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Advertising and marketing company Zeta Global (NYSE:ZETA) reported results ahead of analysts' expectations in Q2 CY2024, with revenue up 32.6% year on year to $227.8 million. On top of that, next quarter's revenue guidance ($239.2 million at the midpoint) was surprisingly good and 3.8% above what analysts were expecting. It made a GAAP loss of $0.16 per share, improving from its loss of $0.24 per share in the same quarter last year.
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Zeta (ZETA) Q2 CY2024 Highlights:
- Revenue: $227.8 million vs analyst estimates of $212.5 million (7.2% beat)
- EPS: -$0.16 vs analyst expectations of -$0.16 (2.4% miss)
- Revenue Guidance for Q3 CY2024 is $239.2 million at the midpoint, above analyst estimates of $230.5 million
- The company lifted its revenue guidance for the full year from $900 million to $925 million at the midpoint, a 2.8% increase
- Gross Margin (GAAP): 60%, down from 63.9% in the same quarter last year
- Free Cash Flow of $19.9 million, up 31.8% from the previous quarter
- Billings: $227.2 million at quarter end, up 32.5% year on year
- Market Capitalization: $4.59 billion
Co-founded by former Apple (NASDAQ:AAPL) CEO John Scully, Zeta Global (NYSE:ZETA) provides software and data analytics tools that help companies market their products to billions of customers.
Advertising SoftwareThe digital advertising market is large, growing, and becoming more diverse, both in terms of audiences and media. As a result, there is a growing need for software that enables advertisers to use data to automate and optimize ad placements.
Sales GrowthAs you can see below, Zeta's revenue growth has been solid over the last three years, growing from $106.9 million in Q2 2021 to $227.8 million this quarter.
This was a standout quarter for Zeta with quarterly revenue up 32.6% year on year, above the company's historical trend. On top of that, its revenue increased $32.89 million quarter on quarter, a strong improvement from the $15.37 million decrease in Q1 CY2024. This is a sign of acceleration of growth and very nice to see indeed.
Next quarter's guidance suggests that Zeta is expecting revenue to grow 26.6% year on year to $239.2 million, improving on the 24.1% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 17.6% over the next 12 months before the earnings results announcement.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Zeta has shown mediocre cash profitability over the last year, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 8.1%, subpar for a software business.
Zeta's free cash flow clocked in at $19.9 million in Q2, equivalent to a 8.7% margin. This quarter's result was good as its margin was 1.2 percentage points higher than in the same quarter last year, but we wouldn't put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.
Over the next year, analysts predict Zeta's cash conversion will slightly improve. Their consensus estimates imply its free cash flow margin of 8.1% for the last 12 months will increase to 9.5%, giving it more money to invest.
Key Takeaways from Zeta's Q2 Results We were impressed by how strongly Zeta blew past analysts' revenue and billings expectations this quarter. We were also excited it raised its full-year revenue guidance. Zooming out, we think this was an impressive "beat-and-raise" quarter that should delight shareholders. The stock traded up 14% to $24.48 immediately following the results.
