Zeta Global Holdings Corp.

The session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Scott Schmitz, Senior Vice President of Investor Relations. Thank you. You may begin.

Thank you, Operator. Hello, everyone, and thank you for joining us for Zeta's fourth quarter and full year 2023 conference call. Today's presentation and earnings release are available on Zeta's investor relations website at investors.zetaglobal.com, where you will also find links to our SEC filings, along with other information about Zeta. Joining me on the call today are David Steinberg, Zeta's co-founder, chairman, and chief executive officer, and Chris Greiner, Zeta's chief financial officer. Before we begin, I'd like to remind everyone that statements made on this call, as well as in the presentation and earnings release, contain forward-looking statements regarding our financial outlook, business plans and objectives, and other future events and developments, including statements about the market potential of our products, potential competition, revenues of our products, and our goals and strategies. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. These risks and uncertainties include those described in the company's earnings release and other filings with the SEC and speak only as of today's date. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures which should be considered in addition to and not as a substitute for our GAAP results. We use these non-GAAP measures in managing our business and believe they provide useful information for our investors. Reconciliations of the non-GAAP measures to the corresponding GAAP measures, where appropriate, can be found in the earnings presentation available on our website, as well as our earnings release and other 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. 2023 was a record year for Zeta that finished with a strong Q4, once again, exceeding our expectations. For the full year of 2023, we delivered revenue of $729 million, up 23% year over year. This marks our fourth consecutive year, exceeding 20% revenue growth, and we are guiding to a fifth year of 20% growth in 2024. Over the past four years, we have also expanded our adjusted EBITDA margins by 1,000 basis points, with over 200 basis points of expansion this past year alone to 17.8%, or $129 million in adjusted EBITDA. Today, the marketing ecosystem is in a state of change. AI has moved from theoretical to a boardroom conversation with chief marketing officers mandated to make AI more actionable to deliver greater efficiency and better experiences for consumers. These CMOs are increasingly looking to Zeta as evidenced by the strong growth in our RFPs and our sales pipeline. Because AI has been at the core of the ZMP for many years, as opposed to many months, we believe that we are at the forefront of a wave that is driving a replacement cycle. We currently have more than 125 patents issued and or pending around AI, machine learning, and other advanced technologies. Marketing has not been able to capitalize on the AI revolution because of an enduring problem. In most enterprises, data is abundant, but intelligence is scarce. The Zeta marketing platform is closing this intelligence gap by allowing customers to use our generative AI with their data and not share it back to the collective. Our investments in 2024 are about making AI more actionable, delivering better experiences for consumers, and widening Zeta's moat. These investments include strengthening our agile intelligence offering, expanding our mobile capabilities, and extending Gen AI into new and additional use cases. One of the most exciting developments is the rollout of a new product initially called Intelligent Agent Composer. This creates Gen AI agents that provide dozens of intelligent and automated tools that make our customers more efficient and more effective. Customers will be empowered to build their own intelligent agents within our platform. allowing them to power workflows and customer experiences specific to their brand and their needs. In this model, Zeta becomes even more essential and a more sticky partner to our clients. Early gen AI products have unlocked creativity and personal productivity, but they have yet to realize their transformative potential for enterprise marketing ecosystems. Our intelligent agent composer has the power to change that. We expect to monetize this new product and additional Gen AI functionality multiple ways, creating new billable modules, generating higher consumption, and lowering the burden of marketing resources within enterprises and agencies. going deeper into our mobile strategy for 2024. Today, mobile engagement largely operates as a point solution within enterprise environments. We see a dual opportunity. First, integrate mobile into a more comprehensive platform. And second, deliver conversational experiences using Gen AI. We believe Our intelligent platform provides a competitive advantage for marketers looking to deliver real-time, personalized experiences for consumers and is a natural fit for mobile environments. For example, we are currently working with a large national retailer to develop a mobile solution to enhance the in-store selling experience by putting Zeta's Data Cloud and the ZMP in the hands of salespeople to deliver real-time customer engagement at the point of sale. This simplifies the complex task of logging into multiple systems for answers on the status of an order, inventory, or personalized client data. The ZMP connects to all subsystems and provides information via a simple conversational interface on a mobile device. Today, mobile accounts for less than 2% of revenue through our platform, but we believe it has the potential to be our next $100 million-plus business, similar to how CTV is scaling. Our unique position in the market and continued investment in AI-powered marketing technology is also creating interest across the ecosystem as we expand our relationships with system integrators. We are in advanced discussions with an array of SIs, including an exciting joint implementation at a large enterprise where solutions spanning data management as well as customer acquisition, growth and retention will be replaced by the ZMP. Overall, our SI implementation is a multi-year rollout, and we expect it to have a larger impact into 2025 and beyond. Zooming back out, I also wanted to spend a minute on recent industry headlines related to cookie deprivation and email deliverability. These changes only elevate the importance of Zeta's proprietary first-party data. as opposed to relying on third-party cookie data to identify individuals. In terms of email, the new requirements from Google and Yahoo are in line with what we have already incorporated into our infrastructure. Our observations pre and post their rollout show equal to, and in some cases, even better deliverability and higher open rates. In short, We believe these changes enhance our competitive position by elevating the value of our identity graph and further improving the effectiveness and return on investment for the ZMP for engagement. Building upon what we discussed at our September 2023 Investor Day, we are taking action on investor feedback related to dilution and stock-based compensation. we are guiding to bring dilution from incentive-based compensation down from 5% in 2023 to 3.5% to 3.75% in 2024. In terms of stock-based compensation, we're also planning to evolve how we incentivize senior management. By way of example, Chris Greiner and I, along with others, are planning not to receive any restricted shares this year. Instead, equity incentive compensation would be based on performance stock units, which are tied to the appreciation of Zeta's share price and will more closely align us with shareholder value creation. These changes, in addition to continuing to benefit from a lower level of pre-IPO stock-based compensation flowing through our P&L, places Zeta on a trajectory to achieve gap-based profitability in the fourth quarter of 2024. At the same time, our goal is to continue to invest in innovation and build a strong culture with the foundation of corporate responsibility. In fact, for the second year in a row, I'm proud to share that Zeta was recognized as one of built-in's best places to work. I'm also pleased to announce that for the second year in a row, we achieved carbon net neutrality, which is an important accomplishment for prospective and existing customers as well as our employees. In closing, 2023 was an incredible year for Zeta, but we believe 2024 will be even better. As always, I would like to sincerely thank our customers, our partners, Team Zeta, and all of our shareholders for their ongoing support of our vision.