Ryan MacDonald: Super helpful color there. Maybe as a follow-up, great to see sort of the guidance increase for the full year being sort of fully driven by the core business and the strength there, but I did want to ask about political and expectations there, I think as we are getting closer and closer to election, we’re hearing more conversations about perhaps funding going more towards legal fees from one party than the other, which is forcing sort of by the administration to maybe not spend as aggressively or maybe they don’t need to. How is this factoring in at all into your expectations for political ad spend as we look into the second half of the year?
David Steinberg: So let me be totally clear. There will be more money spent on marketing in this election than any election in the history of the United States of America. And that will be, I believe, a statistical fact when people look back on this cycle. What I can tell you is, yes, there is a percentage of revenue for one of the candidates that is currently being utilized for legal fees, but the candidates are raising very large amounts of money and they’re going to spend it. As Chris said, our current guidance, I think, does not include an increase in what we believe to be political. And if you look at our historical levels, we feel that we’ve put a good placeholder in for where we think it’s going to be, but I would not expect it to be down from there.
Ryan MacDonald: Thanks again. Congrats on a great quarter.
David Steinberg: Thank you.
Operator: Next question comes from the line of Jason Kreyer with Craig-Hallum. Please proceed with your question.
Jason Kreyer: Great. Thank you, guys and congrats from me as well. Great quarter. David, just wondering if you can maybe frame the importance of AI in your pipeline conversations. Like it seems like, you’ve always won more than your fair share, but maybe now that you’re winning even more than your fair share because of AI, but curious if you can kind of parse that out.
David Steinberg: Well, first of all, thank you, Jason. I appreciate it. It’s funny. Before I got here this today, we’re out on the West Coast, I literally moderated the artificial intelligence panel for the Milken Global Conference from 11:50 to 12:45. And then we put out a results at 1:05, and then I sort of rushed over here to do this with Chris and the team. It is — I’m telling you, there is not an organization out there today that is not looking at how to solve their AI problem. And one of the panelists was really interesting. He said, you’ve got the Fortune 5000. They are not going to be able to do this on their own. They are going to need vendors and partners who bring artificial intelligence to the table for them. And one of the big consensuses of the panel, I’m not sure I said that right, but one of the big consensuses of the panel was if you are not focused on AI right now, they’re going to find partners who are.
And I can tell you that from all of our conversations, this is the issue. It’s what people are focused on, and it’s starting with efficiency, which is very logical. And if you look at how technologies have evolved through the ages, so to speak, they start with efficiency and then they move to meaningful revenue generation. It just so happens that our AI platform can do both. It can help enterprises to more efficiently run their platforms by better utilizing their existing data, expanding out, building agents internally, so they can build their own virtual data scientists using our agent building program, which, by the way, then generates meaningful revenue increment to us, which once again is why I think we posted the first quarter we did, and why we feel so comfortable raising our guidance for the year.
But it is, Jason, the conversation that starts every conversation that we have today.
Jason Kreyer: Thank you. Just one more, I wanted to pivot over to the build-out of this mobile platform. Just maybe if you can give us an idea and the progression there because we’ve seen products like CTV that has kicked in and become a growth accelerant for Zeta. And so I’m curious at what point mobile could achieve that critical math and contribute more to results?
Chris Greiner: Yeah So I mean, listen, we believe that the Zeta ID gives us an unfair advantage in the mobile ecosystem, because much like we don’t use a third-party cookie to identify people and build attribution models, we never used Apple’s IDFA. So when they eliminated it, it created a bit of a wild west out there. Some organizations like Meta have been able to get enough of a percentage of their user base to opt-in to be receiving the tracking pixel that they’re able to build very comprehensive models and go from there. We’ve been able to identify many multiples as a percentage of what Meta has opting in, in the mobile ecosystem already. So we feel like we’re in a very good place to expand into that. I believe we’ll have our product into production and ready to roll by mid this year.
And we expect to start driving meaningful revenue next year. I will reiterate again, we don’t have mobile as a meaningful component of the increased guidance we’re putting out this year. But it’s upside. And I think it really is going to kick in for next year. I have publicly said, Jason, and I believe that mobile will be our next $100 million business as we continue to scale CDP, and I think that will be next.
Jason Kreyer: Great. Thank you.
Operator: Our next question comes from the line of Koji Ikeda with Bank of America. Please proceed with your question.
Koji Ikeda: Yeah. Hey, guys. Thanks for taking the questions here. I wanted to ask about the super-scaled customer strength, the net new addition strength there. And thanks for all the color and the prepared remarks and to a couple of questions that were asked prior. But I did want to focus again on the agency customer strength. So question is around how is Zeta really gaining mind share within the agencies? Does Zeta need like an internal champion within these agencies for each client relationship, so really focused on targeting these relationship owners? Or is the adoption of Zeta within these agencies being more top-down driven?
Chris Greiner: Koji, it’s Chris. I’ll go first on the — a couple of super-scaled data points, then I’ll pass it over to David. Yes, as you mentioned, the up 13 record for us, all 13, by the way, scaled up from that $100,000 to $1 million cohort. So a really good demonstration of the land expand extend strategy working and then the benefit of now of having over 90% of our revenue with customers with us beyond a year. What was also great about those expansions as they were primarily driven by enterprise relationships rather than just agencies, and it came from various industries, ranging from technology to consumer retail, even through travel and hospitality. And as you saw on the ARPU side, use of more than two channels up 30% is also a very strong data point for us. David?
