Greetings, and welcome to the Zeta Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt Pfau, Senior Vice President of Investor Relations. Thank you, sir. You may begin.

Thank you, operator. Hello everyone, and thank you for joining us for Zeta's fourth quarter and full year 2024 conference call. Today's presentation and earnings release are available on Zeta's Investor Relations website, where you will also find links to our SEC filings, along with other information about Zeta. Joining me today on the call 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 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 SEC filings. With that, I will now turn the call over to David.

Thank you, Matt. Good afternoon, everyone and thank you for joining us today. 2024 was a record year for Zeta, capped by a strong fourth quarter, where we once again exceeded expectations. Marketing is at the front lines of the AI revolution, driving an unprecedented replacement cycle across the marketing technology ecosystem. At Zeta, we've consistently skated to where the puck is going. Our early investments in AI and first-party data are resonating with customers and prospects, fueling our record fourth quarter results, and contributing to our market share gains. We believe these investments will propel us to over $2 billion in annual revenue by 2028 as outlined in our Zeta 2028 plan. In the fourth quarter of 2024, we generated record revenue of $315 million, up 50% year-over-year with record adjusted EBITDA of $70 million, up 57% year-over-year, both well ahead of our guidance. For 2025, we are guiding to our sixth consecutive year of 20 plus percent growth, alongside another year of free cash flow margin expansion. Our Zeta 2028 plan forecasts a similar trajectory, 20% organic revenue CAGR between 2024 and 2028, adjusted EBITDA margin improvement of 580 basis points to at least a 25% margin, and free cash flow margin expansion of 700 basis points to at least 16% over this time frame. 2024 was an exceptional year for Zeta and as we entered 2025, our momentum is accelerating. The business has never been stronger and the opportunity has never been bigger. Our vision of an all-in-one marketing platform with AI and data at its core is resonating more than ever. While most AI products either drive efficiency or revenue gains, we believe Zeta's AI does both, creating a powerful competitive advantage and delivering measurable impact. In Q4, the dollar value of our RFPs reached a record high, up close to 40% year-over-year with total pipeline growth of almost 60%. Our U.S. NPS score increased 8 points year-over-year to 55. We saw significant traction with our One Zeta initiative, which focuses on expanding customer use cases, extending our solutions to become more indispensable. A prime example is a Fortune 500 retailer who is an existing retention-based CDP client that added a customer acquisition use case, which should more than double their investment with us. Now let's talk about AI adoption across our platform. Our GenAI products empower customers in three ways: productivity, automating marketing tasks with intelligent AI agents; personalization, enhancing customer experiences with AI-driven audience insights; and precision, enabling marketers to interact conversationally with Zeta's marketing platform for faster, more complete answers. But AI isn't just a tool. It's an extension of the marketing team. Our agentic AI performs specialized roles within an enterprise, seamlessly integrating into workflows to drive efficiency and superior performance. For example, operations specialist agents are being used with multiple financial institutions to automate their quality assurance processes for marketing campaigns. These AI-driven QA agents replace a manual 10-step process, integrating with QA systems of record to track completion, agent ownership and results, ensuring compliance and improving efficiency. We also provide virtual data scientist agents. Clients can bring their own predictive models into our platform, but aligning those models with ingested events and data structures can be complex. Our agents automate the data mapping process, ensuring seamless integration by intelligently matching fields, normalizing formats and resolving discrepancies. This removes manual effort and accelerates time to value for clients. Our Creative agents, like the Visual Composer, act like a world-class creative director, helping marketers to go from a blank slate to a fully designed campaign in minutes. It leverages existing templates and uses AI to generate images, body content, subject lines, and content blocks, reducing iteration cycles and accelerating campaign deployment. While for some companies, AI is just a press release or an add-on, for Zeta, it is foundational to our platform. We've been investing in AI for more than seven years, not seven months, and we have the results to prove it. In 2024, AI adoption across our platform surged. 126 brands adopted our Data Cloud AI within its first year of launch. AI agent usage grew nearly 200% sequentially in Q4 as more enterprises embedded automation. Over 1,000 behavioral taxonomies were created using AI alone, doubling the number of taxonomies in our platform. We are truly shaping the future of AI-powered marketing. Rather than charging separate fees, we monetize our AI products through increased consumption, accelerating adoption across our customer base. Although we are still early in AI adoption across our platform, we saw a meaningful impact to our consumption revenue, which increased over 40% in 2024, a significant acceleration from 2023. Unlike other software companies, we do not need to pivot our business model to monetize our AI innovations; we are already doing so as evidenced by our 2024 results. Zeta's leadership in AI continues to attract top-tier talent. Pam Lord recently joined us as President of CRM from Oracle, where she ran their B2B and B2C marketing cloud businesses. Ed See, our new Chief Growth Officer was previously a partner at McKinsey & Company's marketing and sales practice. We continue to enhance both our team and our platform. We are happy to report that we completed the LiveIntent integration in early January, well ahead of our schedule and it is already delivering incremental value to our customers. We have already launched our first synergistic product from the acquisition, Zeta Direct. This solution combines LiveIntent's premium publisher network with the Zeta Data Cloud, enabling marketers to deliver personalized ads directly within newsletter emails. This innovation enhances publisher monetization while driving a higher ROI for marketers and Zeta, a true win-win-win. As I reflect on nearly four years as a public company, Zeta's trajectory has never been clearer. We have beat and raised guidance for 14 consecutive quarters, outperformed our Zeta 2025 plan a year ahead of schedule, and strengthened our AI data leadership. We remain confident in our ability to be a rule of 40 business for many years to come. We are truly building a one-of-a-kind company. As always, I would sincerely like to thank our customers, our partners, team Zeta, and all of our shareholders for their ongoing support of our vision. Now let me turn it over to Chris to discuss our results in greater detail.

