Zeta Global Holdings Corp. (ZETA) Q2 2022 Earnings Call Transcript

Zeta Global Holdings Corp. (ZETA 1.38%)
Q2 2022 Earnings Call
Aug 03, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by. This is the conference operator. Welcome to the Zeta second quarter 2022 conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded.

I'll hand the conference over to Scott Schmitz, investor relations. Please go ahead.

Scott Schmitz -- Investor Relations

Thank you, operator. Hello, everyone, and thank you for joining us for Zeta's second quarter 2022 conference call. Before we begin, I would like to mention that today's presentation and earnings 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 the call today are David Steinberg, Zeta's co-founder, chairman, and chief executive officer; and Chris Kreider, Zeta's chief financial officer.

Before we begin, I'd like to remind everyone that statements made on this call, as well as in the presentation and earnings release, contains forward-looking statements regarding our financial outlook, business plans and objectives, and other future events and developments, including statements about the market potential of our products, potential competition, and revenues of our products, and our goals and strategies. 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 earnings 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 supplemental non-GAAP financial measures, which should be considered in addition to and not as a substitute for GAAP results.

We use these non-GAAP measures in managing the business and believe they provide useful information for our investors. Reconciliation of the non-GAAP measures to corresponding GAAP measures, where appropriate, can be found in the earnings presentation available on our website, as well as the earnings release and our SEC -- in our filings with the SEC. With that, I will now turn the call over to David.

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

Thank you, Scott. Good afternoon, everyone, and thank you for joining us today. I wanted to start with a quick look back 15 years ago when John Sculley and I cofounded Startup. Our founding vision of using data and software to deliver a better and substantially more efficient marketing platform rings true more than ever in the current environment, and I'm incredibly proud of the business we have built.

Approximately 600,000 companies were founded in 2007 when we started Zeta. Less than 10% of those businesses have survived and less than one-tenth of 1% of those businesses have gone public. And of the public companies, fewer than 100 are generating more than 100 million a year in revenue. The opportunity in front of us is immense, and I could not be more excited about our position in the marketplace, which is manifesting itself in our results.

Simply put, our second quarter was incredibly strong across the board as the efficiency of our platform continues to deliver a greater return on investment for marketers. In the second quarter, we generated revenue of $137 million with an adjusted EBITDA of $18.6 million, both well ahead of our guidance despite broader macro concerns in the market. Our revenue growth accelerated to 28% year over year, with significant margin expansion and strong cash flow generation. In the quarter, we generated $14.7 million of cash from operations, up 93% year over year.

The strength of our business was driven by record new customer wins, progress against our go-to market investments, and our proven ability to deliver a higher return on investment for marketers at a time when efficiency is at a premium. During periods of economic uncertainty, each marketing dollar becomes even more precious. As retail magnate John Wanamaker said in the late 1800s, "I know half my advertising spend is wasted. The trouble is, I do not know which half resonates with the modern CMO." With uncertainty around macro forces such as inflation at a 40-year high, marketing spend that is not addressable nor accountable is simply no longer sustainable.

And frankly, with the tools that we have available today, there is no excuse that to continue. In short, marketing efficiency and efficacy has never been more important than it is today. And improving efficiency is one of the easiest and fastest ways for enterprises to capture savings. Marketers can drive efficiency by accelerating digital transformation, focusing on hyper-targeting, and allocating more investment to addressable channels.

These are the reasons more marketers are choosing Zeta. Zeta's industry leading marketing platform, powered by first-party data and artificial intelligence, delivers actionable intelligence, omnichannel technology, and deterministic measurement to enable more efficient and accountable marketing across the ecosystem. The best ways to prove this is through our recent customer wins. We recently signed a multiyear eight-figure deal with a premier U.S.

financial services firm to help accelerate their digital transformation by unifying their disparate data assets, standardizing business intelligence, and adding more activation channels, bringing personalization and scale to their marketing efforts. We continue to beat large legacy incumbents, including Oracle and Salesforce in this case, by demonstrating a better value proposition through the depth and breadth of our capabilities in the Zeta Marketing Platform. As another example, we recently increased our share of wallet at a leading direct-to-consumer retailer, where efficiency of marketing investments was reevaluated across vendors with return on investment the most important parameter. While others lost budget, Zeta's was increased.

As other vendors have lost the ability to measure with precision, due to changes by large technology providers, marketers are looking for alternatives. And because we are not dependent on Apple's IDFA tracking mechanism or third-party cookies to identify individuals and measure business outcomes, we are able to leverage our data and software advantage to deliver a better return on investment for marketers today and in the future. As enterprises look to capture the value of their first-party data, they are seeking new ways of ingesting, synthesizing, storing, and activating data. This has made the Consumer Data Platform, or CDP, a transformational technology for marketers.