David Steinberg: And Koji, thank you again. What I would tell you as it relates to the agency relationships, if you asked is a top down or bottoms up? The answer is yes. It’s both. We’re coming in, in many cases, as the CEO or Global Chairman of the Holding Corporation. And we’re simultaneously working from the ground up. We have a team now that is fully integrated into the five agencies we work with. Quite frankly, over the last three years, we’ve invested very heavily in that team. The other thing is we’re going where the agencies are, right? So we had a presence at the Consumer Electronics Show this year. We had a presence at the possible conference, and we’ll have a meaningful presence at Canyon [ph] this year. And as we think about the relationships with these agencies, it’s mission-critical that you work both sides, but more than anything, you have to make them the hero.
You have to be able to come in and make sure that the client knows that the agency is the hero, and we are servicing them, and that’s mission-critical to how we make this work long-term. So I will tell you, I feel very good about the relationships we have at the absolute top. And as you can imagine, I spend a lot of personal time on that. And we have an incredible team that’s integrated. And then we have another team that’s farming, that’s in there working with them on a day-to-day basis.
Koji Ikeda: Got it. Thank you for that. And just a follow-up here. I wanted to ask a question on the guidance, I appreciate the raise in the revenue and also the raise in the EBITDA. But when I look at the flow-through from revenue to EBITDA, it looks a little bit less on the EBITDA raise versus the revenue rate. So I just wanted to understand some of the puts and takes there. And then also just on the free cash flow, it looks like that wasn’t raised at all on the guidance. I’m just wondering, help us bridge from revenue to EBITDA and then free cash flow. Thank you.
Chris Greiner : Yes. On the — so free cash flow in the prepared remarks, we had a pretty wide range entering the year to begin with at 75 to 85. And one of the comments I made in the prepared remarks was there’s definitely a scenario where we’re at the higher end of that range now after this raise. But it was more a reflection of kind of how wide that range was to start the year. The only gating factor there is just the timing with these new agencies that we’ve been signing with and collections. There’s really anything fundamentally beyond that that would drive the conversion ratio to be lower. In terms of deleverage in the model, I appreciate the point. If you look at the amount that we raised, grew our revenue — full year revenue year-over-year in the updated guide in relation to EBITDA’s growth from the prior guide to the current guide, I think it drops like a 24% EBITDA margin.
The — on adjusting pure guidance increase basis, you’re right, it drops around 20%. I think that’s a reflection of David talked about. You’re going to see us this year, look, we’re running ahead of our plan. We want to make continued investments in marketing. Just last week, we held a regional-based Zeta Live in Dallas. We can anticipate doing more of those given the success that we saw from that program. So marketing, getting more incremental dollars. And then R&D, I mean the progress we’ve made in just 90 days with the launch of these hundreds of intelligent agents, the progress we’re making on mobile and the progress we’re making in building on our partnership ecosystem. In fact, just today, we made a very exciting new sales leader hire in the partner network for Zeta.
So, putting some more investment in the business, we will continue to get adjusted EBITDA margin expansion. This is our 13th straight quarter of doing that. We don’t anticipate that changing. So, I don’t want that message to be taken away other.
David Steinberg: And Koji, I also want to point out, we are now guiding to the rule of 43 at the end of the first quarter of the year. So, we — I think we — if you take our 19% operating margin plus our projected 24% growth rate, we feel like we’re doing a pretty good job of sort of projecting forward as an organization.
Chris Greiner: Thanks Koji.
Operator: Our next question comes from the line of Zach Cummins with B. Riley. Please proceed with your question.
Zach Cummins: Hi good afternoon David and Chris. Congrats on the strong results. I’m not sure if somebody already asked, I apologize I had to hop from another call, but can you give us a little more sense of the recovery in the insurance vertical specifically? I mean we’ve seen many of the lead gen players really see a good recovery in demand in the first half of this year. So, just curious what you’re seeing on that side and what’s really being built into your guidance for the rest of the year within that vertical?
Chris Greiner: Thanks Zach. We anticipated going into 2024 that we would see insurance and automotive, so, two distinct industries, both return to growth closer to the second quarter. So, both of them growing, albeit combined not at the rate of Zeta’s total growth, but kind of getting to grow faster, we were pleasantly surprised by. Also wouldn’t surprise us that over the course of the year, insurance becomes a faster grower than automotive, but we think both are going to grow. We’ve embedded double-digit growth for those combined industries in our growth outlook. But by virtue of having signed contracts in hand and very late-stage deals in each of those industries in our pipeline gave us the confidence to roll through what was about a third of our first quarter’s beat through the rest of the outlook and feeling still very comfortable with that number.
Zach Cummins: Understood. And I apologize if maybe you addressed it in the script, but any sort of update to how you’re thinking about your 2025 targets? Or is that fair to think about that as a future date potentially?
David Steinberg: I will — I’ll point out again, everything we say about 2025, Zach, is at least. So, I do think at some point, we’ll have to update it as we’re now at a projected $900 million at the middle of the range for this year. But we’re — we don’t want to get ahead of ourselves. We’re feeling very good about the business. We want to continue to execute. We believe we’ve got the right products, the right people, in the right place, at the right time. And when it’s logically time, we’ll start to give thoughts about 2025.