Thank you, David, and good afternoon, everyone. We have a lot of exciting information to share on our 2024 results and Zeta 2028 plan. But before I get into the details, I want to lead with three main themes. First, consistency. Zeta has been incredibly consistent, beating and raising guidance for 14 consecutive quarters and increasing revenue 20% or greater while also expanding our free cash flow margin for four straight years as a public company. Second, momentum. Our investment in an all-in-one marketing platform with AI and data at its core is creating accelerating momentum in our business, driving our fourth-quarter record results and positioning us to target continued revenue growth at a 20% organic compound annual growth rate over the next four years. Third, rarity. There are over 500 public U.S. technology companies. Of those, only 23 are expected to increase revenue by 20% or greater annually from 2021 to 2025. Of those 23, only 8 are expected to also expand their free cash flow margin annually from 2021 to 2025. Zeta is one of those 8, alongside other great companies like Cloudflare, GitLab, and Samsara included in this list. As you will see with our Zeta 2028 plan, we expect to continue to do this for the next four years. Let's get into the fourth-quarter and full-year results. In Q4, we delivered revenue of $315 million, up 50% year-over-year or 31% excluding LiveIntent and political candidate revenue. The full year revenue was just above $1 billion, up 38% year-over-year or 30% excluding LiveIntent and political candidate revenue. This exceeded our initial 2024 guidance of $875 million by $131 million or 15%. Total scaled customer count grew to 527 as of December 31, 2024, up 17% year-over-year and 52 sequentially. LiveIntent added 34 customers to our scaled customer count and excluding this contribution, our scaled customer count increased 9% year-over-year. Our super-scaled customer count of 148 as of year-end was up 13% year-over-year and up 4% sequentially. LiveIntent added three customers to our super-scaled customer count. Remember, we count each customer spending at least $1 million with us over the trailing 12 months as one super-scaled customer regardless of how many brands they are using us for. The number of brands spending at least $1 million with us over the trailing 12 months increased 28% year-over-year. Although customers using multiple brands does not benefit customer count, it does have a positive impact on ARPU. Scalable customer quarterly ARPU of $577,000 increased 27% year-over-year as reported and 32% when removing the impact of LiveIntent. Net revenue retention for the year was 114%, at the high end of our 110% to 115% range, an increase from 111% in 2023 and our highest level as a public company. From an industry perspective, in 2024, seven of our top 10 industries grew faster than 20% year-over-year, with automotive, consumer and retail, insurance, political and advocacy, and technology and media growing the fastest. We ended the year with 180 quota carriers, an increase of 32% year-over-year, partly driven by our LiveIntent acquisition. Excluding LiveIntent, quota-carrying reps increased 20% year-over-year. Our direct mix in the fourth quarter climbed to 74%, up from 70% in the third quarter and slightly higher than 73% in the fourth quarter of 2023. For the full year, our direct revenue mix was 70%. Our GAAP cost of revenue in the quarter was 40%, a 20 basis point improvement from the fourth quarter of 2023 and up 60 basis points from the third quarter of 2024. For the full year, GAAP cost of revenue was 39.7%, up 210 basis points from 2023, mostly driven by a higher mix of integrated revenue due to our agencies initially adopting the social channel before increasing spend to direct channels over time. Leverage in other areas of our operating expenses resulted in our 16th straight quarter of expanding adjusted EBITDA margins year-over-year. In the fourth quarter, we generated $70.4 million of adjusted EBITDA at a margin of 22.4%, 110 basis points higher year-over-year and $4.5 million better than the midpoint of our guidance. We exceeded our adjusted EBITDA guidance despite incurring $2 million of additional expenses related to defending against the short seller report. To this point, our Audit Committee oversaw a review of the allegations, which involved engaging an independent forensic accounting firm to evaluate our shared customer and vendor accounting practices and internal controls. Additionally, we hired a leading data and privacy firm to assess our data and privacy practices. The reviews corroborated that our accounting practices were consistent with U.S. GAAP and that the data and privacy allegations in the short seller report were without merit. Additionally, the findings reinforced the strength of Zeta's internal controls and data privacy practices. For 2024, adjusted EBITDA was $193 million, representing a margin of 19.2% and a 49% increase year-over-year. In the fourth quarter, we achieved positive GAAP net income for the first time as a public company. Our fourth quarter GAAP net income was $15.2 million, which translated to earnings per diluted share of $0.06 in the quarter and a loss of $0.38 per share for the full year. Finally, fourth quarter cash from operating activities was $44 million, up 62% year-over-year with free cash flow of $32 million, up 74%, representing a margin of 10%. This translated to a free cash flow to adjusted EBITDA ratio of 45%. It's worth noting this includes a $22 million working capital headwind driven by growth with agencies and the industry's longer payment cycles. Absent this, cash flow conversion would have been 76%. This dynamic can be seen on Slide 26 in our earnings supplemental. For 2024, our free cash flow was $92 million at a margin of 9.2% and up 69% year-over-year. Now let's get into the details of our Zeta 2028 plan and 2025 guidance. I'll start with the Zeta 2028 plan, as many of the growth drivers and margin levers we will discuss for our medium-term plan are also applicable to 2025. Slides 15 through 20 in our earnings supplemental provide additional details. For revenue, we're targeting over $2.1 