Zeta Swings To $38 Million Profit And Raises Its Annual Earnings Forecast
Sales rose 46%, while free cash flow grew 73%; management credited greater adoption and usage of Athena.
Zeta Global, which sells AI-powered software for personalized marketing campaigns, swung to a $38 million profit in the third quarter from a year-earlier loss and raised its annual earnings forecast in an SEC filing Monday. Sales climbed 46% to $493 million, beating the company's forecast midpoint by $22 million, or 5%.
Athena And Bigger Customer Accounts
Chief Financial Officer Chris Greiner credited Athena, which helps businesses use their data with AI, for the faster expansion: “Our third-quarter results demonstrate the strength of our business, with accelerating revenue growth driven by increased Athena adoption and usage.”
Growth beyond acquired operations also mattered. Revenue rose 30% excluding Marigold and political candidate business; the second quarter's growth excluding Marigold was 28%. Marigold's Enterprise Business contributed $48 million in the latest quarter, and political candidates contributed $7.4 million.
Zeta had 212 customers generating at least $1 million in revenue over the preceding twelve months, up 18% from a year earlier. Average revenue per customer in that group rose 22% to $2.0 million.
The company's marketing platform brings together customer data, messaging and digital-advertising tools, serving businesses in retail, travel, insurance, telecommunications and financial services. Quarterly sales have risen from $396 million in the first quarter to $443 million in the second and $493 million in the third.
Profit Comes With More Cash
The unaudited results put net income at $38.273 million, against a $3.634 million loss a year earlier. Diluted earnings were $0.14 per share, versus a $0.02 loss; adjusted earnings reached $0.38 per share, up from $0.24.
Operating profit rose to $45.948 million from $8.752 million. Zeta also moved into profit for the first nine months, earning $33.199 million against a $38.048 million loss in the comparable period, and reported positive net income over the latest twelve months.
Adjusted earnings before interest, taxes, depreciation and amortization reached $121 million. The margin on that measure widened to 24.6% from 23.2%. Adjustments included $49.978 million in stock-based pay, compared with $45.632 million a year earlier.
Operating cash flow increased 58% to $91 million. Free cash flow rose 73% to $82 million—cash left after capital and website and software-development spending, with exchange-rate adjustments.
Higher Targets For Year-End
Zeta raised its forecast for annual revenue to $1.853 billion–$1.857 billion. The $1.855 billion midpoint is $37 million above the prior $1.818 billion forecast and implies 42% year-over-year growth, or 27% excluding acquisitions and political candidate revenue.
Management now expects annual earnings of $0.22–$0.24 per share, versus $0.09–$0.11 previously. It lifted its adjusted earnings-before-interest-and-other-charges forecast to $414.1 million–$415.2 million from a prior midpoint of $405.2 million. Its free-cash-flow target increased to $270.6 million–$271.6 million from a $255.3 million midpoint.
For the fourth quarter, Zeta projects sales of $521 million–$525 million, against a previous $508 million midpoint. That represents growth of 32%–33%, or 22%–24% excluding acquisitions and political candidate revenue. It expects adjusted earnings before interest, taxes, depreciation and amortization of $135.2 million–$136.3 million, versus the prior $131.9 million midpoint.
Zeta's earnings forecast excludes a possible one-time, non-cash tax benefit from recognizing some previously reserved tax assets. Management believes that benefit has a reasonable possibility of occurring within the next twelve months.
