Zeta Global Holdings Corp. (ZETA) Q3 2025 Earnings Call Transcript
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Overview
The earnings call highlights strong financial metrics, an optimistic guidance increase, and strategic advancements like Athena and AI integration. The Q&A section reveals positive analyst sentiment, with confidence in achieving ambitious targets and addressing past challenges. The company's proactive approach to sales and marketing, despite slight margin declines, and the potential for future acquisitions, further support a positive outlook. With a market cap of $3.78 billion, the anticipated stock price movement is expected to be positive, within the 2% to 8% range, driven by strong growth indicators and strategic initiatives.
Key Financial Performance
Revenue $337 million, up 28% year-over-year excluding political and LiveIntent. This represents an acceleration in growth from Q2. The increase is attributed to leadership in AI-powered marketing and strong customer adoption.
Adjusted EBITDA $78 million, up 46% year-over-year. This growth reflects improved profitability and operational efficiency while investing in AI leadership.
Free Cash Flow $47 million, up 83% year-over-year, representing a margin of 14%. This is the highest free cash flow margin achieved, driven by operational leverage and revenue growth.
Scaled Customer Count 572, up 20% year-over-year. Growth driven by cross-sell initiatives and the OneZeta initiative.
Super-Scaled Customer Count 180, up 25% year-over-year. Growth attributed to broad-based industry verticals and cross-sell of LiveIntent customers.
Scaled Customer Quarterly ARPU $579,000, up 4% year-over-year or 13% when adjusting for political candidate revenue. Growth driven by increased customer spending.
Super-Scaled Customer Quarterly ARPU $1.6 million, up 1% year-over-year or 12% excluding prior year political candidate revenue. Growth driven by higher customer engagement and spending.
Net Cash Provided by Operating Activities $57.9 million, up 68% year-over-year. Growth driven by improved operational efficiency and revenue growth.
GAAP Net Loss $3.6 million, an improvement from a loss of $17.4 million in the third quarter of 2024. Improvement driven by reduced acquisition-related expenses and operational efficiency.
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Operating Highlights
Athena AI: Launched as an AI conversational superintelligent agent, Athena acts as a real-time voice-activated command center for Zeta's marketing platform. It simplifies operations by allowing users to plan, execute, analyze, and optimize in plain English. Athena is expected to be in client beta by Q4 2025 and fully production-ready by Q1 2026.
Zeta Live Event: The fifth annual Zeta Live event saw a 35% increase in attendance, with over $100 billion in annual marketing spend decision-makers present. The event generated a strong pipeline, aiming to close over $100 million in incremental business.
Revenue Growth: Q3 revenue reached $337 million, up 28% year-over-year excluding political and LiveIntent contributions. Adjusted EBITDA grew 46% year-over-year to $78 million, and free cash flow increased 83% year-over-year to $47 million.
Customer Expansion: Scaled customer count grew to 572, up 20% year-over-year, with super-scaled customers increasing by 25% to 180. Customers adopting multiple use cases generate over 3x the revenue of single-use case customers.
Marigold Acquisition: Zeta is on track to acquire Marigold's enterprise software business by the end of 2025. This acquisition will add over 100 enterprises, including 20 of the top 100 advertisers in North America, and enhance Zeta's data cloud and AI capabilities.
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Risk or Challenges
Regulatory Risks: The company acknowledges risks and uncertainties related to forward-looking statements, including regulatory hurdles that may impact financial outlook, business plans, and objectives.
Acquisition Integration Challenges: The acquisition of Marigold’s enterprise software business presents potential challenges in integration, including aligning teams, systems, and customer bases, which could impact operational efficiency and strategic goals.
Economic and Market Conditions: Economic uncertainties and market conditions, such as variability in customer spending and agency payment cycles, could affect revenue growth and cash flow.
Competitive Pressures: The company faces competition from peers with legacy tech debt and other AI-powered marketing platforms, which could impact its market share and growth.
Supply Chain and Operational Risks: Longer agency payment cycles and increased costs in display and video channels could strain operational cash flow and profitability.
Strategic Execution Risks: The success of new initiatives like Athena and OneZeta depends on customer adoption and execution, which, if not achieved, could hinder growth and ROI.
