Zeta Announces Record Fourth Quarter 2022 Financial Results
NEW YORK – Zeta Global (NYSE: ZETA), the AI-Powered Marketing Cloud, today announced financial results for the fourth quarter and full year ended December 31, 2022.
“Our execution and competitive position have never been stronger, evidenced by our record fourth quarter results,” said David A. Steinberg, Co-Founder, Chairman, and CEO of Zeta. “The market continues to move in our direction as data and Artificial Intelligence (“AI”), which are foundational elements of the Zeta Marketing Platform, are now mission critical Boardroom topics. By delivering identity-based data and AI to improve consumer experiences and drive a higher return on marketing investments, we are well positioned to capitalize on the ongoing changes in the marketing cloud ecosystem as enterprises place a premium on marketing efficiency and effectiveness.”
“We continue to be a business delivering beyond its commitments, with fourth quarter results once again exceeding expectations, with top- and bottom-line growth rates ahead of the Zeta 2025 model,” said Chris Greiner, Zeta’s CFO. “This quarterly pattern is forming a multi-year trend of accelerating revenue growth and operating leverage. Our performance is driven by years of headcount discipline, operational excellence and investment rigor, which creates a sustainable basis for continued growth and expanding profitability.”
Fourth Quarter 2022 Highlights
Full Year 2022 Highlights
Guidance
Zeta anticipates revenue and Adjusted EBITDA as follows:
First Quarter 2023
Full Year 2023
Zeta 2025
Zeta 2025 is a long-term plan introduced by the Company in 2022, intended to drive the Company’s vision to become one of the largest marketing clouds in the industry, with targets for business, product, and industry leadership. The financial targets of this plan are to generate in excess of $1 billion in annual revenue with at least 20% Adjusted EBITDA margins by 2025. We are adding an additional financial target to the plan of Free Cash Flow with a target of at least $110 million by 2025.
Investor Conference Call and Webcast
Zeta will host a conference call today, Thursday, February 23, 2023, at 5:00 p.m. Eastern Time to discuss financial results for the fourth quarter and full year 2022. A supplemental earnings presentation and a live webcast of the conference call can be accessed from the Company’s investor relations website (https://investors.rhyzetamigrdev.wpengine.com/) where they will remain available for one year.
About Zeta
Zeta Global (NYSE: ZETA) is the AI-Powered Marketing Cloud that leverages advanced artificial intelligence (AI) and trillions of consumer signals to make it easier for marketers to acquire, grow, and retain customers more efficiently. Through the Zeta Marketing Platform (ZMP), our vision is to make sophisticated marketing simple by unifying identity, intelligence, and omnichannel activation into a single platform – powered by one of the industry’s largest proprietary databases and AI. Our enterprise customers across multiple verticals are empowered to personalize experiences with consumers at an individual level across every channel, delivering better results for marketing programs. Zeta was founded in 2007 by David A. Steinberg and John Sculley and is headquartered in New York City with offices around the world. To learn more, go to rhyzetamigrdev.wpengine.com.
Forward-Looking Statements
This press release, together with other statements and information publicly disseminated by the Company, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Any statements made in this press release or during the earnings call that are not statements of historical fact, including statements about our guidance, the Zeta 2025 plan, the financial targets of Zeta 2025, and the timing of when we will achieve the Zeta 2025 plan, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning our anticipated future financial performance, our market opportunities and our expectations regarding our business plan and strategies. These statements often include words such as “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecast,” “outlook,” “guidance” and other similar expressions. We base these forward-looking statements on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances at such time. Although we believe that these forward-looking statements are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our business, results of operations and financial condition and could cause actual results to differ materially from those expressed in the forward-looking statements. These statements are not guarantees of future performance or results.
