LiveIntent Inc. (ZETA) Earnings Call Transcript & Summary

Greetings, and welcome to the Zeta acquires LiveIntent conference call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Madison Serras. Thank you. You may begin.

Thank you, operator. Hello, everyone, and thank you for joining us on today's conference call for the announcement of Zeta's entering into an agreement for the acquisition of LiveIntent. Today's presentation and news release are available on Zeta's Investor Relations website at investors.zetaglobal.com, where you will also find links to our SEC filings along with other information about Zeta. Joining me on today's call are David Steinberg, Zeta's Co-Founder, Chairman and Chief Executive Officer; Steve Gerber, Zeta's President and Chief Operating Officer; Chris Greiner, Zeta's Chief Financial Officer; and Matt Keiser, LiveIntent's Founder and Chief Executive Officer. Before we begin, I'd like to remind everyone that statements made on this call as well as in the presentation and press release contain forward-looking statements regarding our financial outlook, business plans and objectives, and other future events and developments, including statements about the growth opportunities and accretive metrics related to the LiveIntent acquisition as well as near-term and long-term synergies related to the same. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. These risks and uncertainties include those described in the company's announcement release and other filings with the SEC and speak only as of today's date. In addition, our discussion today will include references to certain forward-looking non-GAAP financial measures, which should be considered in addition to and not as a substitute for GAAP measures. We use these non-GAAP measures in managing our business and believe they provide useful information for our investors. As forward-looking non-GAAP measures, we do not provide a reconciliation to the closest comparable GAAP measure because of inherent uncertainty and unavailability of information without unreasonable efforts. With that, I will now turn the call over to David.

Thank you, Madison. Good afternoon, everyone, and thank you for joining us today on such short notice. I am extremely excited to announce we've entered into an agreement to acquire LiveIntent to strengthen our core assets, including the Data Cloud, and extend our reach into identity resolution and the publisher ecosystem. We believe this advances our position as a leader in AI-powered marketing. We will use our time today to discuss how LiveIntent aligns with Zeta's strategic priorities and M&A principles. You will have an opportunity to hear from Matt Keiser, LiveIntent's Founder and CEO; and from Steve Gerber, Zeta's President and COO, on growth and synergy drivers. Finally, Chris will close with transaction details, followed by Q&A. For background, LiveIntent was founded in 2009 and is a pioneer in people-based marketing. They own and operate one of the largest proprietary identity graphs and are known for providing strong identity resolution capabilities and delivering highly personalized marketing through deep integrations with the world's largest publishers. We've worked with LiveIntent for more than 5 years, so our conviction in the value of their core assets is strong. We are confident the integration of their data assets, publisher network and channel capabilities into the ZMP will drive numerous growth opportunities, namely offering Zeta new capabilities and products to sell in identity resolution, expanding Zeta into publisher monetization, a new market for Zeta, and accelerating our mobile strategy and retail media offerings. These 3 areas not only open new TAMs, but also establish new relationships with multiple Fortune 500 customers and agencies. This transaction also aligns perfectly with the 4 M&A criteria we've talked about previously. First, we believe this is a complementary platform that will seamlessly integrate into the Zeta Marketing Platform within 6 months, let alone the year we usually say we need. Second, the transaction is expected to immediately be accretive to our earnings profile and represents a 16x multiple from an adjusted EBITDA perspective. Third, we believe there are significant cross-selling opportunities with expressed customer interest in several of our large and growing verticals like financial services, insurance and health care. And lastly, these synergies are expected to accelerate growth in the LiveIntent business, while Zeta on an organic basis can continue to grow at our historic growth rates. Now let me turn it over to Matt Keiser, the Founder and CEO of LiveIntent, to provide a few additional details on the business. Matt?