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Guidance & Outlook
2025 Revenue Guidance: Raised by $11 million at the midpoint to $1.275 billion, representing 26% year-over-year growth excluding political and LiveIntent.
2026 Revenue Outlook: Initial guidance set at $1.54 billion, representing 21% growth on 2025 guidance. This is an organic-only view and does not include Marigold.
2025 Adjusted EBITDA Guidance: Increased to $273.7 million at the midpoint, up $9 million from prior guidance, representing a 42% year-over-year increase at a margin of 21.5%.
2026 Adjusted EBITDA Outlook: Guided to $354 million, representing a 23% margin and a 150 basis point improvement year-over-year.
2025 Free Cash Flow Guidance: Increased to $157.4 million at the midpoint, up $15 million from prior guidance, representing 71% year-over-year growth and a conversion of 57% of adjusted EBITDA.
2026 Free Cash Flow Outlook: Guided to $209 million, representing a 14% margin and a 59% conversion of adjusted EBITDA.
Athena AI Platform: Currently in internal beta, expected to enter client beta by the end of Q4 2025, and fully production-ready by the end of Q1 2026.
Marigold Acquisition: Expected to close by the end of 2025. Contributions from Marigold are not included in 2025 or 2026 guidance. Post-acquisition guidance will be provided upon closing.
2026 Political Candidate Revenue: Assumed to be $15 million, which is 2x the midterms in 2022.
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Shareholder Return Plan
Share Repurchase: During the third quarter, we repurchased 1.7 million shares for $28 million and have repurchased 6 million shares for $85 million year-to-date. We also continue to make significant progress in reducing dilution and stock-based compensation expense. Just like the second quarter, in the third quarter, we had 0 net dilution and year-to-date, our dilution is 1.6% as of September 30. We remain on track to achieve both our 4% to 6% normal course dilution target in 2025 and our $190 million equity compensation expense target even when factoring in the equity we anticipate issuing for the Marigold acquisition.
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Key Q&A
Q:How does Zeta's ROI or ROAS compare to that of the walled gardens?
A:David Steinberg stated that Zeta's ROI is on par with walled gardens, with every dollar spent through the Zeta Marketing platform returning a 6x revenue to clients. He highlighted that Zeta is more profitable than competitors in the media space and partners with most walled gardens.
Q:Why has the scaled customer count growth slowed in Q3 compared to previous quarters?
A:Christopher Greiner explained that while scaled customer count grew 20% year-over-year, sequential growth was slower due to a strong progression from scaled to super-scaled customers (12% sequential increase). Additionally, 23 brands were added quarter-to-quarter, reflecting growth within agencies.
Q:How does the $100 million incremental business target after Zeta Live compare to prior years?
A:David Steinberg noted that last year, $57 million in business was closed after Zeta Live. This year, the pipeline is already full enough to achieve the $100 million target, with potential for even higher numbers. He emphasized the strong momentum from Zeta Live.
Q:What is the status of the LiveIntent integration and its performance?
A:Christopher Greiner stated that LiveIntent is performing well, with 100% of their earn-out accrued. He acknowledged initial guidance was set early but highlighted substantial product synergies and cross-sales between Zeta and LiveIntent products.
Q:How will Athena and AI impact cross-sell opportunities and platform value?
A:David Steinberg described Athena as a major driver for the OneZeta methodology, enabling voice-activated and conversational interactions. It will help clients expand use cases and reduce friction, accelerating platform utilization. Christopher Greiner added that use cases with 2 or more grew over 100% year-over-year.
Q:What gives Zeta confidence in providing 2026 guidance early?
A:Christopher Greiner cited strong customer retention (60% with Zeta for 5+ years) and consistent annual spend growth of 15%. The pipeline and strong signings throughout the year also contribute to confidence. David Steinberg added that larger contracts from clients provide greater visibility.
Q:How is Zeta approaching sales and marketing investments given the strong pipeline?
A:David Steinberg mentioned efforts to hire more salespeople, though existing reps have been highly productive. The Marigold acquisition will add a strong sales team. Christopher Greiner noted a material increase in sales and marketing spend from Q3 to Q4 due to Zeta Live.
Q:Why did gross margins slightly decline despite stable direct revenue mix?