Importantly, CDPs not only represent the next generation of technology, they are also substantially less expensive to operate than legacy solutions. At Zeta, we are investing to extend our CDP leadership position with the expansion of data utility tools such as Agile intelligence, which elevates an enterprise's ability to not only make marketing decisions but also answer mission-critical questions such as where to open a new location by moving from insights to intelligence. The CDP underpins all our channels, bringing addressability and accountability to areas that have not enabled precision targeting and measurement. Connected TV is the perfect example, an area where we continue to invest.

In the second quarter, our CTV business once again grew greater than 200%. Switching gears, we also want to acknowledge the feedback we have received from investors regarding potential stock sales to cover required tax withholdings due upon vesting of restricted stock awards. In response to that feedback, the board of directors has authorized the withholding of shares from executive officers as an alternative to sell to cover for taxes upon these vesting events. With this program, the company may pay the withholding taxes in exchange for the cancellation of such executive shares.

On a side note, Chris Greiner, Steve Gerber, and I have no intentions for the foreseeable future of selling any shares into the open market. Separately, our board of directors has authorized a stock repurchase program for up to $50 million of Zeta's Class A common shares through December 31st, 2024. We plan to fund both programs out of the company's free cash flow. The $50 million will be a total between the RSA retirement and the share repurchase program.

We are highly confident in the strength of our business. And outside of our people and our products, we believe the best use of our free cash flow is to buy back shares at these levels. More details can be found on Slide 29 of our earnings supplemental. Lastly, I want to invite you to hear directly from our customers, partners, and industry experts in person or through the webcast of our Zeta live conference on September 28 and 29.

As our world changes at lightning speed, with disruption across every industry, from the post-pandemic economy, to the advancements in technology, including the expansion of Web3, the evolution of customer identity, the maturation of artificial intelligence, we have designed our annual conference to bring together the industry's most forward-thinking leaders to discuss the most critical topics impacting business and marketing today. I hope you will be able to join us. In conclusion, we believe Zeta is incredibly well-positioned in the current uncertain macroenvironment as the efficiency of our marketing platform continues to deliver a greater return on investment for marketers. Our revenue growth accelerated in Q2, and we have strong momentum heading into Q3 on the back of our growing mix of multiyear recurring revenue deals.

And while we are very cognizant of the macroenvironment, we are not seeing an impact to our pipeline, sales cycle, or deal size. However, to be prudent, we are taking an appropriately cautious view with our projections, which Chris will expand upon shortly. We believe our share price represents an extremely attractive opportunity and we intend to use the strong cash generation capabilities of the business to repurchase shares at these levels. We feel incredibly confident in our Zeta 2025 plan, and we are pacing ahead of our targets to get to at least $1 billion in revenue and greater than 20% adjusted EBITDA margin.

The need for data-driven, identity-based marketing has never been stronger, and we are just beginning to scratch the surface of the huge opportunity in front of us. I'd like to thank our 1,400 Zeta employees for the great work they do every day to deliver better experiences for consumers and better outcome for our customers, the world's leading marketers. I would also like to thank our customers, partners, and all our shareholders for the ongoing support of our vision. Now, let me hand it off to Chris to discuss our results in greater detail.

Chris.

Chris Greiner -- Chief Financial Officer

Thank you, David. And good afternoon, everyone. I want to cover four main points on today's call. First, our results.

On every dimension, our performance and KPIs once again are demonstrating how the value proposition of the Zeta Marketing Platform is resonating with our customers. This rings true even more in the current macroenvironment. Second, our guidance. We're raising the midpoint of full year 2022 revenue guidance by 5 million to the high end of the previous range of 563 million.

We are guiding third quarter revenue and profit that is higher than consensus, which is a clear sign of our confidence and the strong visibility into our business. At the same time, we're purposefully embedding conservatism into our full year guidance. This should be received as Zeta recognizing current investor sentiment around an uncertain macro backdrop even though we are not seeing negative impact from our results or a slowing of pipeline demand or a change in our sales cycles or metrics at this time. We want this to be very clearly understood.

With these top-line details, we're also increasing full year 2022 adjusted EBIDTA by more than we beat in the second quarter. Third, the bigger picture. Any way you slice it, be it revenue, scaled customer count, margin expansion, adjusted EBITDA, or even cash generation we're pacing ahead of our Zeta 2025 long-term plan of greater than 1 billion in revenue and at least 20% adjusted EBITDA margins. And finally, with these factors in mind, we're announcing a 50 million share repurchase program, believing that in addition to investing for profitable growth, repurchasing Zeta shares at current price level is the next best investment of the company's capital.

