past.

Jackson Ader: Understood.

Jackson Ader: Second question, a little bit maybe capital. Allocation wise, right. So you know, the the the idea that you're looking to buy back more shares $25 million quarter you have $30 million you know, 30, 40 million left. And coupled with the comment that, you know, that you continue to spend money on innovation, but why?

Jackson Ader: Understood.

Jackson Ader: Second question, a little bit maybe.

Jackson Ader: Capital.

Jackson Ader: Allocation wise right. So.

Jackson Ader: The idea that you're looking to buy back more shares $25 million a quarter you have $30 million.

Jackson Ader: $340 million less.

Jackson Ader: And coupled with the comment that you know.

Jackson Ader: That you continue to spend money on innovation, but why.

David Steinberg: Why spend the $25, $30, $40 million buying back a relatively small number of your shares each If you are seeing a direct correlation to the amount of money you are spending on innovation, driving revenue. Listen, first of all, that's a great question, Jackson. If we could spend more money on innovation faster, we would. The challenge is, we are very, very selective about the engineers we bring into this company, the architects we bring into this company. And we have a large number of open job racks currently. So we are, quite frankly, in a position right now, that we're able to deliver on the innovation and, quite frankly, sales rep goals that we are looking to deliver on, while simultaneously retiring shares.

Jackson Ader: Why spend.

Jackson Ader: The $25 $30 $40 million buying back a relatively small number of your shares each quarter.

Jackson Ader: You are seeing a direct correlation to the amount of money you are spending on innovation.

Jackson Ader: Driving revenue growth.

Speaker Change: Listen first of all Thats, a great question Jackson.

Speaker Change: If we could spend more money on innovation faster we would the challenge is we are very very selective about the engineers, we bring into this company. The architects we bring into this company and we have a large number of open job reqs currently so.

Speaker Change: We.

Speaker Change: Or quite frankly in a position right now that we're able to deliver on the innovation and quite frankly sales rep goals that we are looking to deliver on while simultaneously retiring shares.

David Steinberg: I think the buyback goes back to sort of our M&A. thesis around our five pillars of M&A. And as I look out onto the landscape, at the multiples that we've been trading at, with the profitability we have, I don't think I could buy any company at that rate. So by retiring our own stock, it benefits all of our existing shareholders who we want to reward as a part of sticking with us. Okay, understood.

Speaker Change: The buyback goes back to sort of our M&A.

Speaker Change: Thesis around our five pillars of M&A and as I look out onto the landscape at the multiples that we've been trading at with the profitability. We have I don't think I could buy any company at that rate so by retiring our own stock.

Speaker Change: It benefits all of our existing shareholders, who we want to reward is a part of sticking with us.

Speaker Change: Yes.

Jackson Ader: Thank you very much.

Speaker Change: Okay understood. Thank you very much.

Koji Ikeda: Our next question comes from Koji Ikeda with the Bank of America. Please proceed with your question. Hey guys, thanks so much for taking the questions. I wanted to go back to the commentary on the demand environment and the guidance and the conservatism and the guidance and so, you know, loud and clear, you guys aren't seeing any change in the demand environment. Cut sounds like the conversations you're having with customers are really good. And, you know, I totally get the conservatism. I really do appreciate all the color that you gave on the call and the prepared remarks about the guidance.

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

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

Koji Ikeda: Wanted to go back to the commentary on the demand environment and the guidance and the conservatism in the guidance and so.

Koji Ikeda: And clear you guys aren't seeing any change in the demand environment.

Koji Ikeda: It sounds like the conversations youre, having with customers are really good and I totally get the conservatism I really do appreciate all the color that you gave on the call in the prepared remarks about the guidance.

Koji Ikeda: Um, but. I'm just curious, it feels like something outside of just the high-level macro uncertainty is informing, you know, the more conservative second. And so if you could, you know, if you could share, what are you seeing? Or maybe the better question is, what are you not seeing out there that is tilting you more conservative?

Koji Ikeda: But.

Koji Ikeda: I'm just curious it it feels like something outside of just the high level macro uncertainty is is informing the more conservative second half.