billion, which equates to at least a 20% organic revenue CAGR over the next four years. To put this in perspective, our revenue CAGR between 2021 and 2024 was 30%. Importantly, there's more than enough runway in our core business to achieve this target as we estimate we only have about 1% of our existing customers' marketing and advertising spend, and there is room to increase this penetration to 5% to 15% or more over time. We also have multiple new growth levers, some of which include creating new GenAI capabilities. More GenAI features should drive additional usage of our platform, which we monetize through our consumption revenue as highlighted by David earlier. Leveraging the Publisher Cloud provides us with an opportunity to better monetize our extensive publisher relationships. Introducing new channels, as we're still very early in mobile and plan to continue to enhance the product while also introducing new channels. Extending our vertical expertise through vertical-specific functionality, we can better penetrate verticals were underrepresented today, such as CPG, healthcare, commerce, and travel and expanding our partnership ecosystem. We believe this will drive pipeline growth and be beneficial for margins. The KPIs to achieve our 2028 plan look very similar to our previous mid-term plan. We're targeting scaled customer count growth of 4% to 8% versus our three-year CAGR of 14%. The biggest factor influencing this metric is our agency business, where we expect agencies to continue to add brands to our platform. However, regardless of how many brands an agency is leveraging Zeta for, it's only counted as one customer. From a brand count perspective, our growth will likely be around our historical scaled count trend. For scaled customer ARPU, we're expecting growth of 12% to 16%, in line with our three-year CAGR of 15%. Our One Zeta initiative should positively impact channel and use case expansion, aiding ARPU growth. Further, the aforementioned agency dynamic will also have a positive impact on ARPU. We continue to expect net revenue retention to be in the range of 110% to 115%, in line with the 111% to 114% range that we achieved since 2021. We expect our direct revenue mix to be 70% to 75%, roughly in line with the 70% to 77% annual range we've been in since 2021. Much like our initial medium-term plan, we're targeting significant margin improvement with our Zeta 2028 plan. Our 2028 adjusted EBITDA target of at least $525 million implies a 25% margin, an increase of 580 basis points or an average of 145 basis points per year. We expect to leverage across all areas of our business. Cost of revenue should improve by 100 to 300 basis points. We believe this will mostly be driven by a higher mix of direct revenue, which carries lower costs compared to integrated revenue. This should be driven by agencies ramping usage of direct channels, our One Zeta initiative driving more adoption of direct channels, and higher margins from GenAI products and consumption scaling faster over time. Across our other operating expense lines, we anticipate 280 to 480 basis points of margin improvement. One key point of leverage for Zeta has been growing headcount significantly slower than revenue and adding a higher percentage of headcount outside of the U.S. Over the past three years, our revenue has increased at a CAGR of 30%, while total headcount has only grown at a CAGR of 15% with U.S. headcount growth even slower. Implementing AI internally should enable us to gain further headcount efficiencies. Expanding our partnership ecosystem will also create a margin tailwind. We expect future partners to take on some of the professional services we provide customers today, taking additional costs out of our business. From a free cash flow perspective, we're targeting $340 million plus in 2028, which equates to a CAGR of 39% from 2024. This represents a margin of 16%, an improvement of 700 basis points from 2024. In addition to the aforementioned margin levers, there are two additional factors driving our free cash flow margin improvement. First, we expect CapEx to grow materially slower than revenue. Our capital expenditures and capitalized software development was 4.2% of revenue in 2024, a significant improvement from 5.8% in 2021. Second, the impact of agencies on free cash flow should lessen over time as that business's growth comes more in line with Zeta's overall growth. Moving on to 2025 guidance. We're guiding to the midpoint of full-year 2025 revenue to be $1.24 billion or growth of 23%. This includes LiveIntent revenue of $96 million. Adjusting for the impact of LiveIntent and political candidate revenue in the year-to-year comps, our excluding LiveIntent and political growth rate is 21%. A bridge is provided on Slide 25 in the earnings supplemental. As expected, our 2025 revenue guidance assumes there is no political candidate revenue. However, we are modeling for advocacy revenue to be between $20 million and $25 million compared to $36 million in 2024 and $13 million in 2023. We're guiding to adjusted EBITDA at the midpoint of full-year 2025 to be $256.5 million or a margin of 20.7%, a 150 basis point expansion year-over-year. We're guiding full-year free cash flow to be $129.5 million at the midpoint, representing a margin of 10.4%, a 120 basis point improvement year-over-year and growth of 40%. Finally, on Slide 24 in the earnings supplemental, we've included quarterly 2025 guidance for revenue and adjusted EBITDA, a practice consistent with prior years. I'll conclude with this reflection. Anyone can issue a multi-year plan, but executing against it is another story. At Zeta, not only are we set to materially surpass our original Zeta 2025 plan, but we exceeded one of the key targets, revenue, an entire year ahead of schedule. For our Zeta 2028 plan, we kept the same KPIs and fine-tuned them to the most realistic path to achieve our goals. Just like with our original 2025 plan, we put extensive thought and diligence into our Zeta 2028 plan, which the entire company is focused on executing and accountable for. With that, let me hand the call back over to the operator for David and me to take your questions.

