Zeta (NYSE:ZETA) Exceeds Q4 Expectations, Provides Optimistic Full Year Guidance

Radek Strnad /
2023/02/23 4:25 pm EST

Advertising and marketing company Zeta Global (NYSE:ZETA) beat analyst expectations in Q4 FY2022 quarter, with revenue up 29.9% year on year to $175.1 million. The company expects that next quarter's revenue would be around $150 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Zeta made a GAAP loss of $51.8 million, improving on its loss of $61.1 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) Q4 FY2022 Highlights:

  • Revenue: $175.1 million vs analyst estimates of $160.6 million (9.06% beat)
  • EPS: -$0.36 vs analyst estimates of -$0.40 (9.68% beat)
  • Revenue guidance for Q1 2023 is $150 million at the midpoint, roughly in line with what analysts were expecting
  • Management's revenue guidance for upcoming financial year 2023 is $691 million at the midpoint, beating analyst estimates by 2.9% and predicting 16.9% growth (vs 28.8% in FY2022)
  • Free cash flow of $13.8 million, up 43.5% from previous quarter
  • Gross Margin (GAAP): 62.3%, down from 63.7% same quarter last year

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 $114.4 million in Q4 FY2020, to $175.1 million.

Zeta Total Revenue

This quarter, Zeta's quarterly revenue was once again up a very solid 29.9% year on year. On top of that, revenue increased $22.9 million quarter on quarter, a very strong improvement on the $15 million increase in Q3 2022, which shows re-acceleration of growth, and is great to see.

Guidance for the next quarter indicates Zeta is expecting revenue to grow 18.8% year on year to $150 million, slowing down from the 24.4% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $691 million at the midpoint, growing 16.9% compared to 28.9% increase in FY2022.

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 62.3% in Q4.

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 we would like to see it start improving.

Key Takeaways from Zeta's Q4 Results

With a market capitalization of $1.9 billion Zeta is among smaller companies, but its more than $121.1 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We were impressed by how strongly Zeta outperformed analysts’ revenue expectations this quarter. And we were also glad that the revenue guidance for the rest of the year exceeded expectations. On the other hand, the revenue guidance for next year indicates a significant slowdown in absolute terms. Zooming out, we think this was still a good quarter, showing the company is staying on target. The company is so far flat on the results and currently trades at $9.06 per share.

Should you invest in Zeta 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.