We plan to fund this from our quarterly free cash flow generation. Now let's dive into each of these more deeply to understand what is driving our results: confidence, long-term trajectory, and capital-allocation decisions. In terms of second quarter results, we generated 137 million of revenue, up 28% year to year, up 9% quarter to quarter, and 6% better than the midpoint of our guidance. A very strong wraparound on last year's second quarter growth rate of 39%.

We set a record by adding 14 new skilled customers quarter to quarter, reaching 373 scaled customers and 100 super-scaled customers. The addition of new scaled customers was diverse, coming from advertising and marketing, healthcare, consumer retail, and financial services industries. Scaled customers now represent 97% of total data revenue. The ARPU of scaled customers grew by 19%, once again, ahead of our long-term model of mid-teens growth driven by new customers getting bigger, and our longest tenured customers also growing their spend on data.

This is now a multi-quarter trend. Direct revenue mix, which represents our customers reliance on Zeta's marketing platform and digital channels once again exceeded 80%, resulting in a 290-basis-points year-over-year improvement in our cost of revenue percentage to 36.6% or 390-basis-points improvement, excluding stock-based compensation to 35.3%. We're tracking ahead of our target to reduce cost of revenue by 200 basis points for the year. On a GAAP basis, our net loss was 86 million, which includes 82 million of stock-based compensation and 5.7 million of other expenses, mostly related to the equity component of prior M&A deals.

From an industry perspective, we remain balanced across verticals. This quarter, no industry represented more than 14% of revenue, and on a trailing 12-month measure, six out of our 10 largest industries grew over 25%. Our U.S. business, which accounts for 96% of revenue, grew 32% year over year.

We continue to execute our plan to increase quota carriers, reaching 115 at the end of 2Q, on pace with our estimate to have between 120 to 130 quota carriers by year-end. At the same time, from an expense to revenue perspective, we're getting operating leverage from R&D and G&A, both decreasing by 100 basis points and 240 basis points year over year respectively, excluding stock-based compensation. Revenue growth continues to be increasingly profitable. We generated 18.6 million of adjusted EBITDA, up 63% year over year, with 13.5% adjusted EBITDA margin, up 290 basis points year over year.

And finally, cash from operations was 14.7 million, with free cash flow of 6.2 million. We ended the quarter with 110.8 million of cash on our balance sheet. Now, I'll transition to our increased guidance. Our visibility continues to improve with the addition of more recurring revenue in multiyear customers, a trend that has continued over the past several quarters.

For the third quarter of 2022, we're projecting the midpoint of third quarter revenue to be 141 million, up 22% year over year, with a range of 139 million to 143 million. This is an increase of 2 million from where consensus estimates are today. We expect to generate third quarter adjusted EBITA of 20.1 million at the midpoint of guidance, which would be up 26% year over year, and represents 14.2% margin. A range of adjusted EBITA is 19.8 million to 20.3 million.

At the same time, we recognize there's uncertainty in the current macro backdrop. For this reason, we wanted to be purposely conservative, setting full year and implied 4Q guidance. For the full year 2022, we're raising the midpoint of revenue guidance to 563 million from 558 million, representing growth of 23%. Our new range is 560 million to 566 million, while growth of 22 to 24%.

This implies the midpoint of 4Q guidance is 158 million or 17.5% growth. I want to be clear. Our business is performing extremely well. Our pipelines are growing much faster than revenue.

We're seeing record RFP volumes, win rates remain robust, and sale cycles are not changing. We do not currently see anything that suggests the business is slowing down, but we want to be appropriately cautious in our outlook nevertheless. On an adjusted EBITDA basis, we're increasing the midpoint of full year 2022 guidance from 83.4 million to 86.4 million, with the new range of 85.8 million to 87.3 million. This updated range represents a year-over-year increase of 36% to 38%.

At the midpoint of our increased full year guidance, adjusted EBIT margins would expand by 160 basis points year over year, which brings me to my third point, our pacing to the Zeta 2025 long-term plan. With very strong first-half results, including 26% revenue growth and 250 basis points of adjusted EBITDA margin expansion, we're pacing ahead of our Zeta 2025 targets of at least 1 billion in revenue and at least 20% adjusted EBITDA margin. All the KPIs included in our Zeta 2025 plan, which includes sales headcount, scaled customer count, scaled customer ARPU, net revenue retention, and direct platform mix are tracking at or ahead of plan. These are the results of the investment we've made in our products, people, and go-to marketing initiatives over the last two years and a byproduct of our execution culture and adding to the track record we're establishing as a public company.