Koji Ikeda: So if you could if you could share what are you seeing or maybe the better question is what are you not seeing out there that is tilting your more conservative in the second half.

David Steinberg: Koji, thank you for your question. Let me be 100% clear. This is conservatism. That's it. We are not seeing any change to our business. I'll remind you, 90 plus percent of our customers have been with us for greater than one year. We have seen no pullbacks. We've seen no pauses. In this environment, we thought that it spoke volumes to the quality of our business to raise the second quarter and, quite frankly, to raise the year at all in an environment where most companies are lucky to be reaffirming. So we want to very clearly send a message.

Koji Ikeda: Koji. Thank you for your question, let me be 100% clear this is conservatism that's it.

Koji Ikeda: We are not seeing any change to our business I'll remind you 90 plus percent of our customers have been with us for greater than one year. We have seen no pullbacks, we've seen no pauses in this environment, we thought that it spoke volumes to the quality of our business to raise the second quarter and quite frankly.

Koji Ikeda: To raise the year at all in an environment, where most companies are lucky to be reaffirming.

Koji Ikeda: So we want to.

Koji Ikeda: Very clearly send the message the business is executing as we would hope it would and we are seeing nothing in the back half, but at the same time, we want to show, we're being conservative and thoughtful as it relates to the uncertainty of the environment.

Chris Greiner: The business is executing as we would hope it would, and we are seeing nothing in the back half. But at the same time, we want to show we're being conservative and thoughtful as it relates to the uncertainty of the environment.

Chris Greiner: Koji, just this week, we signed two very, very large contracts. I was very specific in my comments to say every metric we're looking at right now, just as consistent with what David said, would say that we would do our normal, much bigger race. We just, as David noted... you know, what is happening by other public companies right now is, you know, we wanted to, you know, kind of follow suit. Yeah, I listen, we listened to or read the transcripts of call it 100 different earning calls before getting to ours. And we wanted to make sure that we were showing shareholders and potential shareholders, not just that the business is executing incredibly well, but that we were meaningfully de-risking our back half in a situation where we could then show that we would be able to continue to beat and raise as a company and continue to execute.

David: Could you just this week, we signed two very very large contracts. So and it was very specific in my comments to say every metric. We're looking at right now just as consistent of what David said.

David: I would say that we would do our normal much bigger race, we just as David noted.

David: What is happening by other public companies right. Now is we wanted to kind of follow suit, yes, listen we listened to or read the transcripts of call. It 100 different earnings calls before getting to ours and we wanted to make sure that we were showing shareholders and potential shareholders not.

David: Just that the business is executing incredibly well, but we were meaningfully de risking our back half in a situation, where we could then show that we would be able to continue to beat and raise as a company and continue to execute.

Koji Ikeda: Got it. No, thank you for that. And maybe just a quick follow-up here. On the ARPU front, you know, we did notice that sequential decline. I heard you on the prepared remarks. Live intent is playing a factor there. Presumably, there's some political, post-political cycle deflation in ARPU happening there, but just wanted to be sure there isn't anything else to call out in that ARPU number. No, and that ARPU sequential decline is pretty typical from a fourth quarter to a first quarter, Koji. If you look at it on a year-over-year basis, whether it's in total, up 12%, or even the super-scaled ARPU, which is up almost 25% year-over-year.

Speaker Change: Got it no. Thank you for that.

Speaker Change: Maybe just a quick follow up here on the <unk> front.

Speaker Change: I did notice that sequential decline I heard you on the prepared remarks.

Speaker Change: <unk> is playing a factor there presumably there is some political post political cycle deflation and rfps happening there, but just wanted to be sure there isn't anything else to call out in that <unk> number for the first quarter.

Speaker Change: No and Thats that that our <unk> sequential decline is pretty typical from a fourth quarter to first quarter <unk>. If you look at it on a year over year basis, whether its in total up 12% or even the super scaled <unk>, which is up almost 25% year over year.

Chris Greiner: Yeah, and by the way, we added 11 super-scaled customers sequentially quarter-to-quarter. It's one of our bigger jumps we've had. So no, ARPU looked great to us, and I mentioned their fastest-growing cohort are those scaled customers using now three or more channels. It's up 42% year-over-year.