A:Christopher Greiner explained that strong display video channel usage, which has lower margins, impacted gross margins. However, channel usage metrics showed growth, with customers using 4 or more channels up 44% year-over-year.
Q:How is the agency business contributing to growth?
A:Christopher Greiner highlighted that direct revenue mix from agencies grew from 52% to almost 60%. David Steinberg emphasized the importance of agency clients and noted strong expansion with them.
Q:What is the deployment process for Athena, and how does it handle deterministic outcomes?
A:David Steinberg explained that Athena is built into the Zeta Marketing Platform, enabling seamless use for clients. All actions are deterministic, leveraging Zeta's Data Cloud for attribution and execution.
Q:How does Athena's architecture support integration with other platforms?
A:David Steinberg stated that Athena's architecture is internally built and can integrate with platforms via open APIs. It can be layered on top of other platforms initially and become native through full integration.
Q:Does Athena make Zeta more acquisitive?
A:David Steinberg noted that while Athena doesn't necessarily make Zeta more acquisitive, it serves as a bridge for future acquisitions. He emphasized Zeta's strong track record in M&A and the potential for Athena to expand addressable markets.
Q:What is driving growth in the telecom vertical?
A:David Steinberg attributed growth to Zeta's ability to help telecom clients grow at an accelerated pace and lower cost, often displacing major marketing clouds. Christopher Greiner noted that telecom became a top vertical, growing strongly in recent quarters.
Q:How is Zeta addressing working capital headwinds from agency collections?
A:Christopher Greiner stated that free cash flow conversion would have been over 80% without agency payment cycle timing. The long-term target of 70% conversion accounts for these headwinds.
Q:What is the outlook for political and advocacy revenue?
A:Christopher Greiner noted that political candidate revenue is expected to double from midterm to midterm. Advocacy revenue follows a similar pattern, with deals often closing quickly and evolving over time.
Q:How has Zeta's brand image evolved over the past three years?
A:David Steinberg described a shift from 'Zeta who?' to 'Why Zeta?' as the company is now recognized as a cutting-edge player in AI and data-driven marketing. Clients increasingly view Zeta as a critical component of their tech stack.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the question about pricing and packaging strategies to minimize inertia for clients moving to Zeta's platform. Additionally, while they expressed confidence in the Marigold acquisition, they did not provide specific details on how it would impact 2026 guidance beyond general optimism.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI marketing
Athena
Marigold enterprise
Marketing Platform
OneZeta
Zeta Live
Zeta Marketing
acquisition
addition
agreement
attendee
beta
case Zeta
case customer
cash
demo
end
engine
enterprise software
ex LiveIntent
focus
game
goal Zeta
intelligence competitor
measure
number
people
platform Zeta
program
reason
result
retailer
return
track
use case
ZETA Transcript
Zeta Global Holdings Corp. (ZETA) Presents at J.P. Morgan 54th Annual Global Technology, Media and Communications Conference Transcript
Neutral5-18
Zeta Global Holdings Corp. (ZETA) Q1 2026 Earnings Call Transcript
Positive5-1
The earnings call summary highlights strong financial performance with a 20% revenue increase, improved gross margin, and a swing to positive net income. The raised revenue and EBITDA guidance for 2026 further support an optimistic outlook. Despite some risks in forward-looking statements, the overall sentiment is positive, particularly with the launch of the Athena product and the accretive Marigold acquisition. Given the market cap of approximately $3.8 billion, the stock is likely to experience a positive movement of 2% to 8% over the next two weeks.
Zeta Global Holdings Corp. (ZETA) Presents at Morgan Stanley Technology, Media & Telecom Conference 2026 Transcript
Neutral3-3
Zeta Global Holdings Corp. (ZETA) Q4 2025 Earnings Call Transcript
Positive2-24
The earnings call highlights several positive factors: raised revenue and EBITDA guidance for 2025 and 2026, strong free cash flow projections, and strategic initiatives like the Athena AI platform and the Marigold acquisition. The OpenAI partnership and robust international expansion plans further bolster growth prospects. Despite some management ambiguity, the overall sentiment is positive, supported by a strong net retention rate, increasing RFP volumes, and a significant stock buyback program. The market cap suggests a moderate reaction, leading to a 'Positive' prediction for the stock price over the next two weeks.
ZETA Slides
ZETA Report
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