As our business continues to perform and we generate even more free cash flow, we believe the next best use of our cash is to repurchase shares at current price levels. As David mentioned, the board of directors has authorized a 50 million share repurchase program and a share withholding program to remove shares that would otherwise have come to market for tax purposes. To be clear, we do not intend to draw down our cash balance, but instead, we plan to fund the buyback using our positive free cash flow generation. Now, I'll close out with key takeaways from today's call.

First, demand for our platform is resilient. Our sales pipeline to deal metrics reflect this. We have record RFP volume and pipelines are growing faster than revenue in value and opportunity count. We do not see an elongation of sales cycles and like last quarter, deal sizes continue to get bigger while contract durations continue to get longer.

Second, we've purposely set third quarter and fourth quarter guidance conservatively in recognition of investor sentiment and broader macro uncertainty despite not seeing signs of softness in our results or demand pipeline. And finally, adjusted EBITDA and cash generation is growing significantly faster than revenue, and we're taking a disciplined approach to deploying capital. As I've stated before, we're building a culture of high performance and a track record of consistent and predictable execution. With that, let me hand the call back to the operator for David and me to take your questions.

Operator?

Questions & Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator instructions] We will pause for a moment as callers join the queue. The first question comes from Arjun Bhatia with William Blair.

Please go ahead.

Unknown speaker

Thanks, operator. This is Chris on for Arjun. The first question for me is, so, you know, you guys were very clear that the business performing well and you're not seeing any impacts throughout the pipeline or anything else on the business right now. But can you help us unpack the scenario that's built into guidance? What are the underlying assumptions and how did you arrive at that? Thanks.

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

Well, we're looking, first and foremost, Chris, at our guaranteed contracts, which at this point are pretty high. And, you know, we have very, very good visibility into any quarter that we come into. Quite frankly, we really feel like we have 85% visibility into any year we're entering. So, we feel pretty solid about where we are.

It's funny because there's been a lot of talk about the downturn of marketing. Really, if you look at it, most of the companies that have had challenges are mobile-only companies that are very focused on what's going on in the U.S. and the elimination of Apple's IDFA and the rise of TikTok and others. We have seen our pipelines grow over the last few months, quite frankly.

I think part of it was faster, you know, putting us at the far-right hand corner, not supposed to say we are the leader, but it's pretty evident if you look at the report for marketing automation, and that really increased our RFP flow. But what we've also seen is we've seen, even in the parts of our business that are focused on marketing, we're seeing them grow at a faster pace than even other parts of our business because as marketers are looking for that marketing efficiency, they're just not finding it in other vendors. So, they're moving additional budgets to us, and we're winning more. 

Chris Greiner -- Chief Financial Officer

Hey, Chris, just to add to that, I think what we really want clearly understood, and I think you acknowledged it in your question, is really just derisking. In terms of how the outlook and guidance is built, it's built the same way that we've done over the last now four quarters as a public company, where we've built a track record of beating and raising on the top and the bottom line, bottoms up by scale to customer with, as David mentioned, very little yield required from incremental new business at current levels. So a very conservative derisked outlook, but the business is performing exceptionally well.

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

Quite frankly, it's performing, as well as it has ever performed in the 15 years since we founded it.

Unknown speaker

Great. Thank you. That's all very helpful color. And then can you give us a bit -- so looking at the Zeta 2025 plan, kind of thinking about the catalysts there.

So, the go-to-market expansion seems to be going exceptionally well. You know, obviously, great to see the 14 new scaled customers in the quarter. Where do you see the most opportunity in terms of product innovation over the next couple of quarters to help start to drive customer ARPU up to that long-term target? Thank you.

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

Well, we're getting pretty close to the long-term target quite frankly. We grew ARPU by 18% this quarter. And as I'm sure you recognize, Chris, it was a record quarter for us on adding scaled customers. Interestingly enough, we're seeing customers who are coming on board starting at much higher levels than they ever have in the past.

We've traditionally had a sales motion where we've started with a pretty small proof of concept and then scaled from there. What we're seeing is we're seeing them come in and literally become scaled customers right off the bat. The other sort of three products that I think are going to really change the game for us, first and foremost, is CTV. We were pretty clear that that division grew another 200% last quarter.

I'll remind you, you know, it grew 399%, you know, a few quarters ago. That's not a slowing down. It's just the numbers are getting much, much bigger. So, quite frankly, at 200% year-over-year growth, this quarter was greater dollar growth than 399% a few quarters ago.

