Zeta Global Q1 2025 Earnings Report

Zeta Global EPS Results

• Actual EPS: -$0.09
• Consensus EPS: $0.12
• Beat/Miss: Missed by -$0.21
• One Year Ago EPS: -$0.23

Zeta Global Revenue Results

• Actual Revenue: $264.42 million
• Expected Revenue: $254.18 million
• Beat/Miss: Beat by +$10.24 million
• YoY Revenue Growth: +35.60%

Zeta Global Announcement Details

• Quarter: Q1 2025
• Date: 5/1/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 4:30PM ET

Zeta Global (NYSE:ZETA), founded in 2007 and headquartered in New York City, is a leading data-driven marketing technology company. The firm’s mission centers on helping brands acquire, grow and retain customers through a unified customer lifecycle management platform. Over the years, Zeta Global has built a reputation for leveraging big data and predictive analytics to power digital marketing programs across multiple channels.

At the core of Zeta’s offering is the Zeta Marketing Platform, which combines identity resolution, audience insights and real-time engagement capabilities. Key components include the Zeta Identity Graph, a proprietary data asset that maps consumer touchpoints, and Zeta Data Cloud, which aggregates and enriches first- and third-party data for targeted campaigns. The platform supports email marketing, display and social advertising, mobile messaging, CRM integration and advanced analytics, enabling clients to execute personalized campaigns at scale.

Zeta Global serves a diverse client base spanning industries such as retail, financial services, travel and telecommunications, with operations primarily in North America and growing footprints in Europe and Asia-Pacific. Under the leadership of founder and CEO David A. Steinberg, the company went public in March 2021 via a special purpose acquisition company (SPAC) transaction and trades on the New York Stock Exchange under the ticker ZETA. Zeta’s executive team draws on deep expertise in data science, digital marketing and enterprise software to guide its continued expansion and product innovation.

Zeta Global Q1 2025 Earnings Call Transcript

Key Takeaways

• In Q1 Zeta delivered $264 M revenue (+36% YoY) and $47 M adjusted EBITDA (+53% YoY), both beating guidance.
• Built on Q1 outperformance, Zeta raised its Q2 and full-year 2025 guidance by $2 M at midpoints—projecting 23% reported revenue growth—while taking a disciplined, conservative stance for H2 amid macro uncertainty.
• Zeta launched AI Agent Studio and agentic workflows, a suite of generative AI tools that link multiple AI agents to streamline complex marketing tasks and enhance ROI measurement.
• The agency segment gained momentum in Q1 with two new independent agencies platformed (two more nearing signing) and solid growth among holding companies, driven by Zeta’s deterministic attribution and profitability.
• Zeta improved free cash flow conversion to 60% (up from 50% a year ago), repurchased $25 M of shares in Q1, cut 2025 stock-based compensation guidance to $190 M (versus $195 M in 2024), and expects 4%–6% normal dilution.

Presentation

[Operator]

Greetings, and welcome to the ZETA First Quarter twenty twenty five 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. It is now my pleasure to introduce your host, Matt Vaugh, Senior Vice President of Investor Relations. Thank you, sir. You may begin.

[Matthew Pfau, SVP - Investor Relations at Zeta Global]

Thank you, operator. Hello, everyone, and thank you for joining us for Zeta's First Quarter twenty twenty five 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.

[Matthew Pfau, SVP - Investor Relations at Zeta Global]

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 our other filings with the SEC.

[Matthew Pfau, SVP - Investor Relations at Zeta Global]

With that, I will now turn the call over to David.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Thank you, Matt. Good afternoon, everyone, and thank you for joining us today. 2025 began much like 2024 ended, with Zeta exceeding expectations and gaining share in a dynamic market. This marks our fifteenth consecutive quarter of 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, 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, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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-nineteen and the tech reset of twenty twenty two, growing revenue by 20% in 2020 and twenty nine percent 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 twenty twenty five, we generated revenue of $264,000,000 up 36 year over year, with adjusted EBITDA of $47,000,000 up 53% year over year, both well ahead of our guidance. Given our first quarter's outperformance, strong pipeline, and second quarter visibility, we are raising our second quarter and full year 2025 guidance.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Here is a real world example of how a customer uses our AgenTic workflows. 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.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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. 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, proving early traction in a market with over a thousand potential prospects. We also experienced solid year over year growth with large holding companies in the first quarter.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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. 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 ZEDA, a true win win win.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

At Zeta, we have faced challenging macro times before and emerge stronger by controlling the controllable. How we think, how we act, how we deliver value for our customers. In the end, execution is the difference between surviving uncertainty and thriving through it. As always, I would like to sincerely thank our customers, our partners, Team Zeta, and all our shareholders for the ongoing support of our vision. Now let me turn it over to Chris to discuss our results in greater detail. Chris?