The forward-looking statements are subject to and involve risks, uncertainties and assumptions, and you should not place undue reliance on these forward-looking statements. Factors that may materially affect such forward-looking statements include, but are not limited to: global supply chain disruptions; macroeconomic and industry trends and adverse developments in the debt, consumer credit and financial services markets and other macroeconomic factors beyond Zeta’s control; increases in our borrowing costs as a result of changes in interest rates and other factors; the impact of inflation on us and on our customers; potential fluctuations in our operating results, which could make our future operating results difficult to predict; underlying circumstances, including cash flows, cash position, financial performance, market conditions and potential acquisitions; prevailing stock prices, general economic and market condition; the impact of COVID-19 and other future pandemics, epidemics and other health crises on the global economy, our customers, employees and business; the war in Ukraine and escalating geopolitical tensions as a result of Russia’s invasion of Ukraine; our ability to innovate and make the right investment decisions in our product offerings and platform; our ability to attract and retain customers, including our scaled and super scaled customers; our ability to manage our growth effectively; our ability to collect and use data online; the standards that private entities and inbox service providers adopt in the future to regulate the use and delivery of email may interfere with the effectiveness of our platform and our ability to conduct business; a significant inadvertent disclosure or breach of confidential and/or personal information we process, or a security breach of our or our customers’, suppliers’ or other partners’ computer systems; and any disruption to our third-party data centers, systems and technologies. These cautionary statements should not be construed by you to be exhaustive and the forward-looking statements are made only as of the date of this press release. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
The first quarter and full year 2023 guidance provided herein and Zeta 2025 targets are based on Zeta’s current estimates and assumptions and are not a guarantee of future performance. The guidance provided and Zeta 2025 targets are subject to significant risks and uncertainties, including the risk factors discussed in the Company’s reports on file with the Securities and Exchange Commission (“SEC”), that could cause actual results to differ materially. There can be no assurance that the Company will achieve the results expressed by this guidance or the targets.
Availability of Information on Zeta’s Website and Social Media Profiles
Investors and others should note that Zeta routinely announces material information to investors and the marketplace using SEC filings, press releases, public conference calls, webcasts and the Zeta investor relations website at https://investors.rhyzetamigrdev.wpengine.com (“Investors Website”). We also intend to use the social media profiles listed below as a means of disclosing information about us to our customers, investors and the public. While not all of the information that the Company posts to the Investors Website or to social media profiles is of a material nature, some information could be deemed to be material. Accordingly, the Company encourages investors, the media, and others interested in Zeta to review the information that it shares on the Investors Website and to regularly follow our social media profile links located at the bottom of the page on rhyzetamigrdev.wpengine.com. Users may automatically receive email alerts and other information about Zeta when enrolling an email address by visiting «Investor Email Alerts» in the «Resources» section of the Investors Website.
Social Media Profiles:
www.twitter.com/zetaglobal
www.facebook.com/ZetaGlobal/
www.linkedin.com/company/zetaglobal
www.instagram.com/zetaglobal/
The Following Definitions Apply to the Terms Used Throughout this Release, the Supplemental Earnings Presentation and Investor Conference Call
Non-GAAP Measures
In order to assist readers of our consolidated financial statements in understanding the core operating results that our management uses to evaluate the business and for financial planning purposes, we describe our non-GAAP measures below. We believe these non-GAAP measures are useful to investors in evaluating our performance by providing an additional tool for investors to use in comparing our financial performance over multiple periods.
Adjusted EBITDA is a non-GAAP financial measure defined as net loss adjusted for interest expense, depreciation and amortization, stock-based compensation, income tax (benefit) / provision, acquisition related expenses, restructuring expenses, change in fair value of warrants and derivative liabilities, certain dispute settlement expenses, gain on extinguishment of debt, certain non-recurring IPO related expenses, including the payroll taxes related to vesting of restricted stock and restricted stock units upon the completion of the IPO, and other expenses. Acquisition related expenses and restructuring expenses primarily consist of severance and other employee-related costs which we do not expect to incur in the future as acquisitions of businesses may distort the comparability of the results of operations. Change in fair value of warrants and derivative liabilities is a non-cash expense related to periodically recording “mark-to-market” changes in the valuation of derivatives and warrants. Other expenses consist of non-cash expenses such as changes in fair value of acquisition related liabilities, gains and losses on extinguishment of acquisition related liabilities, gains and losses on sales of assets and foreign exchange gains and losses. In particular, we believe that the exclusion of stock-based compensation, certain dispute settlement expenses and non-recurring IPO related expenses that are not related to our core operations provides measures for period-to-period comparisons of our business and provides additional insight into our core controllable costs. We exclude these charges because these expenses are not reflective of ongoing business and operating results.
Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow provide us with useful measures for period-to-period comparisons of our business as well as comparison to our peers. We believe that these non-GAAP financial measures are useful to investors in analyzing our financial and operational performance. Nevertheless our use of Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow has limitations as an analytical tool, and you should not consider these measures in isolation or as a substitute for analysis of our financial results as reported under GAAP. Other companies may calculate similarly-titled non-GAAP financial measures differently than us, thereby limiting the usefulness of these non-GAAP financial measures as a comparative tool. Because of these and other limitations, you should consider our non-GAAP measures only as supplemental to other GAAP-based financial performance measures, including revenues and net loss.
We calculate forward-looking Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow based on internal forecasts that omit certain amounts that would be included in forward-looking GAAP net income (loss). We do not attempt to provide a reconciliation of forward-looking Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow guidance and targets to forward looking GAAP net income (loss), GAAP net income (loss) margin or cash flows from operating activities, respectively, because forecasting the timing or amount of items that have not yet occurred and are out of our control is inherently uncertain and unavailable without unreasonable efforts. Further, we believe that such reconciliations would imply a degree of precision and certainty that could be confusing to investors. Such items could have a substantial impact on GAAP measures of financial performance.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
As of December 31,
2022 2021
Assets
Current assets:
Cash and cash equivalents $ 121,110 $ 103,859
Accounts receivable, net of allowance of $1,882 and $1,295 as of
December 31, 2022 and December 31, 2021, respectively 106,322 83,578
Prepaid expenses 7,150 6,970
Other current assets 1,866 1,649
Total current assets 236,448 196,056
Non-current assets:
Property and equipment, net 5,981 5,630
Website and software development costs, net 36,713 38,038
Right-to-use asset – operating leases, net 7,388 —
Intangible assets, net 44,358 40,963
Goodwill 133,069 114,509
Deferred tax assets, net 745 956
Other non-current assets 1,800 1,113
Total non-current assets 230,054 201,209
Total assets $ 466,502 $ 397,265
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 33,668 $ 21,711
Accrued expenses 72,364 63,979
Acquisition-related liabilities (current) 14,743 8,042
Deferred revenue 2,228 6,866
Other current liabilities 5,707 5,159
Total current liabilities 128,710 105,757
Non-current liabilities:
Long-term borrowings 183,953 183,613
Acquisition-related liabilities (non-current) 17,932 14,915
Other non-current liabilities 7,877 2,492
Total non-current liabilities 209,762 201,020
Total liabilities 338,472 306,777
Stockholders’ equity:
Class A common stock $ 0.001 per share par value, up to 3,750,000,000
shares authorized, 175,266,917 and 159,974,847 shares issued and
outstanding as of December 31, 2022 and December 31, 2021, respectively 175 160
Class B common stock $ 0.001 per share par value, up to 50,000,000
shares authorized, 32,099,302 and 37,856,095 shares issued and
outstanding as of December 31, 2022 and December 31, 2021, respectively 32 38
Additional paid-in capital 900,924 584,208
Accumulated deficit (771,056) (491,817)
Accumulated other comprehensive loss (2,045) (2,101)
Total stockholders’ equity 128,030 90,488
Total liabilities and stockholders’ equity $ 466,502 $ 397,265
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