The other is CDPs. We are the player in the CDP ecosystem. And if you look at our ability to put in multiple types of CDPs, and I think this is really something most people do not understand, we can put in the most comprehensive and deep CDP possible and we can put a CDP lite in that allows us to sit next to some of our large competitors, but yet still allow the client to access our data in that CDP ecosystem and deploy and activate seamlessly through the Zeta Marketing Platform. So we don't need to always, "rip out" our large competitors upfront.

We can start with the CDP lite. We can give them a taste of the data. We can help them segment. We can use the algorithms to help them target, lower their acquisition cost, and then deploy.

And what we find is we win the vast majority of the RFPs for ripping out the competitor when they start there and then grow. And then third, our Agile intelligence product is one that I'm incredibly excited about, which is giving enterprises for the first time from Zeta the ability to perform mission-critical business functions and make mission-critical business decisions that don't necessarily revolve around marketing. One of the largest hotel companies in the world is using our Agile intelligence product to figure out what their wallet share is in different geographies and has completely changed their strategy and intends on opening 600 new hotels over the next two years based on where their competitors -- where their existing customers are spending the most money, where they are not. And they're now using our Agile intelligence product to be the primary determinator as to where they're going to place those 600 locations.

So, CDP, CTV, and Agile Intelligence, in my opinion. And by the way, we're just getting started. We're innovating every day, and we want to roll out new products every day.

Chris Greiner -- Chief Financial Officer

Thank you, Chris. Operator, next question, please.

Operator

The next question comes from Ryan MacWilliams with Barclays. Please go ahead.

Ryan MacWilliams -- Barclays Capital -- Analyst

Thanks for taking the question. You know, really good to see the record new scaled customer ads in the quarter, especially when many of your peers are calling out longer sales cycles themselves or some difficulties in the enterprise. Is there anything about Zeta's go-to market or ROI that's allowing deals to get done and what does it look like for your pipeline for the next few quarters for these scaled customers? Thanks.

Chris Greiner -- Chief Financial Officer

Hey, Ryan. I'll go and take that one. And David can certainly jump in. We have -- our customers are gracious enough to speak with us after we closed deals and help us understand why we won.

And to your point, one of the first reasons they listed was the importance of having an ROI value proposition that's not just verifiable but can be measured in months and quarters, not years. We fit into that really well. They've also highlighted the fact that we can come in and replace multiple-point solutions. And our data continues to be a massive advantage for them.

The pipelines are great. As I've said in the prepared remarks, overall value of the pipe is up 44%. We're seeing deals, as David mentioned, that have now multiple channels built into them, which is driving a higher initial RPU, while at the same time, our longest, most tenured customers are also getting bigger on the back end. So it's a really nice combination.

The pipelines are healthy, the win rates continue to be north of 50%. So, we're feeling very, very good about the execution and the productivity ramping of the salesforce.

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

Yeah. I think that's very well said. You know, it's funny, I've been obviously doing this for 15 years. I used to joke that this industry was primarily driven by wine and steak.

Today, it's driven by data and results and the efficiency of our platform, coupled with the efficacy of our platform. So, as you've seen, some of the large sort of technology companies battling it out and you know, you see the IDFA. I know everybody is saying, "Oh, Google has pushed out the elimination of the third-party cookie," but what you're seeing is more and more people are opting out of it. So even though they're pushing it out, they're making it easier to opt out of it, which both of those things really play to us, because we've never used Apple's IDFA or a third-party cookie to identify individuals or build our attribution models.

So, we're able to continue to prove the efficiency and effectiveness of our model, whereas a lot of our competitors are not able to do that, as well as us. And I think it was very purposeful that we set our sales cycles are not extending. We're actually closing deals faster than ever. And, you know, as Machiavelli once said, right, never waste a crisis.

We see the current downturn as an incredible opportunity for Zeta to win and take bigger market share in the marketplace. And the good news is we've effectively doubled our sales force in the last couple of years, and we're very well-positioned right now to do that. And we feel like we're going to continue to see that.

Ryan MacWilliams -- Barclays Capital -- Analyst

Perfect. Really appreciate the color there. And just -- have you seen any outside macro impact to the reoccurring or like the usage revenue side of the business at this point? 

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

Our reoccurring business grew faster than our recurring business last quarter.

Ryan MacWilliams -- Barclays Capital -- Analyst

Thanks, guys.

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

[Inaudible]

Operator

The next question comes from DJ Hynes with Canaccord. Please go ahead.