[Christopher Greiner, Chief Financial Officer at Zeta Global]

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

[Christopher Greiner, Chief Financial Officer at Zeta Global]

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. Now, let's get into the details of our first quarter results. In q one, we delivered revenue of 264,000,000, up 36% year over year or 26% excluding the contribution from LiveIntent. 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 quarter.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Scaled customer quarterly ARPU of $467,000 increased 12% year over year and super scaled customer quarterly ARPU of 1,400,000 increased 23% year over year. From an industry perspective, on a trailing twelve month basis, six of our top 10 verticals grew faster than 20% year over year. 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 LiveIntent integration. Our direct mix in the first quarter was 73%, down from 74% in the fourth quarter of twenty twenty four, but up from 67% a year ago, resulting in direct revenue growth of 48% year over year.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Our GAAP cost of revenue in the quarter was 39.1%, a 90 basis point improvement sequentially and a 30 basis point improvement from the first quarter of twenty twenty four. This improvement in cost of revenue, as well as leverage in other areas of our operating expenses resulted in our seventeenth straight quarter of expanding adjusted EBITDA margins year over year. In the first quarter, we generated $46,700,000 of adjusted EBITDA at a margin of 17.7%, two hundred basis points higher year over year and $2,200,000 better than the midpoint of our guidance. One of the add backs to adjusted EBITDA was $3,000,000 of restructuring expenses, which were anticipated and primarily related to the integration of LiveIntent. Our GAAP net loss for the first quarter was $22,000,000 an improvement from $40,000,000 in the first quarter of twenty twenty four.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

First quarter net cash provided by operating activities was $34,800,000 up 41% year over year with free cash flow of $28,200,000 up 87% and representing a margin of 10.7%. This translated to a free cash flow conversion of 60%, a significant improvement from 45% in the fourth quarter of twenty twenty four and fifty percent in the first quarter of twenty twenty four. We also repurchased 1,600,000.0 shares for $25,000,000 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 1,800,000.0 shares for $21,000,000 between April 1 and April 25. We have approximately $38,000,000 remaining under our current share repurchase authorization.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

And upon completion of this authorization, we plan to initiate a new one. 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 metrics.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

We believe this makes our platform more resilient in volatile macro environments, as lower funnel spend tends to be less discretionary than top of funnel brand awareness efforts. Third, we primarily address large enterprises whose marketing spend tends to be more stable than small businesses in our view. 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 four percentage points, reaching 29%.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

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

[Christopher Greiner, Chief Financial Officer at Zeta Global]

We are increasing our second quarter revenue outlook by $2,000,000 while adjusting our growth expectations for the second half of the year. 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 this period. Second, although we continue to see healthy demand, our guidance assumes a softer macro in the second half of the year. 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.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

To be clear, our customers have not expressed intentions to decrease their investments with Zeta due to macro uncertainty nor has there been pull forward in spending. Our intent is to create buffer by exercising prudent conservatism regarding expectations for the remainder of 2025. 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%, a growth of 21% when adjusting for LiveIntent and political candidate revenue in the year over year comps. For the second quarter, we now expect revenue of $297,000,000 at the midpoint, 2,000,000 higher than our previous guidance.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

For adjusted EBITDA, we're increasing the midpoint of our 2025 guidance to 258,500,000.0 up 2,000,000 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 and D and G and A. We have many levers we can pull within operating expenses 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 twenty twenty five, we now expect adjusted EBITDA of $54,900,000 at the midpoint, up from our previous expectation of $54,400,000 and representing growth of 42% and a margin of 18.5%. We are increasing the midpoint of our 2025 free cash flow guidance to $131,500,000 up $2,000,000 from the midpoint of our previous guidance and representing year over year growth of 43%.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