Thank you. Our first question is from Matt Swanson with RBC. Please proceed with your question.

Yeah. Thank you guys so much for taking my question and congratulations on the quarter. Chris, you covered a lot of ground there going through those three sets of guidance. Maybe pulling in the zoom lens a little bit. Can you just talk a little bit about what you're kind of thinking through from a macro environment, maybe a more like demand-centric spending environment for both Q1 and for 2025?

Yeah, look, our approach and the simplest way to put it is we've followed how we've done it historically, which means that it requires the low end of each of our KPIs to get to our guide, giving us the same level of flexibility we've gone into future years in terms of our guide, as well as future long-term models. Given where we are in the first two months of the quarter, we've got very good visibility into obviously Q1. We've leveraged our Zeta economic insight data to be able to anticipate macro trends. As I think about the verticals that have contributed to the strong growth we saw in 2024, I would expect those to be on the higher end of performers as well into 2025. We are obviously very aware of the macro. We're aware of the inflationary backdrop. We're aware of tariffs. We're aware of other items, but we feel like we've put appropriate conservatism into our guide to account for that. David, anything you'd add?

Yeah. And Matt, let me just say that we're not seeing any challenges from any clients at this point. So we're feeling very good about where we are versus the macro environment as it exists today.

I appreciate that. And then, David, great to hear that you already have LiveIntent integrated as quickly as January. Can you just talk a little bit more about what you're hearing from customers in terms of their initial use cases and initial adoption? And then to broaden it out, in the 2028 plan, we have some new verticals and new products. What do you see from when you launch new products that gives you confidence in that long-term ARPU expansion just in customers' desire, I guess, to take more from Zeta?

Yes. And to be clear, we've been experiencing that type of ARPU growth. So we don't need to grow our ARPU as a percentage to hit this plan. We can just continue to do what we're doing as we did to get to the 2025 plan from a revenue perspective by the end of 2024. But Zeta Direct is a really cool product, Matt. What we did was we took their inventory, which embeds into newsletters, which was traditionally served based on the content the consumer was consuming. So you're getting this newsletter from this publisher, it might be a daily update from The New York Times, it might be an automotive update from The Washington Post, and so on and so forth. We’ve added our Data Cloud on top of that, and we can now directly target a deterministic individual in addition to the content they're consuming. That has already shown an increased return on investment for the marketer and higher revenue to the publisher with us sitting in the middle of the transaction. So we garner higher revenue as a percentage of that. It really is a win-win-win, and I think it's a perfect example of taking 1 plus 1 and equaling 4. We, once again, Matt, feel very good about where we are with our existing customers and if you look at the agency business, which has been among our fastest growing, their ARPUs are going up dramatically because they keep adding more brands, and it just counts as one super-scaled customer.

Our next question comes from DJ Hynes with Canaccord Genuity. Please proceed with your question.

Hey. Good evening, guys. Nice set of results. David, maybe I could have you expound on that last point, which is the agency business. Clearly, the ARPU gains suggest there's lots of momentum there. Maybe just talk about what you're hearing from those folks? What kind of visibility do you have into the pipelines that they have for pulling in new brands? How are you thinking about the growth opportunity with the agencies for 2025 and beyond?

Thank you so much, DJ. I appreciate the compliment. What I would tell you is that right now, one of the reasons I think we are drinking from the fire hose in our agency business is because something that most people don't understand is we are the most profitable partner, on average, that the agencies work with, bar none. Our competitors who have had some challenges over the last number of months are charging a meaningful upcharge to data expenses. We bundle the data in as part of the activation and are generally lowering the cost to the agency or increasing their profit depending on how they book it by 25%. So what we're seeing is that the agencies are moving more and more brands and more and more volume to us. What we're seeing out of agreements that have already been executed as minimum amounts for this year gives us a tremendous amount of comfort in the projections that we're putting out there.

Yes. Makes sense. Maybe a follow-up to that. It was interesting, one of the agents you called out was kind of a push into creatives. And I'm curious, like how deep does Zeta want to go into creative? Does that create any channel conflict with these agency customers? Are they asking you to do that? Just talk about the opportunity there and whether that's meaningful to Zeta.

Yeah, so let me be clear. We do not want to compete with the agencies as it relates to creative. That is not in our roadmap. What we are doing is taking their creative and optimizing it for any screen size, would be a perfect example. So you're opening it on an iPhone, an Android device, an iPad, a laptop, a TV commercial. The dynamic agent is able to optimize that creative for that. Now we have some enterprise clients that are using very basic creative tools, whereas they might not have an agency. But any time we're working with an agency, we are not putting out as a standalone product a creative product. We very much want to support the creative assets of the agencies and we want to utilize our tools to help optimize that creative, looking at what has the highest conversion rates by creative and the best return on investment for the client.

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

Hey. Thanks, guys, and congrats on another strong quarter. So look, you guys are working with some of the largest marketing companies. You're talking about 44% of the Fortune 500. You're just running at a scaled customer ARPU of $2 million today. So, what are the key elements of the strategy that help you increase wallet share, so it's not $2 million but $20 million or $40 million or $80 million over time?

So, great question, Jason. Well, I mean, first, let's start with One Zeta, which is consolidating all of our use cases into one sale and we're starting to see more and more Zeta one customers. It's interesting because, today, the scaled customers we have spend over $100 billion a year in marketing, and in the last year, we captured 1% of that spend. As we look forward to the next few years, our goal is to get to 2% of that spend. We don't have to get to 5% or 10%. But what I would tell you is we have a number of enterprise clients where we are above 5% of their wallet share, which gives us a roadmap for how to move other clients up and as you move the top of the range up, you bring the mean up and as you bring that mean up, you can move from 1% last year to 1.25% or 1.3% this year and then go up from there to 200 basis points by 2028.

You can, Jason, see this really clearly in the earnings supplemental on Slide 10, where if you look at our greater than 1 million scaled customers, which on a brand basis grew 28% year-over-year, but on an ARPU basis, to your question, those greater than 1 million customers on average are already spending almost $7 million. Now if you compare that to our 100k to 1 million customers, the amount of leverage we have there, just shy of 500k per, we see a substantial growth and ramping as they spend more time on the platform. If you reference Slide 11, which is a slide we produce annually, you'll see we continue to make significant inroads within scaling those customers within the first year, almost now at 1 million per compared to around 600k in the last couple of years in that first year.

