Zeta (NYSE:ZETA) Q1: Beats On Revenue, Provides Optimistic Full Year Guidance

Petr Huřťák /
2023/05/04 4:24 pm EDT

Advertising and marketing company Zeta Global (NYSE:ZETA) reported results ahead of analyst expectations in the Q1 FY2023 quarter, with revenue up 24.8% year on year to $157.6 million. The company expects that next quarter's revenue would be around $162 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. Zeta made a GAAP loss of $57 million, improving on its loss of $72 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) Q1 FY2023 Highlights:

  • Revenue: $157.6 million vs analyst estimates of $150.3 million (4.89% beat)
  • EPS: -$0.38 vs analyst expectations of -$0.29 (31.7% miss)
  • Revenue guidance for Q2 2023 is $162 million at the midpoint, above analyst estimates of $160.9 million
  • The company lifted revenue guidance for the full year, from $691 million to $701 million at the midpoint, a 1.45% increase
  • Free cash flow of $10 million, down 27.5% from previous quarter
  • Customers: 411 customers paying more than $100,000 annually
  • Gross Margin (GAAP): 65.5%, down from 67% same quarter last year

“Q1 was another proof point in our belief that the market is moving in Zeta’s direction,” 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 $101.5 million in Q1 FY2021, to $157.6 million.

Zeta Total Revenue

This quarter, Zeta's quarterly revenue was once again up a very solid 24.8% year on year. But the revenue actually decreased by $17.5 million in Q1, compared to $22.9 million increase in Q4 2022. However, Zeta's sales do seem to have a seasonal pattern to them, and since management is guiding for revenue to rebound in the coming quarter we wouldn't be too concerned.

Guidance for the next quarter indicates Zeta is expecting revenue to grow 18% year on year to $162 million, slowing down from the 28.4% 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 15.8% 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 65.5% in Q1.

Zeta Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.66 left to spend on developing new products, marketing & sales and the general administrative overhead. While it improved significantly from the previous quarter this would still be considered a low gross margin for a SaaS company and we would like to see the improvements continue.

Key Takeaways from Zeta's Q1 Results

With a market capitalization of $1.92 billion Zeta is among smaller companies, but its more than $107.8 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 very impressed by the strong improvements in Zeta’s gross margin this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations. On the other hand, it was unfortunate to see the slowdown in new contract wins. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. But the market was likely expecting more and the company is down 1.96% on the results and currently trades at $9 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.