Thank you, David. I'm really excited about joining the Zeta team and believe this is a great fit for our organization. We've been working together successfully for years, and we know how compatible we are. We share the very same DNA. We've made the same investments in people-based marketing, AI, e-mail and messaging. Together, we're better. LiveIntent is a leader in real-time people-based marketing with proprietary technology powering mobile-centric experiences and first-party identity solutions. LiveIntent serves 3 significant sets of customers: publishers, enterprises and agencies. We help publishers curate and monetize their people-based audiences through newsletters, in mobile and on websites. We help advertisers unlock engaged people-based audiences across all channels. We're used and trusted by over 2,000 publishers, including BuzzFeed, FreeStar, Redfin, Warner Bros. Discovery and Ziff Davis. We're very excited about the opportunity to bring omnichannel buying, AI-driven insights and workflows that streamline operations and enhance performance, a market-leading CDP with clean room capabilities and a top-rated e-mail service provider to our customers, delivering an all-in-one, people-based marketing experience capable of servicing publishers and retail commerce needs like no other solution. Our companies could not be more aligned. We have a shared vision, complementary assets and a common belief that we're entering a new era in marketing technology, one in which are uniquely positioned to deliver more value to customers and grow at an accelerated rate. Now let me turn it back over to Steve for more on the growth synergy drivers from Zeta's perspective.

Thank you, Matt, and welcome to Team Zeta. At Zeta, we are laser-focused on accelerating growth for brands by delivering better experiences for consumers and better results from their marketing programs. LiveIntent amplifies this mission. We believe M&A can be a force multiplier for the business and the value we deliver to customers. We call this the 1 plus 1 equals 4 opportunity. Zeta plus LiveIntent is a perfect example. Together, we will deliver outsized value for customers through a one-of-one platform that combines the best of both, provide expanded capabilities to partners through best-in-class identity, intelligence and omnichannel activation, bring new human capital and expertise, and unlock new growth vectors, resulting in repeatable, profitable growth. We are highly confident that the integration of their data assets, publisher network and channel capabilities into the ZMP will drive unmatched outcomes at scale. First, we believe LiveIntent's extensive identity graph, which includes engagement from over 235 million unique hashed e-mail addresses per month, will enhance Zeta's identity resolution capabilities. Authenticated and authoritative identity is the backbone of our platform that combines precision and scale. Second, with over 2,000 premium publishers and relationships with 8 out of the top 10 in the Comscore ranking, LiveIntent enhances and extends Zeta's existing publisher network and positions the combined business to bring a new offering, the Publisher Cloud, to market. This creates a closed-loop ecosystem that will rival the reach and targeting capabilities of the walled gardens. And third, LiveIntent accelerates our mobile strategy and retail media offerings. LiveIntent powers millions of mobile experiences per day and complements the AI-powered mobile products that we unveiled at Zeta Live. Additionally, LiveIntent's recent entry into the fast-growing retail media ecosystem is both disruptive and aligned with our strategy to deliver a more innovative set of offerings to retailers and brands. The benefits of this 1 plus 1 equals 4 combination will be clear from day 1, but compound over time. As more brands view first-party data as a corporate asset, seek to make AI actionable and move towards a single platform that powers more efficient and effective marketing across the customer life cycle, this acquisition will accelerate data's flywheel and position the combined company to grow faster than the market. I'll now hand it off to Chris to share more on LiveIntent's scale and the deal terms of the transaction. Chris?