Three months ended December 31, Year ended December 31,
2022 2021 2022 2021
Revenues $ 175,140 $ 134,846 $ 590,961 $ 458,338
Operating expenses:
Cost of revenues (excluding depreciation and
amortization) 65,979 49,011 215,466 174,720
General and administrative expenses 51,017 53,924 213,615 189,606
Selling and marketing expenses 76,194 65,391 299,238 229,343
Research and development expenses 17,231 14,189 69,454 64,474
Depreciation and amortization 12,430 12,787 51,878 45,922
Acquisition-related expenses — 437 344 1,953
Restructuring expenses — 260 — 727
Total operating expenses $ 222,851 $ 195,999 $ 849,995 $ 706,745
Loss from operations (47,711) (61,153) (259,034) (248,407)
Interest expense 2,301 1,328 7,303 7,033
Other expenses / (income) 1,872 (1,310) 13,983 (279)
Gain on extinguishment of debt — — — (10,000)
Change in fair value of warrants and derivative
liabilities — — 410 5,000
Total other expenses $ 4,173 $ 18 $ 21,696 $ 1,754
Loss before income taxes (51,884) (61,171) (280,730) (250,161)
Income tax benefit (131) (33) (1,491) (598)
Net loss $ (51,753) $ (61,138) $ (279,239) $(249,563)
Other comprehensive (income) / loss:
Foreign currency translation adjustment (1,477) (88) (56) 64
Total comprehensive loss $ (50,276) $ (61,050) $ (279,183) $(249,627)
Net loss per share
Net loss $ (51,753) $ (61,138) $ (279,239) $(249,563)
Cumulative redeemable convertible preferred stock dividends — — — 7,060
Net loss available to common stockholders $ (51,753) $ (61,138) $ (279,239) $(256,623)
Basic loss per share $ (0.36) $ (0.46) $ (2.01) $ (2.95)
Diluted loss per share $ (0.36) $ (0.46) $ (2.01) $ (2.95)
Weighted average number of shares used to compute net loss per share
Basic 145,489,764 133,697,870 138,985,265 86,932,191
Diluted 145,489,764 133,697,870 138,985,265 86,932,191
The Company recorded total stock-based compensation as follows:
Three months ended December 31, Year ended December 31,
2022 2021 2022 2021
Cost of revenues (excluding depreciation and amortization) $ 2,198 $ 1,140 $ 6,634 $ 2,589
General and administrative expenses 24,528 29,292 113,401 100,160
Selling and marketing expenses 34,612 34,951 152,377 129,577
Research and development expenses 6,365 5,163 26,580 26,833
Total $ 67,703 $ 70,546 $ 298,992 $259,159
Consolidated Statements of Cash Flows
(In thousands)
Three months ended December 31, Year ended December 31,
2022 2021 2022 2021
Cash flows from operating activities:
Net loss $ (51,753) $ (61,138) $ (279,239) $ (249,563)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 12,430 12,787 51,878 45,922
Stock-based compensation 67,703 70,546 298,992 259,159
Gain on extinguishment of debt — — — (10,000)
Deferred income taxes 446 (840) (2,668) (2,475)
Change in fair value of warrant and derivative liabilities — — 410 5,000
Change in fair value of acquisition-related liabilities 756 (1,806) 12,990 (1,823)
Others, net (376) (658) (592) 1,868
Change in non-cash working capital (net of acquisitions):
Accounts receivable (15,231) (8,578) (19,826) (1,155)
Prepaid expenses 219 (1,150) (270) (3,067)
Other current assets 27 1,409 (214) 5,725
Other non-current assets (87) (50) 63 (592)
Deferred revenue (3,801) 4,127 (4,566) 2,813
Accounts payable 6,277 (4,282) 13,530 (22,243)
Accrued expenses and other current liabilities 8,223 11,856 10,001 14,618
Other non-current liabilities (1,736) (1,297) (2,003) 105
Net cash provided by operating activities 23,097 20,926 78,486 44,292
Cash flows from investing activities:
Capital expenditures (5,067) (2,599) (22,232) (9,482)
Website and software development costs (4,184) (3,853) (17,004) (17,274)
Business and asset acquisitions, net of cash acquired — (17,934) (9,209) (20,093)
Net cash used for investing activities (9,251) (24,386) (48,445) (46,849)