Speaker Change: Yes.

Speaker Change: I the way, we added 11 super scale customer sequentially quarter to quarter, It's one of our bigger jumps we've had.

Speaker Change: So now.

Speaker Change: <unk> look great to us and I mentioned their fastest growing cohort or those scale customers using now three or more channels is up 42% year over year, we were particularly proud koji to get to 159 Super scaled customers and that doesn't include a number of super scaled clients. We've signed in the last 30 days.

Chris Greiner: We were particularly proud, Koji, to get to 159 super-scaled customers, and that doesn't include a number of super-scaled clients we've signed in the last 30 days. Got it. Thanks guys. Thanks for taking the questions. Thanks, Coach.

Speaker Change: Got it thanks, guys. Thanks for taking the questions.

Speaker Change: Thanks Scott.

Brian Schwartz: Our next question comes from Brian Schwartz with Oppenheimer & Co. Please proceed with your question. Yeah, hi, thanks for taking my questions this afternoon.

Speaker Change: Our next question comes from Brian Schwartz with Oppenheimer <unk> co. Please proceed with your question yes.

Brian Schwartz: Yes, hi, Thanks for taking my questions. This afternoon, David wanted to circle back on the AI.

Brian Schwartz: David, wanted to circle back on the AI-Agentic Studio product. Just wanted to ask you what you're seeing in terms of consumption trends. Are the early customer adopters, are they fully scaled in production with Agentic AI and they're coming back to buy more from you? Or is it still early and most are testing and piloting the deployment? Oh, no, Brian, we have we have a meaningful percentage of our customers who have adopted the agentic AI. And, you know, I believe the number is, you know, customers who have adopted it are growing at greater than 40% from a consumption revenue perspective, year over year.

Speaker Change: <unk> studio.

Speaker Change: Product just wanted to ask you what you're seeing in terms of consumption trends are the early customer adopters are they fully scaled in production with <unk> and they're coming to buy back to buy more from you or is it still early and most are our task and piloting the deployment.

Speaker Change: Oh no Brian we have we have a meaningful percentage of our customers who have adopted the agenda.

Speaker Change: And I believe the number is.

Speaker Change: Customers, who have adopted it are growing at greater than 40% from a consumption revenue perspective year over year, So youre seeing meaningfully faster growth from organizations that adopt adopt the agenda.

David Steinberg: So you're seeing meaningfully faster growth from organizations that adopt, adopt the agentic AI the big leap which is in beta is stringing them together, which is an agentic workflow. And I want to be clear, when you have four agents strung together, each agent that you add to the equation is a step function better than having just one. So one agent would be regular, two would be a step function better, three would be two step functions better, and four would be three step functions better. So, you know, we're seeing massive, massive opportunities around that beta that I think will really bear fruit in the back half of the year.

Speaker Change: Big Leap, which is in beta.

Speaker Change: Is stringing them together, which is an agenda workflow and I want to be clear when you have.

Speaker Change: For agent strung together.

Speaker Change: Each agent that you add to the equation is a step function better than having just one so one agent would be regular two would be a step function better three would be to step functions better and four would be three step functions better. So we're seeing massive.

Speaker Change: Massive opportunities around that data that I think will really bear fruit in the back half of the year.

Chris Greiner: Thank you, David.

David: Thank you David and then a follow up I'd have for Kras.

Chris Greiner: And then the follow up I have for Chris, what can you share with us from what you're seeing in the shifts in terms of the leading indicators, just thinking about your pipeline, maybe the rate of RFP? The cadence of conversions, the size of your lands, how have they been trending in Q1 and year to date? Thanks. Thanks, Brian. Trending similar to how they ended last year. Sales pipeline growing faster than the overall revenue of the company, which has always been our model, and that continues to be the case. Very healthy RFP backdrop. And then sales productivity, where it all really rubber hits the road, you know, we're seeing very strong sales productivity from all of our cohorts, those sellers that are in their first year, kind of that 12 to 24-month period, and then our most experienced sellers continue to be our most productive.