Perfect. And then just a follow-up to something we discussed in December. But you spent a lot of time with your biggest customers over the last handful of months here. Just wondering how those conversations continued to progress. And what is it about those conversations that drives them to want to do more with Zeta?

I think a lot of it goes back to efficiency and effectiveness and superior revenue growth. When you think about artificial intelligence, the vast majority of enterprises that are out there are using it for efficiency in automation, which, of course, we're doing as well. But the ability to drive meaningful revenue growth per dollar invested into the Zeta Marketing Platform is causing them to move budget from other partners to us. We're seeing that in the results. We grew the business 50% in the fourth quarter, 40% excluding political, and we're really seeing the AI's implementations driving more efficiency and driving superior revenue growth compared to our competitors.

Our next question comes from Ryan MacDonald with Needham & Company. Please proceed with your question.

Hi. Thanks for taking my question and congrats on a great close to 2024. David, you talked about this concept of One Zeta, where you're consolidating all of your use cases into one sale. Can you just talk about the challenges of that concept given that you're now integrating sales forces on new products that you've recently acquired, adding in generative AI to that? Are you seeing early signs of the benefits of that on RFP flow in terms of just larger or more comprehensive RFPs as you mature in that motion? Thanks.

First of all, thank you, Ryan. We're super proud of the quarter and the year. The answer is absolutely yes. We're starting, for the first time, to see meaningful RFPs coming in as One Zeta. I will tell you, the addition of Pam and the addition of Ed are going to be really game-changing for our ability to do that with the relationships they both have and the ability to cross-sell across the entire company with one group. In the past, we had been siloed; we would create a sale and then upsell. We had the hunter close the deal and then the farmers would try to spawn out. What we're doing now is we're leading with One Zeta and it's been very exciting to break through those silos.

If you look inside the sales pipeline, Ryan, just as a point of evidence, what we're seeing is that the average deal size is up 35% year-to-year, so your point of bringing all three of those use cases together.

Appreciate all the color on that. And then, obviously given all the success that the company has had, it's obviously gonna bring in new competition into the market. We've recently seen reports about Meta trying to go to the agencies to do more on AI-based advertising. Can you just talk about what you're seeing in terms of newer movement or any changes competitively? And whether or not some of this moves from the walled gardens creates any concern in the near term? Thanks.

Thank you, Ryan. No, we're not seeing any competition from guys like that. In fact, we continue to grow our business with Meta pretty materially and have a very deep and meaningful relationship with them. They tend to focus on very few, very large partners. You're seeing Google and Meta going at it a little against each other. But that has, in no way, affected us. Quite frankly, I think that it's been, in some ways, benefited us because we're such good partners with Meta, we've been able to drive more business and build a deeper and more meaningful relationship. I would also comment on the fact that we haven't seen any small up-and-comers either. I think a lot of that has been the inability for start-ups outside of pure AI to get financing over the last three to four years. In a normal world, you would get to our scale and growth rate, size, you would have some new start-ups coming after you. We have not seen that either. It has been a really unique opportunity as we've brought everything together where you would traditionally need upwards of 17 different vendors to put together what the Zeta Marketing Platform can deliver. We're not seeing any one organization trying to replicate that at this point.

Our next question comes from Terry Tillman with Truist Securities. Please proceed with your question.

Yeah. Congratulations from me as well. Hi, David, Chris, and Matt. First question might be a multi-parter, and then I had a follow-up. But you all provided some interesting stats in terms of the pipeline and the value of the pipeline kind of ending the year. What I'm curious about is, how do we think about timing of that converting into meaningful or material revenue? And if some of these are kind of One Zeta deals, does it take a little bit longer before we start seeing that in the model in '25? And then I had a follow-up.

Yeah, we're not seeing any change in our deal cycles. That's been something we've been saying for, frankly, years. Without a doubt, some of the bigger deals that come in through the RFP process will be, call it, 7 to 12 months, but they can move much faster than that. Still, the vast majority of the deals we're closing are still pilots and proof of concepts across all three use cases. It doesn't mean it takes a long amount of time. I don't expect the conversion of the pipeline to be any different in '25 than we've seen in '24 or 2023.

And remember, Terry, that seven or eight months, many of those guys entered our pipeline seven or eight months ago. You're actually seeing a consistent movement from what I would say is the pipeline to RFPs and pilots to convert it to clients to the ability to scale to scaled clients and then ultimately super-scaled clients. If you look at our confidence in our business, putting forth a 2028 plan that continues to show a minimum of a 20% organic CAGR, we're feeling very bullish about where the business is right now.

Yeah, that's definitely clear, David. I guess it seems like forever ago, but it really wasn't that long ago in Zeta Live. So much has happened since then, but there was a lot on the mobile side. So just maybe a quick update on that and potentially could this start becoming meaningful in '25 in terms of a key revenue channel? Thank you.

We've always said we thought mobile would be a big driver into 2026 and beyond and it could happen in 2025. We have a number of clients who have adopted it and we're very, very proud of the product we've built; it's doing quite well. I mean it's growing at a massive rate, but off a zero base. The one challenge about getting bigger and bigger is it's harder for new products to drive the needle. Products like connected television are still growing above 100% a year. That's meaningful revenue, and it's starting to really impact what we're seeing as a business. I expect mobile to do that in the years to come.