Unknown speaker

Hey, this is Luke on for DJ. Thanks for taking the question. So maybe just to go back to that, you know, reoccurring revenue topic. Can you help us think about the durability of that revenue stream? How are those contracts structured? How is that, you know, revenue stream trended in prior market downturns? And what gives you the confidence that customers will replenish those budgets in a tougher macro setup?

Chris Greiner -- Chief Financial Officer

Yeah, we don't we don't disclose or report publicly on the breakdown of those revenue streams. But I certainly understand the intent of the question. So, we kind of try to answer, without going into what we don't disclose and segregate publicly. I think the best way to look at that type of revenue with our customers, which as David mentioned, had a really strong growth in the quarter, is we look at them over their tenure with Zeta.

And in our publicly filed materials in our supplemental earnings package, we break out those scaled customers based upon how long they've been with Zeta. And what you'll see, and this continued to be a trend, is the stickiness of those scaled customers, which you can, you know, you can infer certainly that about half have a recurring component, about half have a reoccurring component. The net revenue retention rate for those customers that have been scaled for the last two years has been over 120%. And as you'd expect, the more they stay, the longer they stay with us, the bigger they're becoming.

The way that we're able to predict their usage-based spend is through the ROI that we generate and through, you know, the very good relationships that our farmers have with those accounts. So, we're able to add channels as we're more effective and we're more efficient, and we've been increasing now and be able to add use cases. A lot of those contracts, by the way, are multimonth, multiquarter in nature. So we have very good visibility, which is why we've been able to predict and beat and raise as consistently as we have.

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

Yeah, I think that's something that Chris touched on that's really important. Even the reoccurring business has contracts associated with it that go out anywhere from, you know, a quarter to a year. They're just not three-year subscription contracts. So, you know, as I said earlier, we enter any given year with 85% visibility into the revenue.

Right now, what we're telling you is we don't really need any additional new customers to hit the numbers that we're putting out there for the Q3, Q4. We're just trying to derisk the quarter in an environment where there's a lot of uncertainty out there. But as Chris also said, we've been public for four quarters. We have beat all four quarters and we have raised all four quarters.

And, you know, that is something that we think is important. So when we project, our goal is to attempt to continue to do that and we feel that we have the visibility. I want to say again, I do think there is a overestimation of the downturn of marketing. I think you're going to see digital marketing grow over the next year.

You might not see that in linear, but I certainly think you're going to see that. And I, for one, have never seen a time where our pipelines were healthier with companies looking to do digital transformation and really focus on efficiency and efficacy of marketing. And that is the sole purpose of the Zeta Marketing Platform.

Unknown speaker

Really great to hear and really helpful. Thank you. And then maybe just another quick one. You know, you've talked a decent amount about IRI -- ROI, but, you know, with ROI and time to value sort of top of mind for a lot of customers.

Can you talk about sort of how long implementation cycles are for your various use cases and how quickly can customers and prospects really see that return show up in their numbers?

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

It depends on the type of company and the type of industry, right? But we can -- because we're 100% cloud based and we can plug into any open API, we can literally have a customer up within seven days of executing a contract depending on the product. Some products take longer. Some products, you know, quite frankly, can be up faster. We have seen an independent study that showed for every dollar invested in the Zeta Marketing Platform, we are able to return $10 in revenue to our client.

And that's been a very, very powerful study. It depends on the industry. You know, if you're in the automotive insurance industry, it might take a number of months. If you are a e-commerce retailer, it can take hours.

But we are able to prove the efficiency, efficacy, and the return on investment.

Chris Greiner -- Chief Financial Officer

Thank you, Luke. Operator Next question, please.

Operator

The next question comes from Richard Baldry with ROTH Capital. Please go ahead.

Richard Baldry -- ROTH Capital Partners -- Analyst

Thanks. In your supplementary deck, it calls out that you have a 6% customer, which at this scale now would be north of 30 million a year for a single player. Could you maybe talk a little bit about that use case? Maybe not by name, but you know, vertical? How many channels are they using? How long have they been with use, or how replicable that could arguably be across its own vertical, maybe other verticals because it's obviously a, you know, the best case that you have. Thanks.

Chris Greiner -- Chief Financial Officer

Hey, Rich, that's actually data from 2021. But, you know, we would be in that realm for 2022, but that is vintage 2021 data. But I think to the spirit of your question, what allows them to get as large as they do, it's -- you're right, it's the addition of channels and it's the addition of use cases. As we think about channel usage right now in our business, and last quarter, this was true and it's continued to be true.