David: What can you share with us from what Youre seeing in the shifts in terms of the leading indicators just thinking about your pipeline maybe the rate of rfps the cadence of conversions the size of your land.

David: How have they been trending in Q1 and year to date. Thanks.

Brian Schwartz: Thanks, Thanks, Brian.

Brian Schwartz: The trending similar to how they ended last year sales pipeline growing.

Speaker Change: <unk> faster than the overall revenue of the company, which has always been our model and that continues to be the case very healthy RFP backdrop.

Speaker Change: And then sales productivity, where it all really the rubber hits. The road, we're seeing very strong sales productivity from all of our cohorts. Those sellers that are in their first year kind of that 12 months to 24 month period, and then our most experienced sellers continue to be our most productive.

David Steinberg: Yeah, I mean, Brian, I'll just make an off the cuff comment that I've never seen our pipeline RFPs or conversions at a better place than they are right now. We've signed three of the biggest deals we've ever done in the last 90 days.

Speaker Change: I mean, Brian I'll, just make an off the cuff comment that I've never seen our pipeline rfps or conversions at a better place than they are right. Now we've signed three of the biggest deals we've ever done in the last 90 days.

Speaker Change: Thanks.

Brian Schwartz: Thanks. Thanks, Brian.

Brian Schwartz: Thanks, Brian.

Zach Cummins: Our next question comes from Zach Cummins with B Riley Securities. Please proceed with your question. Hi, good afternoon, David and Chris. Thanks for taking my questions. Chris, I want to start off, I don't think I saw it in your script or within a presentation.

Speaker Change: Our next question comes from Zach Cummins with B Riley Securities. Please proceed with your question.

Zach Cummins: Yes, hi, good afternoon, David and Chris Thanks for taking my questions. Chris I wanted to start off I don't think I saw it in your script or was that presentation, but in terms of all the new scaled customers added here in Q1 is it fair to assume essentially all of those are from the organic business rather than from <unk>.

Chris Greiner: But in terms of all the new scaled customers added here in Q1, is it fair to assume essentially all of those are from the organic business rather than from any sort of live intent customer? Well, it's all fully integrated now. There are some live intent customers that are contributing to it. But you know, it's all fully blended. Now that obviously has the, if it's helping skilled customer count, it's a drag on skilled customer ARPU, because they're they tend to have, you know, smaller ARPUs to begin with, but Really, I mean, could not be happier with how scaled customer count in total started the year.

Speaker Change: Ligand take customers.

Speaker Change: Well, it's all fully integrated now there are some live in 10 customers that are contributing to it but it's all fully blended now that obviously is the if it's helping scaled customer count it's a <unk>.

Speaker Change: Drag on scaled customer ARPA, because they tend to have smaller ARPA is to begin with but.

Speaker Change: Yes, really I mean could not be happier with how scaled customer count and total started the year and by the way that they didn't have many large customers sac. So.

Chris Greiner: And by the way, they didn't have many large customers, Zach. Even in the case where somebody might have been attributed to them, we would have had to grow them in many cases to that rate to get them to there.

Even in the case, where somebody might have been attributed to them. We would have had to grow them in many cases to that rate to get them to their incidental and we've talked about earlier, but it just came to mind one of the verticals that contributed the most scaled customers quarter over quarter was actually consumer retail.

David Steinberg: Incidentally, and we talked about earlier, but it just came to mind, one of the verticals that contributed the most scaled customers quarter over quarter was actually consumer retail. Got it. That's that's great to hear.

Speaker Change: Got it that's that's great to hear.

David Steinberg: And my one follow up question, maybe I know most of the major holding companies, at least on their commentary in May, April, With the macro uncertainty, we're talking about leaning into their more durable businesses, which tend to be these data-driven marketing initiatives. So just curious if that's potentially accelerating any opportunity that you see with these agencies. Any sort of update around trends in those Yeah, no, it's meaningfully accelerate there. You know, we've, we've had, we sort of open, we talked about the fact that we've had one agency hold code that we've worked for a long time that continues to grow nicely.

Speaker Change: One follow up question, maybe geared towards David.

I know most of the major holding companies at least some of your commentary in April.

