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11/1/2022
Thank you for standing by. This is the conference operator. Welcome to the Zeta third quarter 2022 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Scott Schmitz, Senior Vice President, Investor Relations. Please go ahead.
Thank you, Operator. Hello, everyone, and thank you for joining us for Zeta's third quarter 2022 conference call. Before we begin, I would like to mention that today's presentation and earnings release are available on Zeta's Investor Relations website at investors.zetaglobal.com. where you will also find links to our SEC filings along with other information about Zeta. Joining me on the call today are David Steinberg, Zeta's co-founder, chairman, and chief executive officer, and Chris Greiner, Zeta's chief financial officer. 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, and revenues of our products and our goals and strategies. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. 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. Our discussion today will include references to certain supplemental non-GAAP financial measures, which should be considered in addition to and not as a substitute for our GAAP results. We use these non-GAAP measures in maintaining the business and believe they provide useful information for our investors. Reconciliations of the non-GAAP measures to the corresponding GAAP measures, where appropriate, can be found in the earnings presentation available on our website, as well as our earnings release and our filings with the SEC. With that, I will now turn the call over to David.
Thank you, Scott. Good afternoon, everyone, and thank you for joining us today. Our third quarter results were an incredible way to celebrate our 15-year anniversary. Our year-over-year revenue growth rate further accelerated to 32%, or $152 million, with adjusted EBITDA of $22.4 million, which was up 40% year over year. We generated $19.5 million in cash from operations, up 92% year over year, with 9.4 million in free cash flow, up 152% year over year. On the back of this momentum, We are once again increasing our fourth quarter and full year 2022 revenue and adjusted EBITDA guidance, which Chris will discuss in further detail shortly. Zooming out, there is no question that the macro environment is creating more uncertainty and driving more scrutiny on how and where enterprises invest. The pressure for enterprises to improve their ability to acquire, grow and retain customers at a lower cost is greater now more than ever. In the spirit of never wasting a crisis, CMOs are looking to emerge with a more efficient and effective solution with a better return on investment, which Zeta delivers. Marketing spend tied to measurable outcomes that delivers a strong, verifiable return on investment has shifted from one of many objectives to the primary objective. That is why enterprises continue to invest in first-party data and customer data platforms, or CDPs. That is why enterprises continue to invest in digital transformation. That is why enterprises continue to invest in more addressable and accountable methodologies that deliver greater precision and measurable value. In short, we believe the market is moving even closer to Zeta's sweet spot, where our value proposition shines. And because we make sophisticated marketing simple and address the requirements for both revenue generation and cost savings, our growth rate has continued to accelerate. The Zeta Marketing Platform, or ZMP, was purpose-built to improve marketing efficiency and efficacy, bringing marketers an array of benefits with data, AI, and activation in a single platform, a unique advantage that we have over our competitors. By resolving identity with our data cloud, we reduce waste, improve personalization, and bring more precision to measurement. By enriching a brand's knowledge of their customers, we uncover new insights and unlock new growth opportunities. And by leveraging cutting-edge technology that is flexible, modular, and scalable, we can wrap around an existing enterprise's tech stack, reducing the time to implementation to days or weeks, and establishing they land to expand sales motion. This allows us to generate new relationships, even when most enterprises are looking to reduce their numbers of partners. As evidenced by the record 16 new scaled customers we added this quarter on the back of record RFP activity. We're replacing multiple incumbents as the broad capabilities of our platform enable enterprises to consolidate multiple-point solutions and simplify their environment and further cut costs. The theme of thriving through times of uncertainty was also front and center at our Zeta Live conference a little over one month ago in New York City. With combined in-person and virtual viewers of over 8,000 people, the event generated over 1,500 new prospects for the company and continued to raise our profile. In attendance were Fortune 500 brands and many of the largest agency holding companies, as well as world-renowned entrepreneurs, marketers, and business leaders. With over half of the 50-plus guest speakers representing women and people of color, the events panelists were not only exceptional, they were also as diverse as the market segments they represent. We were excited to bring many of the conversations Zeta has had with marketing leaders on a daily basis into a broader forum to help other brands adapt and strengthen their own approach to marketing. If you missed any of the remarkable content, I would encourage you to view a replay of the panels, which are available on our website at ZetaGlobal.com. A good example of an enterprise that made significant strides this quarter was one of the largest consumer goods companies, which began using our CDP to better identify and understand its existing customers and reduce their reliance on paid media channels. Our agile intelligence product delivered sharp insights and accelerated their time to revenue and ultimately return on investment. This case study highlights two themes, consolidating vendors and driving more activation through our platforms. This starts with a better understanding of an enterprise's customers by creating more personalized experiences across channels. Then we're able to help them measure with greater certainty, which continuously makes our AI platform smarter and the results continue to get better and better. This is ROI realization in action. and is what makes our customer relationships sticky with a high degree of visibility. One of our Fortune 100 customers stated during Zeta Live, the more data we put into the CDP, the more activation we deliver through Zeta's marketing platform, and the better the results we see. That same customer identified Zeta as a mission-critical partner and expects to allocate more of their spend to us next year. This virtuous cycle is evidenced in another example. A leading automotive aftermarket retailer, which was already using Zeta CBP for retention marketing, extended their use cases by launching acquisition marketing with audio and CTV channels. Through the same platform, they were able to plan, execute and measure the efficacy of audio and CTV impressions against in-store and online sales. This is one of the reasons we saw more than a 250% growth rate in our CTV business this quarter. And it also highlights the power of our CDP, which was recently identified as one of the largest fastest growing CDPs, according to IDC. As I mentioned in my opening remarks, this past month was our 15th anniversary as a company. We celebrated with a day of service across the company as we look to give back to our communities. Over the course of this year, we have also begun taking steps towards reducing our carbon footprint. We are working with cloud and technology partners to adhere to GHG standards and make sustainability a business imperative. I am incredibly pleased to announce that we are on track to achieve our goal of net carbon neutrality for Zeta in 2022. I am incredibly proud of the business we have built and the virtues embraced by our people. Our founding vision of using data and software to deliver a better and substantially more efficient marketing platform rings true more than ever in the current environment. And while we have come a long way, as we like to say at Zeta, we are just getting started. I would like to sincerely thank our Zeta team, our customers, our partners and all of our shareholders for their ongoing support of our vision. Now let me hand it off to Chris to discuss our results in greater detail. Chris?
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