Now more than half are using more than one, which was an important threshold that we crossed last quarter. And then interestingly, if you look at the number of scaled customers that are using four or more, it's now past double digits as a percentage of the total scaled customer count. So, adding more channels has been an effective path for us. I think the really big greenfield opportunity is adding more use cases, and I think what's interesting to us is, interesting in a good way, is now, you know, call it 89% of our scaled customers only use Zeta for one of the three use cases.

We can do all three for them. But that's a, you know, a massive opportunity that is not built into any of our longer-term models or certainly our guidance.

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

And Rich, the other thing I think that's important to think about is the better an enterprise understands their metrics, the better we can partner with them. And the company in question we're talking about is one of the most metrics-oriented companies in the world. And that's really where we can excel and we can really show that return on investment at scale. And, you know, some of these companies are willing to move substantial percentages of their marketing budget.

In this case, you know, that that 6% represents, you know, call it 5% of their marketing budget. But we think we can get that one customer at a much higher than that as well.

Richard Baldry -- ROTH Capital Partners -- Analyst

Thanks.

Operator

The next question comes from Jason Kreyer with Craig-Hallum. Please go ahead.

Jason Kreyer -- Craig-Hallum Capital Group -- Analyst

Thank you. Thank you. David, you talked about customers reaching scaled levels more quickly than they have in the past. Can you just talk about what's driving that? Like you spent some time just a second ago talking about channels and use cases.

Are people adopting more channels and use cases earlier or just making larger commitments upfront?

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

I think it's the latter. I think I mean, what we're seeing is as marketers are under more pressure to not just be able to create return on investment for their enterprises, but be able to prove it to their bosses. They're looking at the Zeta data cloud combined with the Zeta Marketing Platform, with the CDP at the core, and saying that they almost can't believe how good it is. Sometimes we have to prove that we can actually do what we say we can do.

And then as soon as we prove it, we see them scale very, very quickly. It used to be -- we would do a $50,000 proof of concept. Then we try to get them to 100,000. You try to grow from there.

We're seeing clients come in and say, "Hey, can we do" -- you know, we're doing $250,000 proof of concepts and then executing contracts for a year or two years, you know, within a week of that. So, it's been very exciting.

Jason Kreyer -- Craig-Hallum Capital Group -- Analyst

OK. And then just wanted to get some, you know, further color from you on Google's decision to push out cookie deprecation. You know, so it seems like the later adopters are not going to get kicked out another year. And I'm just wondering if that creates any sort of a void in those people potentially being Zeta customers or if you think you can continue to fill that in, you know, despite the fact that this deadline has been kicked out a little bit further.

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

Yeah. Listen, I mean, I think that everybody who understands the industry understands that Google is not really doing this for consumer privacy, right? They're doing it because they would argue that if you are on Chrome, if you have a Gmail account, if you own an Android phone, you're a first-party customer. And, you know, that's a very aggressive, you know, sort of position to take. I joke, it's sort of like Verizon saying because they're your telco provider, they can listen in on your calls.

Obviously, it's not totally synonymous. We don't use the third-party cookie and we never have. So, as we look at our business, our efficacy has, quite frankly, stayed the same. I think Google is under pressure from a regulatory perspective, especially in Europe.

They're starting to get it in the U.S. And what I think a lot of regulators are seeing is that, you know, they're not necessarily doing that for privacy as much as they're doing it to take a deeper and more meaningful hold on Internet marketing. As it relates to pushing it out, I don't think it matters. And I think Google has figured this out very -- I mean, listen, they're the smartest -- some of the smartest people in the world.

So that's -- it's not shocking they figured it out. People are opting out at a much greater rate. So, if they just make it easier for you to opt out of it, they never have to make it go away. It just goes away.

Now, I want to reiterate again for Zeta, we don't use it today. We're not planning on implementing it for sure. But as other organizations have been based on that, I think it's going to help them the longer it pushes out without getting rid of it. But it necessary -- it does not necessarily hurt us because what we are seeing is, first of all, our ability to operate in places like Safari today, which have not had third-party cookies for many years, is already a major competitive advantage for us.

That's just an example of one place that doesn't allow it today.

Chris Greiner -- Chief Financial Officer

Thank you, Jason. Operator. Next question, please.

Operator

The next question comes from Koji Ikeda with Bank of America. Please go ahead.

Unknown speaker

Hi. This is Tanika on for Koji. Thanks for taking my question and nice meeting you guys, especially with all the hype out there and advertising demand. My question was around your partnership strategy.