Thank you, Steve, and welcome aboard, Matt. It's been great getting to know you and your team. Total consideration for the LiveIntent business is $250 million, with $77.5 million in cash and $172.5 million in common stock. Additionally, there is a 3-year earn-out tied to significant adjusted EBITDA growth and sustained margin expansion. As David mentioned earlier, the acquisition will meet our disciplined M&A criteria around a fast integration, accretive metrics and verified customer interest and cross-selling opportunities. In terms of LiveIntent's scale and profitability, we expect the business on an annualized pro forma basis to deliver $76 million in full year 2024 revenue with an accretive gross margin profile and $15.5 million in adjusted EBITDA. In fact, with an adjusted EBITDA margin 100 basis points higher than Zeta's current full year 2024 margin guide of 19% and compelling revenue growth synergy cases, the valuation multiple is highly accretive. We expect to close the transaction during the fourth quarter and plan to include a line item for LiveIntent's inorganic revenue contribution for the stub period in the fourth quarter of 2024 and provide similar visibility to their anticipated 2025 inorganic contribution during our February earnings call next year. My team's focus over the next several months will be partnering closely with our colleagues at LiveIntent along with Zeta's leaders to integrate LiveIntent's systems, procedures and KPIs. Before I turn the call over to the operator for a brief Q&A, I want to quickly cover 2 housekeeping items. First, we posted a presentation to our Investor Relations website to supplement today's discussion for your [ ease ]. And second, in conjunction with the 8-K filed this afternoon announcing the acquisition, we are reaffirming our recently updated third quarter 2024 revenue and adjusted EBITDA guidance of at least $255 million in revenue and at least $50.2 million in adjusted EBITDA. With that, let me turn the call over to the operator. Operator?

[Operator Instructions] Our first question is from Ryan MacDonald from Needham & Company.

Congrats on the acquisition. Maybe to start, just really curious on maybe double-clicking on the enhanced functionality that LiveIntent is bringing to the mobile and the retail media side of the business. Obviously, big areas of focus at Zeta Live in terms of the product sessions, but I would love to just hear a little bit more what this is adding to Zeta that you previously didn't have? And again, how quickly you might be able to get that integrated in the product?

Well, thanks for jumping on so quickly, Ryan. We appreciate it. Let me start by saying that LiveIntent has one of the best data graphs on the planet. They utilize it in 2 main ways. First, they help publishers and retailers monetize, in most cases, their newsletters, including the largest retailer in the United States and, I believe, the world. So when they're working with that platform, the LiveIntent platform is feeding custom advertising from their advertisers into that retailer and many other retailers' electronic newsletters to help them better manage their own retail media strategies as they expand out from just their own portals to being able to deliver information, ads and offers to their hundreds of millions of customers globally where they are in that moment. At the same time, the vast majority of what the platform is doing is being delivered to mobile devices. So when they are feeding the data and the offers and the custom ads into the newsletters, they're also feeding them into a sort of a form that can be delivered across any device. And the vast majority of the devices that this is being delivered to is being delivered to mobile devices. So the ability to feed sort of their massive data ecosystem and ability to uniquely identify hundreds of millions of people in the United States into our Data Cloud is also going to further bolster our capabilities around mobile. So we see these as 2 very, very important attributes to accelerating our mobile offering and our retail media strategies that we discussed at Zeta Live.

Super helpful color there. I appreciate it. It sounds extremely valuable. Maybe just a quick follow-up. And you mentioned, obviously, you've been working with them for about 5 years as a partner. Can you talk about customer overlap between the two? Clearly, there's a natural cross-sell opportunity, but what's the sort of existing overlap between the 2 customer bases?

So one of the things that's most exciting about this opportunity is the cross-sell that you said. And one of the things we love about LiveIntent is the deep relationships they have with premium publishers and when we think there's a big opportunity for us to extend our platform to publishers. As it relates to marketers, this represents an incremental channel to bring to our own as well as bringing the power of the Zeta Marketing Platform, starting with identity data into intelligence through activation to their customers. So there's very low overlap, to be clear. There's not a lot of customers that we share, which is one of the opportunities we like. As you know, Ryan, in our M&A thesis and principles, one of them is we have to feel like our customers want to buy their products. And we have meaningful demand already from our customers for their products, and we are just beginning the conversations with their customers about cross-selling our products.

Our next question is from Arjun Bathia from William Blair.

This is Chris on for Arjun . I'll echo my congrats on the acquisition. One of the things I was curious about, I think, David, you touched on the time line being a bit shorter in terms of integration for LiveIntent. Can you just expand on that a bit on what is it about, from a technological standpoint, the 2 platforms that will help you accelerate that time line?