As I mentioned upfront, 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 $190,000,000 for 2025, lower than the $195,000,000 in 2024. 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%.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

This is a significant reduction from 15% total dilution in 2024, which included 8% normal course equity grant dilution. Slide 20 in our earnings supplemental outlines how we plan on achieving these targets. 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 goals. We recognize that stock based compensation expense and dilution are important topics for our investors, and we're taking significant steps to improve both. Lastly, we remain confident in our Zeta 2028 plan and are reaffirming our long term targets, which project over $2,000,000,000 in annual revenue, at least 25% adjusted EBITDA margin and 16% plus free cash flow margin in 2028.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Now let me hand the call back over to the operator for David and Niamh to take your questions. Operator?

[Operator]

Thank you. 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 queue. We ask that analysts limit themselves to one question and a follow-up so that others may have an opportunity to do so as well.

[Operator]

You may press star two 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 Our first question comes from Terry Tillman with Truist Securities. Please proceed with your question.

[Terry Tillman, Managing Director at Truist Securities]

Yeah. Hey, David, Chris and Matt. Bear with me. I've got my own preamble here. First of all, congrats on the fifteenth, beat and raise quarter and then also on the color on the second half guidance philosophy.

[Terry Tillman, Managing Director at Truist Securities]

That's actually very helpful. My first question relates to like progress on OneZeta in terms of accelerating the cross sell and use case expansion? I know you all brought in some key leaders recently, some talent acquisition, but just maybe an update on OneZeta and how that's tracking? And then I had a follow-up. Thank you.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Well, let me start by saying thank you, Terry. I'm losing my voice here a little bit. But One What? Yes, I get that. I get that. I would tell you is the One Zeta strategy is ahead of schedule. Even I just got back from the POSSIBLE conference where during the course of the contract, 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 in multiple channels, they have multiple use cases and multiple channels continues to be one of the biggest drivers of the business.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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 5,000,000 to 10,000,000 a year. We're now looking at how do we get five or six customers to 100,000,000 a year.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

And we're actually well on our way to that exiting the first quarter.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

'1, just bringing the data points to light there Terry for you. 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.

[Terry Tillman, Managing Director at Truist Securities]

That's great. Thank you for that both of you. Just one question as we think about the growth algorithm, kind of excluding LiveIntent, 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 scaled customers and ARPU from scaled customers?

[Christopher Greiner, Chief Financial Officer at Zeta Global]

I think in line with our model. 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. Interestingly, the scaled customer count growth is obviously aided by LiveIntent, but the ARPU is impacted negatively by LiveIntent just given what their average customer size is.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

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 to customer count and ARPU growth side.

[Terry Tillman, Managing Director at Truist Securities]

That's great. Thank you.

[Operator]

Our next question comes from Jason Kreyer with Craig Hallum. Please proceed with your question.

[Jason Kreyer, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Wonderful. Thank you. Great job again, guys. 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 Zeta is seeing or what Zeta customers are seeing versus the broader macro?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

In fact, Jason, April ended just as strong as March did. So we're 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 Kreyer, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Perfect. Good to hear. Wanted to also just ask about this independent agent opportunity. Curious there if the go to market is like how the go to market with independents is different than HoldCo's? And then Chris, like in the past, we've dealt with kind of some headwinds to margin and cash flow as you've seen greater opportunities with HoldCo's.

[Jason Kreyer, Senior Research Analyst at Craig-Hallum Capital Group LLC]

So just curious if there's anything we need to think about as you deepen that opportunity with independent agents?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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 DSOs from the agency holdcos. 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.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Jason, on the cash flow point, I'm glad you raised it. Throughout the course of the quarter as we were meeting with investors, 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. And then the third was to continue to focus on more and more free cash flow conversion and generation.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

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. David?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

And 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 HoldCo.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

In fact, this week, in addition to the promise, we just signed another independent agency this week.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Yes. We're I mean, we will I mean, the independent agency ecosystem has over 1,000 potential prospects in it. And we doubled it in the first quarter over last year. And I think that's a trend I think you can't probably double it every quarter from a cyclical perspective. 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.