Speaker Change: With the macro uncertainty we are talking about leaning into their more durable businesses, which tend to be these data driven marketing initiatives. So just curious if thats potentially accelerating any opportunity that you see with these agencies or just any sort of update around the trends in those conversations with major holding companies.

Speaker Change: Yes, no it's meaningfully accelerate there.

Speaker Change: We've had we sort of open we talk about the fact that we've had one agency holdco that we've worked for a long time that continues to grow nicely. We had one agency holdco that continues to scale at rates that we've not seen before we now have a third one who is scaling at the same rates as the second.

David Steinberg: We had one agency hold code that continues to scale at rates that we've not seen before. We now have a third one who is scaling at the same rates as the second. And I think a lot of that goes back to our ability to provide them with data driven marketing, I think it's also really important to know. that even You know, the three of the, you know, we've got five of the eight large agency holdcos, you know, you're starting to see, you know, number two, three, and four scale meaningfully right now. And I think part of that goes back to two things.

Speaker Change: And I think a lot of that goes back to our ability to provide them with data driven marketing.

Speaker Change: I think it's also really important to note.

Speaker Change: That.

Speaker Change: Even.

Speaker Change: The three of them, we've got five of the eight large agency hold COSE.

Speaker Change: Starting to see.

Speaker Change: Two three and four scale meaningfully right now and I think part of that goes back to two things. One we are often their most profitable partner so as theyre looking at uncertainty Theyre looking to drive greater margin opportunity for themselves by using this Ada marketing platform and our data.

Zach Cummins: One, we are often their most profitable partner. So, you know, as they're looking at uncertainty, they're looking to drive greater margin opportunity for themselves by using the Zeta marketing platform in our data cloud. And two, back to your point, the ability to show true return on investment to their clients. Well, thanks for taking my questions and best of luck with the rest of the quarter.

Speaker Change: Cloud and to back to your point the ability to show true return on investment to their clients.

Speaker Change: Understood. Thanks for taking my questions and best of luck with the rest of the quarter.

Speaker Change: Exactly.

Gabriela Borges: Our next question comes from Gabriela Borges with Goldman Sachs. Please proceed with your question. Hi, good afternoon. Thank you. David, I wanted to ask you a little bit about with replacement cycles for some of the marketing cloud competitors that have talked about having their own agent strategies. Just curious if you're seeing a continuation on the acceleration trend that you've talked about previously and if there's any other call you would add. Yeah, thank you, Gabriella. That is a great question. And the answer is yes, we continue to see the replacement cycle, which we believe is still in early innings, accelerating.

Speaker Change: Our next question comes from Gabriella Borges with Goldman Sachs. Please proceed with your question.

Gabriella Borges: Hi, Good afternoon. Thank you David I wanted to ask you a little bit about what you're seeing with replacement cycles for some of the marketing cloud competitors that have talked about having their own agent strategies. Just curious if youre seeing a continuation on the XR some trend that you've talked about previously and if theres any other color you out here.

Speaker Change: Yes. Thank you Gabrielle and that is a great question and the answer is yes, we continue to see the replacement cycle, which we believe is still in early innings accelerating and it's interesting because when you think about our platform because we re architected and relaunched in 2021 by putting AI.

David Steinberg: And it's interesting, because when you think about our platform, because we rearchitected and relaunched in 2021, by putting AI agents and data as native to the application layer, there's no latency in the processing inside of our marketing cloud, whereas all of our competitors currently are operating with AI outside of the core cloud. So you leave the cloud to the algorithm to do a query, the algorithm then has to do a data dip to go back to the algorithm to make an answer and then go back and tell the marketing cloud what to do. That tech debt is destroying return on investment for enterprises.

Gabriella Borges: Hi.

Gabriella Borges: <unk> agents and data is native to the application layer Theres no latency in the processing inside of our marketing cloud, whereas all of our competitors currently are operating with AI outside of the core cloud. So you leave the cloud to the algorithm to query the algorithm that has.

Gabriella Borges: To do a data dipped to go back to the AGA rhythm to make an answer and then go back and tell the marketing cloud what to do that tech that is destroying return on investment for enterprises and we are seeing is a part of that marketing cloud replacement cycles are continuing to grow and we expect that to.