It's a very natural selling motion for our sellers, right? They have to learn a new capability. It's really an extension of how they're selling today as a new channel.

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

Perfect. Thank you, guys. Congrats on the strong close to the year here. Maybe if I can switch back to agencies for a second. Chris, I'm curious what role you see agencies contemplating in that 2028 model. We know they're kind of on the upward part of the S curve in terms of growth right now. But kind of how are you anticipating the growth might shape out over the next couple of years? And then the other piece just in terms of mix - where are you thinking the agencies are in the pace of adopting digital channel or sorry, direct channels? Are you starting to see that pick up in late '24, early '25 here? And just how do you think that might trend over the coming years?

Yeah. We think of the agency first off, which reached, call it, right around 20% of revenue this year, which was obviously expected and substantial growth to be an even bigger part of the pie as we go deeper into 2028. We see it as part of the core being able to get to that growth plan by itself, just by accessing more and more wallet share and the brand strategy and the brand go to market is one of the fastest ways that we can do that. Obviously, we highlighted a number of other growth drivers incremental to the core that could frankly drive us north of the $2.1 billion, which is why we said it's an at least. In terms of where we are on getting the direct mix, we made really exciting improvements this year. We're still not quite at roughly 50% direct to 50% integrated. So there's still upside there. I think as those agencies continue to grow in brands, grow in their channel adoption towards direct mix, that will also accrete to our gross margins in addition to the work we're doing on One Zeta. As more of our consumption-based revenues come from our generative AI, that also aligns with a higher margin profile for business.

Okay. Understood. And then, just a quick one to put a finer point on it. I know we talked about this a little bit late in 2024, but kind of the fallout from – or the customer conversations that you've had following up with some of your customers post the short report. Has there been any impact or any change in those conversations since that's happened? How are your customers reacting? And what are you seeing from them post some of the events late last year?

Well, I think if we had seen material changes, Arjun, we wouldn't have grown by 50%. What I would tell you is, no. We have seen no material changes from the last update we gave, which was that we have not lost any client directly over this, and we continue to see that. I was super excited that we were able to announce that our audit committee had done a full review. They brought in a full forensic accounting firm that went through every single one of the transactions that could be deemed a client and a vendor and found no issues whatsoever in there. Then we brought in a law firm that is one of the top data experts in the country. They vetted everything in the report and found no merit whatsoever in it, and reported that to our audit committee, which was very happy to put this issue behind us.

Our next question comes from Kelly Valentini with Goldman Sachs. Please proceed with your question.

Hi. Thank you for taking my questions, and congrats on the quarter. Wanted to walk through the comments you made on getting those budget penetration to 5% to 15%. I am curious like in the typical customer you see that expansion, how much of that would you expect to be taking share from Walled Gardens versus taking share from other technology providers?

Thank you, Kelly. I appreciate the compliment, and it's a great question. We don't traditionally take business from the Walled Gardens. We partner with them. By using our data, we can build an attribution model that can go into a Walled Garden or outside of it. We see the Walled Gardens more as our partner than our competitor. There are a number of companies from which we are taking meaningful market share. It's hard to grow the business at these rates if we weren't. They are typically last-generation marketing clouds or DSPs, where they haven't fully integrated data and AI as native to the application layer. Because of their technology debt, they're not able to get to the type of speed to intelligence that our platform can provide for a significantly superior return on investment. If the market itself is growing 10% to 15%, and we grew 40%, not including political, that would imply everything above that was taking market share from competitors.

That makes sense. As a follow-up, just curious, anything you can give on what assumptions you're making on AI revenue growth and kind of the 2025 and 2028 targets?

Yeah. We have not broken it out in the 2028 in a line-item fashion. We did say it will be one of the five new levers we feel like we have in addition to the core growth business. If you look toward 2024 and our consumption-based revenue, which accelerated by over 40% year-over-year, that's roughly half of Zeta's revenue, and that was an acceleration from 2023. Certainly, a portion of that is driven by our early-stage generative AI products, which are intended to drive higher outcomes and, subsequently, more usage and more spend with the brand annually over time.

What we're seeing, Kelly, is the ability to meaningfully drive consumption is a substantially better return on investment for us than charging an all-you-can-eat fee or putting a small price on the AI. Although we will be rolling out AI products in the near term that will have to be paid for as it relates to sitting on top of the Zeta Marketing Platform.

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

Great. Thank you so much. This is Katie on for Elizabeth Porter this afternoon. Wanted to hit on the verticalization piece here. Zeta has had a lot of success given the diversification of the business across industries. Some of those key verticals you called out in commerce and CPG do have some vertical-specific competitors in there. What gives Zeta the right to win in these verticals where you're more under-penetrated today? When can we expect that vertical expansion contribution to layer into the model? Thank you.

No problem, Katie. Thanks for the question. We've already started to build, in fact, in a lot of our virtual demos that we'll do with investors, we showcase a CPG real-world demo today, where we're using customers and showing them what their customers are spending on with their brand and with their competitors. In each one of those verticals, where we think we're underrepresented today, there's a massive TAM and amount of marketing and advertising spend, which comes down to the type of data that we can put in front of the marketer and how actionable we can make it for them in a totally different way than our competitors can do. It all starts with the data, the software, the analysis we put on top of it, and the recommendations that they can then perform on the platform.

By the way, a lot of the 'vertical competitors' really are more vertically focused from a sales perspective than they are from a platform perspective. We've invested heavily in our sales force, as you've seen, growing to 180 quota carriers. We're expanding out into new verticals with salespeople that we think will really benefit us this year and in the years to come.