[Jason Kreyer, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Great stuff guys. Thanks.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Thanks, Jay.

[Operator]

Our next question comes from D. J. Heinz with Canaccord Genuity. Please proceed with your question.

[David Hynes, Managing Director, Software Lead Analyst at Canaccord Genuity Group]

Hey, guys. Congrats on the nice quarter and glad to hear April closed equally as strong. David, you gave us 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 current environment, what are those and where would the impact show up first, right? Is it an ARPU? Like what are you paying attention to and what are the verticals?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Yes. Sorry. Thank you, DJ. 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 U.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

S. But as we all know, think even organizations in The U. S. That manufacture here are bringing parts and they have supply chain issues in there. We saw the opposite.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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. But I would have been most worried about automotive. We're not seeing anything there yet. And then retail, right?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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 shift budget from partners that don't have the type of return on investment and quite frankly the ability to prove it that we currently have an evidence. Chris?

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Yes.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

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 in the prepared remarks, on a trailing twelve 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 well north of 20. As I think about those verticals and we put in our guidance commentary, our four fastest growing verticals can grow half that rate in the second half and we still get to our guide. And again, we're not seeing any data driven reasons as to why that would be the case in our sales pipeline etcetera, just our conservatism in the buffer that we're putting in place.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

But we've even gone to the lanes 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 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 being very comfortable with where we've set guidance in terms of our relative exposure and their exposure.

[David Hynes, Managing Director, Software Lead Analyst at Canaccord Genuity Group]

Yes. Okay. That's all very helpful color. Chris, maybe this is probably not a fair question 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 trade off would be showing more operating leverage?

[David Hynes, Managing Director, Software Lead Analyst at Canaccord Genuity Group]

Maybe you could just talk philosophically with respect to kind of the internal scenario planning that you're doing.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Yes. 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 seventeenth straight quarter of adjusted EBITDA 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.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

And at the same time within G and A and R and D which we've done for a while, we continue to move work where it could 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 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 signal to The Street that there's more leverage in our business for us to get for the rest of the year as well.

[David Hynes, Managing Director, Software Lead Analyst at Canaccord Genuity Group]

Yes. Very helpful. Thank you, guys.

[Operator]

Our next question comes from Arjun Fathia with William Blair. Please proceed with your question.

[Arjun Bhatia, Co-Group Head - Technology, Media & Communications at William Blair]

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 grew through 2020, you grew through the post COVID kind of post zero slowdown. 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 if there is in the back half of the year, sort of a macro slowdown, I'm curious what strategies 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 maybe new products or different use cases or different customer types that you can lean into, at this point. But I'm curious what that looks like?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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. 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.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Now 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. But I do think, as Chris said, in addition to the levers we have in the 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.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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. So once again, we don't want anybody to confuse conservatism with any weakness in the business.

[Arjun Bhatia, Co-Group Head - Technology, Media & Communications at William Blair]

All right. Yes, perfect. Very helpful. And then one for you, Chris. It's encouraging to see the cash flow conversion get better.

[Arjun Bhatia, Co-Group Head - Technology, Media & Communications at William Blair]

Obviously something investors have been focused on, but what are you doing actually to drive cash flow conversion higher and maybe what's still available to get that metric to move higher through the year?

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Yes. Look, something that we have talked about with investors and the Street is we fully expected our if you look at CapEx, it'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 EDAR perspective, but you saw a really sizable tick down in CapEx both software capitalization and data capitalization from the fourth quarter. So it's areas like that that we talked about we expected to see that we're executing on and just more and more of the business is dropping to the bottom line. It's 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 free cash flow for sure.

[Arjun Bhatia, Co-Group Head - Technology, Media & Communications at William Blair]

All right. Perfect. Thank you guys.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Thanks, Thanks,

[Operator]

Our next question comes from Elizabeth Porter with Morgan Stanley. Please proceed with your question.

[Elizabeth Porter, Analyst at Morgan Stanley]

Great. Thank you so much for the question. 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.

[Elizabeth Porter, Analyst at Morgan Stanley]

So I 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, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

In fact, Elizabeth, our amongst our fastest growing channel CTV is still the fastest, but social grew really nicely. So nothing there at all that alarmed us or caused us any concern.