David Steinberg: And we are seeing as a part of that, marketing cloud replacement cycles are continuing to grow. And we expect that trend to continue.

Gabriella Borges: And to continue.

Gabriella Borges: Yes.

Clark Wright: Thank you very much. Our next question comes from Clark Wright with D.A. Davidson. Please proceed with your question. Awesome, thank you. There's been some some recent events within the walled gardens. And I was wondering if you could talk about maybe the opportunity that a fragmented ecosystem might have for data, especially with global agencies, since they typically start with social media as their first use case. Yeah, I mean, I wouldn't. I mean, I think, you know, people are still talking about how Microsoft was supposed to be getting broken up. You know, what I will caveat, Clark, is that if if there is a meaningful breakup in the ecosystem of the large walled gardens, that would be a massive opportunity for Zeta to work with those new assets, buy some interesting assets, or partner with interesting assets.

Gabriella Borges: Thank you very much.

Speaker Change: Our next question comes from Clark <unk> with D. A Davidson. Please proceed with your question.

Clark: Awesome. Thank you there's been some some recent events within the walled gardens and I was wondering if you could talk about maybe the opportunity that a fragmented ecosystem might have for data, especially with global agencies. They typically start with social media at their first use case.

Yes.

Clark: I mean, I think people are still talking about how Microsoft was supposed to be getting broken up.

Clark: No.

Clark: What I will caveat Clark is that if if there is a meaningful break up in the ecosystem of the large walled gardens that would be a massive opportunity for data to work with those new assets by some interesting assets or partner with interesting assets and we're all.

David Steinberg: And we're already looking at what that could look like. But I once again, I don't want to put the cart before the horse here. I'm not sure we'll see anything happen anytime soon. Although if it does, that would be a meaningful accelerator to our business. Got it. And then as a follow up here, you talked about multi-year deals, can you talk about maybe the change in duration of contracts that you've seen over the last few years and kind of what you expect, which is implied by the guide?

Clark: Already.

Clark: Looking at what that could look like but I. Once again I don't want to put the cart before the horse here I'm not sure we'll see anything happen anytime soon although with it does that would be a meaningful accelerator to our business.

Speaker Change: Got it and then as a follow up here you talked about multiple sizable multi year deals can you talk about maybe the change in duration of contracts that you've seen over the last few years and kind of what you expect.

Clark: Which is implied by the guidance.

David Steinberg: Oh, I said you first, but okay, yeah. So interestingly enough, I would say most of our early agency hold code deals had no contract. It was a monthly agreement that, you know, we would just agree to operate together and go from there. And we now have multi-year deals on the three largest and scaling the fastest, and at least one year deals with everybody else. So it's really giving us a lot of long-term visibility. Our largest agency hold code client, where quite frankly, we're working across dozens of brands, and we're working across multiple agencies that are a subset of it.

Clark: Okay.

Clark: So do first but yes.

Clark: Yup.

Clark: So interestingly enough I would say most of our early agency Holdco deals had no contract. It was a monthly agreement.

Clark: That we would just agree to operate together and go from there and we now have multiyear deals.

On the three largest and scaling the fastest and at least one year deals with everybody else. So it's really giving us a lot of long term visibility our largest agency holdco client, where quite frankly, we're working across dozens of brands and.

Clark: We're working across multiple agencies that are a subset of it rolls up to one enterprise, but in that case, they just signed a meaningful multiyear deal, which we were very pleased about.

David Steinberg: It rolls up to one enterprise. But in that case, they just signed a meaningful multi-year deal, which we were very pleased about. Awesome. Thank you.

Clark: Awesome. Thank you.

Clark: Yeah.

Operator: We have reached the end of our question and answer session, which concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: We have reached the end of our question and answer session, which concludes today's teleconference. You may disconnect. Your lines at this time.

Clark: Thank you for your participation.

Clark: [music].

Clark:

Clark: Okay.

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Clark: Yes.

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Clark: Okay.

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Clark: Okay.

Clark: Yeah.

Clark: Okay.

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