Helpful. And then, just one quick follow-up on the NRR. In the long-term model, we are not looking to inflect too materially from the 114% today. Obviously, that's a pretty impressive stat already. Maybe just expand on the different drivers there. Is there any limitation on the upper bound to NRR around expansion activity as you kind of land with these higher ARPU customers? Thank you.

There's no limitation on where it can go, although we continue to guide to 110% to 115%, which has been our range. We've been sort of between 111% and 114%. The agency holdcos, as their ARPU grows dramatically, benefit our NRR. We just don't lose many customers, which is also a very good thing. I think we can continue to keep it in that range. In the years to come, we can begin to look at getting it above that range. But in the short run, we feel very comfortable with 110% to 115%.

We show the life of the cohorting of a customer set on Slide 11 in the earnings supplemental. If you look at those spending – that have been on the platform less than a year, they're averaging $900k, which is up from $600k last year. The one to three-year cohort continues to accelerate to $1.2 million. Customers with us for three or more years are now averaging $2.6 million compared to $2.1 million last year. We feel that the 110% to 115% is rooted in deep analysis by cohort, and it's also consistent with our growth algorithm, historically about half of our growth has come from existing customers and half from new.

Our next question comes from Jackson Ader with KeyBanc Capital Markets. Please proceed with your question.

Hey, guys. This is Jack on for Jackson Ader. Wanted to ask what your political revenue assumptions are implied in your outlook? And do you expect to gain market share with political campaigns?

So there are two pieces – thanks, Jack. Political candidate revenue was around $44 million in 2024. We've always expected that in 2025, there shouldn't be any political candidate revenue of materiality certainly. Then there's the advocacy portion; Zeta is working with political action groups and NGOs. In 2024, that was in line with our expectations; it was $36 million. For that piece of our business, which we're putting more quota carriers into, building new capabilities, leveraging relationships from the political cycle, we expect that business to go to $20 million to $25 million in 2025. Comparing that to an off political year back in 2023, that's significantly up from around $13 million. That's how we think about the contribution of political candidate and advocacy in 2025.

Got it. Very helpful. As a follow-up, how much revenue today is coming from the marketing cloud? And how much do you expect that to be in 2028 as it progresses?

I mean all of it. All our revenue goes through the marketing cloud. Maybe you could fine-tune that question.

I'll follow-up with you guys offline on that.

Yeah. We're going to talk in a bit. But literally, Jack, all of our revenue goes through the marketing cloud at this point. We consolidated that a few years ago; everything now goes through one user interface with one reporting infrastructure and everything is totally integrated.

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

Yeah. Hey, guys. Thanks for taking the questions. Maybe this one's for Chris. And so Chris, when I look at the third-quarter transcripts, I recall that you said you were very comfortable with 2025 consensus revenue growth of 17%. And so I know that was supposed to be without LiveIntent. That number is a couple of millions below the $1.144 billion that you're guiding to today without LiveIntent. If I use that $1.144 billion and compare it to where you ended up at 2024, that implies 14% organic growth versus the third quarter when you said 17%. In Slide 24, it says 21% growth. I just want to ensure I'm comparing apples-to-apples here with that original 17% comment from the third-quarter call.

That 17% comment, we very carefully walked through what we were presuming, that should have gotten most analysts to around, call it, $1.2 billion in revenue compared to the $1.24 billion that we're at today. You back out $17 million of LiveIntent from the $1.6 billion we did in 2024, and you back out $44 million of political candidate revenue, you get to a normalized base of $944 million. If you do the same on 2025 you remove $96 million for LiveIntent, which is what we'd expect that business, that’s a 20% growth rate, consistent with what we talked about when we made the acquisition. That gets to roughly $1.44 billion. So, it's a 21% growth rate, so roughly four points higher than that 17% we had talked about earlier. We went through the task on Slide 24 to clearly break this out in steps by quarter, and each quarter of 2025, growth is effectively between 20% and 22% when you exclude LiveIntent and political candidate revenue.

It's important because we've got to exclude those two things to get to the 21%. But you need to pull that inorganic revenue out of 2025 without pulling it out of 2024.

Got it. Thank you for that. I guess the conservatism in the guidance or any sort of consideration in the guide this year, just thinking about all the macro and regulatory and tariff noise out there. Is there any additional conservatism that you pulled with the guidance this year? Thank you.

We tried to be consistent with our historical approach, which is to build in ample conservatism, so that we don't need the midpoint or even the high end of our metrics to get to our guidance. The way we built that guidance is we can get to guidance at the low end of all our metrics. We made that call based on our awareness of what's going on in the macro backdrop. David, anything you'd add?

Yes. I would say, Koji, just we've known each other for a while now. We've beat and raised 14 quarters in a row. Our goal is to be here the same time next year saying we've now beat and raised 18 times in a row, and we feel we've put the right guidance out to do that.

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

I am on mute. Sorry about that everyone. A couple of questions from me. Chris, I just wanted to ask you on the deceleration in the Q1 guide. I know the comp is a few points harder here, and there are political spending headwinds on the comparable. But is there anything else that you're contemplating in that guide to see that type of organic deceleration beyond those items? Did having one less day also have an impact in terms of the Q1 guide? And then I have a follow-up.

No, that wouldn't be any material impact. As you said, it's 30% all-in. The guide is 20% if you adjust for LiveIntent since there wasn't any political candidate revenue in Q1. It's our conservatism. We're trying to be consistent with what we've done in the past and just build multiple ways to get to the number. If we do that, we’ll be in the same place we've been in the past in terms of our traditional beats.