[Elizabeth Porter, Analyst at Morgan Stanley]

Great. And then just as my follow-up, I wanted to just get more perspective on how you're thinking about the growth opportunity with agencies longer term. I think it was about 20% of the business last year. And given the move more into the independent side of this too, could we start to think about the agency business as being a majority piece of the business in the not too distant future?

[Elizabeth Porter, Analyst at Morgan Stanley]

And then any sort of more near term changes to be thinking about as it relates to the cohort in 2025?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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'll continue to see on platform and cost of goods sold continue to get better.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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. 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 cost of goods sold is very, very low and we're able to work with them as it relates to cash flow.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

So I think right now we've got a really good mix and I think it's going to continue at its current pace.

[Elizabeth Porter, Analyst at Morgan Stanley]

Thank you.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Thanks.

[Operator]

Our next question comes from Ryan MacDonald with Needham and Co. Please proceed with your question.

[Ryan Macdonald, Senior Analyst at Needham & Company]

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 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 your customers?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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. I think that's one of the reasons you saw the numbers flow through. Our RAI adoption leads to a substantially higher revenue from customers who adopt it.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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.

[Ryan Macdonald, Senior Analyst at Needham & Company]

Super helpful color. Chris, maybe for you as a follow-up. Noticed updated guidance that the expectation for LiveIntent 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?

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Look, performed right in line with what we expected it to do. I think it did like $19,500,000 compared to the $20,000,000 guide that we had in place. So it's right on the trajectory for the year that we expected to be on. What you're not necessarily seeing show up in LiveIntent because that's kind of their standalone businesses performance are all of the synergies and the products that we're creating that that's actually it's benefiting the organic side of the business to some degree. But combined, the standalone capabilities in the business model of LiveIntent has added new channels for us to sell, which is additive to the business model.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

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. So very, very happy with how LiveIntent's performing out of the gate.

[Ryan Macdonald, Senior Analyst at Needham & Company]

Appreciate the color. Congrats again.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Thanks, Ryan.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Thanks, Ryan.

[Operator]

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

[Richard Baldry, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Thanks. So you're seeing the agencies mix 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 the initial clients?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Thanks, Rich. 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 holdcos move clients over faster. Some are starting there. A big chunk of them are migrating from integrated to direct.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

But both of those are tailwinds right now for that part of the business.

[Richard Baldry, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Okay. Given the strength strategically of the LiveIntent acquisition, sort of curious your thoughts overall on M and A as you go forward. You've been using a lot of free cash flow to do buybacks, but are there other tuck in technologies or channels that you'd still like to be adding to the suite of offerings? Thanks.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Yes. I mean, Rich, as you know, we'll continue to look at our M and 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'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 been keeping us busy.

[Richard Baldry, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Great. Thanks.

[Operator]

Our next question comes from Matt Swanson with RBC Capital Markets. Please proceed with your question.

[Matthew Swanson, Director - Equity Research at RBC Capital Markets]

Yes. Thank you. And I'll add my congrats on the quarter. 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.

[Matthew Swanson, Director - Equity Research at RBC Capital Markets]

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 lands?

[Christopher Greiner, Chief Financial Officer at Zeta Global]

It's interesting Matt. If you look at our net revenue retention range, it's been like 01/2011 to 114 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 very consistent. 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.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Think it's an interesting point. David, you were going to

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Yes, I was going to 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 2022 or 2020. But what I would say, and Chris is of course right, when you've got January to 114% of your revenue becomes your net retention rate, 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 faster than they will when things are not uncertain. So listen, it's good to have all three use cases.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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 we think that's a trend that's going to continue.

[Matthew Swanson, Director - Equity Research at RBC Capital Markets]

That's really helpful. And then I know first previously when you've talked about guidance, you've mentioned the Zaid 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 the year?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Yes. 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.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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 drive return on investment that other enterprises we compete with do not do. 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.

[Matthew Swanson, Director - Equity Research at RBC Capital Markets]

Thank you.

[Operator]

Our next question comes from Jack Szanader with KeyBanc. Please proceed with your question.

