Zeta (NYSE:ZETA) Beats Expectations in Strong Q3, Provides Optimistic Full Year Guidance

Radek Strnad /
2022/11/01 4:27 pm EDT

Advertising and marketing company Zeta Global (NYSE:ZETA) announced better-than-expected results in the Q3 FY2022 quarter, with revenue up 32.2% year on year to $152.2 million. The company expects that next quarter's revenue would be around $160 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Zeta made a GAAP loss of $69.4 million, down on its loss of $69.1 million, in the same quarter last year.

Is now the time to buy Zeta? Access our full analysis of the earnings results here, it's free.

Zeta (ZETA) Q3 FY2022 Highlights:

  • Revenue: $152.2 million vs analyst estimates of $141 million (7.94% beat)
  • EPS: -$0.49 vs analyst expectations of -$0.45 (8.08% miss)
  • Revenue guidance for Q4 2022 is $160 million at the midpoint, above analyst estimates of $158.8 million
  • Free cash flow of $9.65 million, roughly flat from previous quarter
  • Gross Margin (GAAP): 62.2%, up from 61.3% same quarter last year

“Our strong third quarter results were an incredible way to celebrate our 15-year anniversary,” said David A. Steinberg, Co-Founder, Chairman, and CEO of Zeta.

Co-Founded by former Apple CEO, John Scully, Zeta Global (NYSE:ZETA) provides software and data analytics tools that help companies market their products to billions of customers.

The digital advertising market is large, growing and becoming more diverse, both in terms of audiences and media. This as a result drives a growing need for a software that enables advertisers to use data to automate and optimize ad placements.

Sales Growth

As you can see below, Zeta's revenue growth has been strong over the last two years, growing from quarterly revenue of $95.2 million in Q3 FY2020, to $152.2 million.

Zeta Total Revenue

This was a standout quarter for Zeta, with the quarterly revenue up 32.2% year on year, which is above the trend for the company. On top of that, revenue increased $14.9 million quarter on quarter, a very strong improvement on the $11 million increase in Q2 2022, and a sign of re-acceleration of growth.

Guidance for the next quarter indicates Zeta is expecting revenue to grow 18.6% year on year to $160 million, in line with the 17.8% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 15.4% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Zeta's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 62.2% in Q3.

Zeta Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.62 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and it has dropped significantly from the previous quarter, which is probably the opposite of what shareholders would like it to do.

Key Takeaways from Zeta's Q3 Results

With a market capitalization of $1.71 billion Zeta is among smaller companies, but its more than $114.8 million in cash and positive free cash flow over the last twelve months give us confidence that Zeta has the resources it needs to pursue a high growth business strategy.

We were impressed by how strongly Zeta outperformed analysts’ revenue expectations this quarter. And we were also excited to see the really strong revenue growth. Overall, we think this was a really good quarter, that should leave shareholders feeling very positive. The company is flat on the results and currently trades at $8.37 per share.

Zeta may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.