Okay. And then the follow-up question I had on the 2028 guide. I know there was some discussion earlier about the agency business, which is doing really well for you. Is it your expectation, Chris, that this business could double in its percentage of the revenue mix as we fast forward to 2028? Thanks.

The base will keep growing, right? Doubling in size is not outside the realm of possibility. It will be a bigger piece of the pie. Today, it's about 20% of revenue. Doubling is feasible, but I wouldn't count on it as we sit here today.

Yes, nor would I, Brian. I think it's going to double as a business, but I don't think it's going to double as a percentage.

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

Hi. Good afternoon, and just adding on my congratulations for the quarter. Just double-clicking a little bit more on the agency opportunity. David, can you speak to just the growth opportunity that you have with the top five global holding companies versus maybe your aspirations to expand into the mid-market on the agency side?

Yeah, I mean we are adding mid-market agencies faster than I think we could have even expected, and they're all on platform. That's a really nice thing for margin in the long term. The opportunity with the five large agency holding companies we work with is very, very large. We continue to be their most profitable partner. We tend to be more flexible than our competitors and have built deep, meaningful relationships with them. I expect us to continue to grow those businesses significantly and continue to grow brands. If you look at our projections out through 2028, as Chris has said a few times, we can be at the low end of our metrics and still beat those numbers.

Slide 17 in the supplemental lays out what our compound growth rates have been through the first long-term plan. The quota carrier compound annual growth rate was 22% from 2021 to 2024. We're baking in some efficiency that we've been seeing as of late. It's our expectation that we can grow the quota carrier base between 10% and 15%. What we found, we don’t want a growth number to force us down the path of quantity but focus on quality over just throwing bodies at sales.

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

Thanks. Maybe switching gears. I wanted to look at the balance sheet. You repurchased $31 million worth of shares in the quarter. That's three times what you've done in the rest of the year combined and almost matched your free cash flow. Sort of curious your thought process around the buyback on a go-forward. Do you think you'll run it at a higher percent of free cash flow? Do you think you’d be opportunistic and ever look at taking the actual cash balances down to pursue it more aggressively? Just to give us a backdrop for the year ahead. Thanks.

I think, listen, Rich, the stock dropped to a ridiculous place. We’ve massively accelerated buying stock. We still think it's very low, and we'll continue to buy it at an accelerated pace. I don't see any better use for our cash right now than buying back shares. We used about 100% of free cash flow. We expect to drive meaningful free cash flow this year. You could see us do, at least half and potentially much higher as a percentage of free cash flow as we look at buying back stock because, right now, it is the best investment for us our cash in the current environment.

And the follow-up for me would be, it looks like we probably have a better M&A environment with an administration that might let more things go through. How are you thinking about growth, the inorganic growth opportunities now and looking ahead to broaden offerings and entering new markets, etc.?

Yeah. We are seeing more deals now than we have in many years. What I would say is it's still going to be hard to find deals that match our four M&A pillars. If we can find deals that match our four M&A pillars, we will act on them. We have meaningful cash. We have meaningful capacity and we’re in a unique position with the type of free cash flow we expect to generate to be able to do very opportunistic deals. I will say what I say to you whenever we're together. I believe transformative deals transform both companies for the worse. So we won’t be doing anything that 'is transformative.' But we will continue to be opportunistic and look at opportunities where we can take 1 plus 1 and equal 4.

Our next question comes from Ryan MacWilliams with Barclays. Please proceed with your question.

Hey, David and Chris. This is Eamon on for Ryan. Thanks for the question and appreciate all the detail today. Can you help us understand the key levers for the free cash flow and EBITDA margin expansion highlighted by your 2028 guide?

Yeah, certainly. We talked about getting anywhere from 100 to 300 basis points we think from cost of revenue. That’s really driven by three initiatives. The first being our One Zeta initiative, where we're being more successful at bringing all three use cases together, which gives us good synergies and higher margin profiles. We're continuing to drive more direct channel usage across the platform, particularly with agencies. Our generative AI and consumption-based revenue tend to have higher margins as they scale, which should also help the COGS line. We think we can continue to get great leverage out of the OpEx line, which is evidenced in the supplemental where we show we've had a 30% compound annual growth rate on revenue over the last several years compared to only 15% CAGR in headcount - in U.S. headcount growing at a rate even lower. We will eventually adjust that working capital deficit with agencies as that growth catches up. That’s a significant lever. This year's results showed that if we had a neutral working capital position, we would have had a 76% free cash flow conversion. So I think that's a key driver. Over time, less as a percentage of revenue of CapEx will be in our business. Those efficiencies will get us to 65% conversion out in 2028 really nicely within reach, in fact already there on a normalized basis.

Perfect. Thanks, Chris. As a follow-up, have you seen any changes in the environment post U.S. election regarding customers' willingness to spend?

We really haven't, Eamon. We've been working close with our customers. As you know, we're very, very close to our customers. Many discount what a large percentage of our business we have done when we enter the year. We have incredible visibility into what we’ve put out. As Chris has said, we've been conservatively projecting, so we have not had any clients pull back, and we continue to be full speed ahead.

There are no further questions at this time. I would now like to turn the floor back over to David Steinberg for closing comments.

I could not be prouder of this team for working through the turbulence we've seen over the last quarter and putting up the type of results we have as an organization. It really shows that our strategy of putting AI and data as foundational to our platform, bringing in the world's best people, and letting them do their jobs can ultimately drive financial results showing how strong our platform is in the marketplace. We believe we're going to organically double this business again over the next four years. I could not be more proud of our Zeta people and am incredibly proud to be running this company. Thank you very much.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.