[Jackson Ader, Managing Director at KeyBanc Capital Markets]

Great. Thanks. Hey, good evening, guys. 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?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

No. It was the prior, but I probably shouldn't have said it. It was yeah, but it's neither here nor there. The reality is, right now we are executing the company. 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.

[Jackson Ader, Managing Director at KeyBanc Capital Markets]

Understood. Second question a little bit maybe capital allocation wise, right? So the idea that you're looking to buy back more shares, 25,000,000 a quarter, have $30 30 million 40 million dollars left. And coupled with the comment that continue to spend money on innovation but why spend the $25,000,000 30 million 40 million dollars buying back a relatively small number of your shares each quarter if you are seeing a direct correlation to the amount of money you are spending on innovation driving revenue growth?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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 recs currently.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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. I think the buyback goes back to sort of our M and A thesis around our five pillars of M and 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.

[Jackson Ader, Managing Director at KeyBanc Capital Markets]

Okay, understood. Thank you very much.

[Operator]

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

[Koji Ikeda, Director - Enterprise Software Equity Research at Bank of America]

Yeah. 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 in the guidance. And so, loud and clear, you guys aren't seeing any change in the demand environment and sounds like the conversations you're having with customers are really good.

[Koji Ikeda, Director - Enterprise Software Equity Research at Bank of America]

And 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. But I'm just curious, it feels like something outside of just the high level macro uncertainty is informing the more conservative second half. And so 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 in the second half?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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 environment.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Yes. And Koji, just this week, we signed two very, very large contracts. So and 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 raise. We just as David noted, what is happening by other public companies right now is we wanted to kind of follow suit.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Yes. 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.

[Koji Ikeda, Director - Enterprise Software Equity Research at Bank of America]

Got it. No, thank you for that. And maybe just a quick follow-up here on the ARPU front, we did notice that sequential decline. I heard you on the prepared remarks, LiveIntent 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 for the first quarter?

[Christopher Greiner, Chief Financial Officer at Zeta Global]

No. And 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. Yes, we're and by the way, we added 11 superscaled customers sequentially quarter to quarter. It's one of our bigger jumps we've had.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

So now ARPU looked great to us and I mentioned their fastest growing cohort are those scaled customers using now three or more channels is up 42% year over year.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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 thirty days.

[Koji Ikeda, Director - Enterprise Software Equity Research at Bank of America]

Got it. Thanks guys. Thanks for taking the questions.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Thanks, Kuj.

[Operator]

Our next question comes from Brian Schwartz with Oppenheimer and Co. Please proceed with your question.

[Brian Schwartz, Managing Director and Senior Analyst at Oppenheimer & Co. Inc.]

Yes. Hi, thanks for taking my questions this afternoon. David, I 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 AgenTeq AI and they're coming to buy back to buy more from you?

[Brian Schwartz, Managing Director and Senior Analyst at Oppenheimer & Co. Inc.]

Or is it still early and most are testing and piloting the deployments?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

No, Brian. We meaningful percentage of our customers who have adopted the AgenTek AI. And I believe the number is customers who have adopted it are growing at greater than 40% from a consumption revenue perspective year over year. So you're seeing meaningfully faster growth from organizations that adopt the AgenTeq AI. The big leap, which is in beta, is stringing them together, which is an agentic workflow.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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. We're seeing massive, massive opportunities around that beta that I think will really bear fruit in the back half of the year.

[Brian Schwartz, Managing Director and Senior Analyst at Oppenheimer & Co. Inc.]

Thank you, David. 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 RFPs, the cadence of conversions, the size of your lands, how have they been trending in Q1 and year to date? Thanks.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

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, we're seeing very strong sales productivity from all of our cohorts. Those sellers that are in their first year kind of that twelve to twenty four month period and then our most experienced sellers continue to be our most productive.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Yes.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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 ninety days.

[Brian Schwartz, Managing Director and Senior Analyst at Oppenheimer & Co. Inc.]

Thanks.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Thanks, Brian.

[Operator]

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

[Zach Cummins, Senior Research Analyst at B. Riley Securities]

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 within the 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 any sort of LiveIntent customers?