Cash flows from financing activities:
Cash paid for acquisition-related liabilities (3,667) (9,786) (5,959) (9,850)
Proceeds from credit facilities, net of issuance cost — — 5,625 183,311
Proceeds from initial public offering, net of issuance cost — — — 126,538
Repurchase of shares (5,297) — (9,607) (64,468)
Proceeds from employees’ stock purchase plan 1,422 809 2,742 809
Exercise of warrants and options 34 27 199 137
Repayments against the credit facilities — — (5,625) (180,745)
Net cash (used for) / provided by financing activities (7,508) (8,950) (12,625) 55,732
Effect of exchange rate changes on cash and cash equivalents (36) 89 (165) (41)
Net increase in cash and cash equivalents, including restricted cash 6,302 (12,321) 17,251 53,134
Cash and cash equivalents and restricted cash, beginning of period 114,808 116,180 103,859 50,725
Cash and cash equivalents and restricted cash, end of period $ 121,110 $ 103,859 $ 121,110 $ 103,859
Supplemental cash flow disclosures including non-cash activities:
Cash paid for interest, net $ 1,670 $ 1,331 $ 5,673 $ 7,004
Cash paid for income taxes, net $ 497 $ 464 $ 1,611 $ 1,758
Liability established in connection with acquisitions $ 756 $ 8,390 $ 20,529 $ 10,185
Capitalized stock-based compensation as website and software development costs $ 1,263 $ 1,366 $ 5,394 $ 10,196
Shares issued in connection with acquisitions and other agreements $ 4,069 $ 23,000 $ 19,005 $ 29,650
Dividends on redeemable convertible preferred stock settled in Company’s
equity $ — $ — $ — $ 60,082
Non-cash settlement of warrants and derivative liabilities $ 410 $ — $ 410 $ 63,100
Right-to-use asset established $ 9,559 $ — $ 9,559 $ —
Operating lease liabilities established $ 12,050 $ — $ 12,050 $ —
Non-cash consideration for website and software development costs $ 274 $ 1,506 $ 1,255 $ 1,551
The following table reconciles adjusted EBITDA and adjusted EBITDA margin to net loss and net loss margin, respectively, the most directly comparable financial measures calculated and presented in accordance with GAAP.
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands)
Three months ended December 31, Year ended December 31,
2022 2021 2022 2021
Net loss $ (51,753) $ (61,138) $(279,239) $(249,563)
Net loss margin (29.5)% (45.3)% (47.3)% (54.4)%
Add back:
Depreciation and amortization 12,430 12,787 51,878 45,922
Restructuring expenses — 260 — 727
Acquisition-related expenses — 437 344 1,953
Stock-based compensation 67,703 70,546 298,992 259,159
IPO related expenses — — — 2,705
Gain on extinguishment of debt — — — (10,000)
Dispute settlement expense — — — 1,196
Other expenses / (income) 1,872 (1,310) 13,983 (279)
Change in fair value of warrants and derivative
liabilities — — 410 5,000
Interest expense 2,301 1,328 7,303 7,033
Income tax benefit (131) (33) (1,491) (598)
Adjusted EBITDA $ 32,422 $ 22,877 $ 92,180 $ 63,255
Adjusted EBITDA margin% 18.5% 17.0% 15.6% 13.8%
The following table reconciles Cash Flows from Operating Activities in the Consolidated statements of cash flows to free cash flow.
Three months ended December 31, Year ended December 31,
2022 2021 2022 2021
Cash Flows from Operating Activities $ 23,097 $ 20,926 $ 78,486 $ 44,292
Capital expenditures (5,067) (2,599) (22,232) (9,482)
Website and software development costs (4,184) (3,853) (17,004) (17,274)
Effect of exchange rate changes on cash and cash equivalents (36) 89 (165) (41)
Free Cash Flow $ 13,810 $ 14,563 $ 39,085 $ 17,495
[1] Free Cash Flow, Adjusted EBITDA, and Adjusted EBITDA margin are not measures of financial performance prepared in accordance with GAAP. See “Non-GAAP Measures” for more information and, where applicable, reconciliations to the most directly comparable GAAP financial measures at the end of this release.