Thank you, Chris. So let me start by saying the beauty of having partnered with them for 5 years, we have a deep and meaningful understanding of their people and their tech. So we already understand the tech incredibly well. We also are both fully cloud-based. So there's not a lot of legacy tech debt on the LiveIntent side, which allows us to fully integrate them into the ZMP within 6 months. We feel very confident on that. And as you know, we always say we want to be within 12, but in this case, we're going to be able to do it materially faster, which we think will bring the joint products to customers faster than ever.

Understood. That's helpful color. And then one other thing I want to touch on. So from a data perspective, if I'm understanding correctly, this is primarily to help with identity resolution. Is there an actual element where this is additive in terms of the first-party data that you're providing to your customers as well? Is it both pieces or just kind of the resolution side of things?

So Arjun, as we've talked about, identity is the backbone of the ZMP, and this is a way for us to strengthen it. When we talked about our Data Cloud in the past, we talked about 3 different components: identity, identifiers and signals. So this is really about adding incremental identifiers and incremental signals that allows us to resolve identity so that we can be that ubiquitous identity layer within an enterprise. Authoritative and authenticated identity is a core part of the ZMP, and LiveIntent really strengthens that.

This is also going to be a large number of incredibly powerful signals that will feed into our large language models and allow us to get to higher levels of intent than ever before. So as I said in the prepared remarks, Chris, and I think it's important to note, we believe that AI is only going to be as good in the long run as the data you feed into it. The more first-party data we control, the more valuable we are to the enterprise when we merge our data with their data in the CDP, and that's where the intelligence is created. So with the billions and billions of signals that will come out of the LiveIntent acquisition that we can synthesize to the deterministic individuals that are already in the Data Cloud, as Steve Gerber said, that is going to massively increase the value of the collective data set and make us more valuable than ever to enterprises and agencies that want to use our platform.

Next question is from Terry Tillman from Truist Securities.

Great. Connor Passarella on for Terry. I just wanted to start with one on the growth specifically. Just want to double-click on what kind of gives you all the confidence around being able to grow [indiscernible].

Connor, I'm sorry, we're getting massive static out of your call and I'm not hearing what you're saying. I'm really sorry.

Okay. Team, is it a little bit better?

Well, that's more than a little bit better. It's substantially better, Connor. Thank you very much for fixing that.

That's great. Okay. Sorry about that.

Would you mind repeating your question? Don't be sorry. Just repeat the question if you don't mind.

You got it. Yes. So I just wanted to kind of ask around the growth, specifically just wanted to double-click on what kind of gives you all the confidence around being able to grow LiveIntent at a faster overall pace versus the core platform. Can you kind of just speak to those aspects?

Yes. So let me start by saying 5 years of partnership where we have partnered with them, we've consumed their data. We understand the value of it first and foremost. Second, over the last number of months as a partner, we have tested this product with a number of our large enterprise clients who love it. So we are highly confident in the tests that we've already ran and the orders we believe we already have that we are going to be able to grow this asset materially as a component of Zeta.

Great. That's really helpful. Maybe just as a quick follow-up. Just anything you can share on some of the pieces that you are inheriting from a resource and channel perspective, specifically on the go-to-market seller side and then as well within the engineering department?

Connor, Chris here. What's really terrific about the sales and go-to-market motion and distribution of LiveIntent is they have the exact same hunter-farmer model that Zeta has. So it plugs in really neatly from that perspective. We're taking on right around 25 to 30 total quota carriers, and it's divided pretty evenly between hunters and farmers. Matt, anything you'd like to add from that perspective?

Our products are really an absolute fit. They go hand in glove, as we already talked about, from Zeta's AI-based marketing cloud to unified identity intelligence, omnichannel activation in a single platform. All the features our customers have been looking for, it's built on Zeta's vision of a single platform delivering better experiences for consumers, stronger results for marketers and publishers. Together, we create this closed-loop ecosystem that's going to rival the reach and targeting capabilities of the walled gardens.