[Christopher Greiner, Chief Financial Officer at Zeta Global]

It's all fully integrated now. There are some LiveIntent customers that are contributing to it, but it's all fully blended now. That obviously has the if it's helping scaled customer count, it's a drag on skilled customer ARPU because they tend to have smaller ARPUs to begin with. But really, I mean, could not be happier with how skilled customer count in total started the year.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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.

[Christopher Greiner, Chief Financial Officer at Zeta Global]

Yes. 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.

[Zach Cummins, Senior Research Analyst at B. Riley Securities]

Got it. That's great to hear. And my one follow-up question, maybe geared towards David. I know most of the major holding companies, at least on their commentary in mid 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 or just any sort of update around trends in those conversations with major holding companies?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Yes. No, it's meaningfully accelerate there. We've had we sort of opened we talked about the fact that we've had one agency holdco that we 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, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

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 note that even the three of the we've got five of the eight large agency holdcos, you're starting to see number 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 they're looking at uncertainty, they're looking to drive greater margin opportunity for themselves by using the Zeta Marketing Platform and our Data Cloud.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

And two, back to your point, the ability to show true return on investment to their clients.

[Zach Cummins, Senior Research Analyst at B. Riley Securities]

Understood. Well, thanks for taking my questions and best of luck with the rest of the quarter.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Thanks. Thanks, Zach.

[Operator]

Our next question comes from Gabriela Borges with Goldman Sachs. Please proceed with your question.

[Gabriela Borges, Analyst at Goldman Sachs]

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 you're seeing a continuation in the acceleration trend that you've talked about previously and if there's any other color you would add here?

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Yes. Thank you, Gabriela. 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 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. And we are seeing as a part of that Marketing Cloud replacement cycles are continuing to grow and we expect that trend to continue.

[Operator]

Thank you very much. Our next question comes from Clark Wright with D. A. Davidson. Please proceed with your question.

[Clark Wright, AVP - Research Analyst at D.A. Davidson]

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 Zeta, especially with global agencies since they typically start with social media at their first use case.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

Yeah, I mean, I wouldn't I mean, I think people are still talking about how Microsoft was supposed to be getting broken up. What I will caveat, Clark, is that 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. 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.

[Clark Wright, AVP - Research Analyst at D.A. Davidson]

Got it. And then as a follow-up here, you talked about multiple sizable multiyear 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?

[Matthew Swanson, Director - Equity Research at RBC Capital Markets]

Said you

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

So interestingly enough, I would say most of our early agency holdco deals had no contract. It was a monthly agreement 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, are quite frankly, we're working across dozens of brands and we're working across multiple agencies that are a subset of it.

[David Steinberg, Co-Founder, Chairman & Chief Executive Officer at Zeta Global]

It rolls up to one enterprise. But in that case, they just signed a meaningful multiyear deal, which we were very pleased about.

[Clark Wright, AVP - Research Analyst at D.A. Davidson]

Awesome. Thank you.

[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.

Participants

Executives

• Matthew Pfau, SVP - Investor Relations
• David Steinberg, Co-Founder, Chairman & Chief Executive Officer
• Christopher Greiner, Chief Financial Officer

Analysts

• Terry Tillman, Managing Director at Truist Securities
• Jason Kreyer, Senior Research Analyst at Craig-Hallum Capital Group LLC
• David Hynes, Managing Director, Software Lead Analyst at Canaccord Genuity Group
• Arjun Bhatia, Co-Group Head - Technology, Media & Communications at William Blair
• Elizabeth Porter, Analyst at Morgan Stanley
• Ryan Macdonald, Senior Analyst at Needham & Company
• Richard Baldry, MD & Senior Research Analyst at Roth Capital Partners, LLC
• Matthew Swanson, Director - Equity Research at RBC Capital Markets
• Jackson Ader, Managing Director at KeyBanc Capital Markets
• Koji Ikeda, Director - Enterprise Software Equity Research at Bank of America
• Brian Schwartz, Managing Director and Senior Analyst at Oppenheimer & Co. Inc.
• Zach Cummins, Senior Research Analyst at B. Riley Securities
• Gabriela Borges, Analyst at Goldman Sachs
• Clark Wright, AVP - Research Analyst at D.A. Davidson