I saw that you guys had an announcement on a deeper integration with Amazon Web Services. I just wanted to understand what exactly that deeper integration entails. And is that going to help you guys [Inaudible] with existing customers and more customers? Anything on that partnership? Thank you.

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

First of all, thank you for the compliment. We're certainly very excited about the quarter and appreciate it. So when you look at the big partnerships we've announced, sort of the three big ones thus far, Dun & Bradstreet, Snowflake, and AWS. And if you focus on AWS, we're the first marketing cloud to ever be in the AWS store.

And we see that as a big competitive advantage. And Snowflake has already been an incredible partner. We've won multiple deals in partnership with Snowflake, with a joint go-to-market strategy. And quite frankly, if you look at a lot of the other marketing clouds, they've done a very good job of working with system integrators.

One of our challenges has always been we don't need a system integrator. Our platform is plug and play. It's all cloud based. You're able to plug in to the open API, and we're able to do whatever necessary customization has to be done.

We do that as a part of our contribution to help the client get up. We don't charge for it. We generally just do it. And quite frankly, there's very little of it.

Most of the other large marketing clouds have partnered with everybody from Accenture to Merkle to others, because there's a tremendous amount of customization and work that they want to get on top of implementing that platform. Our partnerships have largely been focused around go-to-market strategy and large tech partnerships. To answer your question, specifically, we believe AWS and Snowflake help us win in both ways. They help us get new clients because it brings massive credibility to Zeta to be fully integrated into AWS and fully integrated into the Snowflake ecosystem.

And what we're finding is as existing clients want to grow the relationship, those platforms have been very instrumental in helping us to do that. So quite frankly, it's a win-win. I do spend a sizable percentage of my personal time on partnerships. It's something where I believe sort of one partnership can equal, what, you know, 15 or 20 of our salespeople can do.

And we try to spend our time efficiently there.

Unknown speaker

Thank you so much.

Operator

The next question comes from Ryan MacDonald with Needham. Please go ahead.

Ryan MacDonald -- Needham and Company -- Analyst

Yeah. Hi. Good afternoon and congrats on a great quarter. David, my first question for you, you know, you talked multiple times on the prepared remarks about share -- opportunities for wallet share gains within existing customers.

Just curious, you know, given, you know, what the broader macroenvironment, even though that is not seeing any impact, you know, when you talk to your customers, are you starting to see sort of consolidation of spend at all? And if so, how are you positioning or sort of strategizing from a go-to-market perspective with your farmers to try to take advantage some of those additional wallet share opportunities?

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

Thank you, Ryan. Let me -- not to sound contrite, but we actually are seeing an impact from the market downturn. It's helping us. What we're seeing is that market downturn is creating greater pressure on marketers to create better efficiency of marketing and be able to prove it.

So, you know, one of the two case studies we gave in my prepared remarks was around winning market share or wallet share. That particular client lowered their marketing budget materially, but simultaneously raised what they were spending with Zeta significantly. Those are two very important things. So, I do think we're seeing consolidation.

I think we're seeing that consolidation around partners that can drive efficiency and prove it, i.e. efficacy. And I think we're going to see that trend continue up. You know, to me, that's sort of the exciting part of what we're seeing right now in the downturn.

And obviously, I think a lot of people have looked at us and said, "Oh, my goodness, Facebook is having challenges or SNAP is having challenges or others having -- therefore, Zeta must be having challenges." I really don't want to sound contrite again, but quite frankly, the challenges they're having have an inverse effect on us where they create a tailwind for us because marketers are moving to where we are.

Ryan MacDonald -- Needham and Company -- Analyst

Very helpful. Thanks, David. And then, Chris, maybe a follow-up for you. You know, you talked about the size of the pipeline or the growth of pipeline in terms of value size being really strong, up 44%.

I'm curious what you're seeing in terms of the mix of that pipeline between early stage and late stage. Really, just curious, you know, given the strong net customer ads in the quarter of 14, you know, were you seeing any pull forward of demand, so to speak, in the quarter? Thanks.

Chris Greiner -- Chief Financial Officer

Yeah. We saw no pull forward. The results were, you know, good old-fashioned sales execution. And that team deserves an enormous pat on the back.

In terms of the health of the pipeline, it's where we want it. It's the right balance between what sits at the top and what is well progressed and ready to close. I think exciting for us also is, you know, we talked on past calls about sales productivity, when you look at our cohorts of sellers and as you know, we measure our sellers and those that have been with us 12 months, 12 to 24 and greater than 24, it's the progression you want to see, both in terms of the size of their pipe, as well as the types of -- and the size of deals that they're closing. So, for example, as you'd expect, our newer sellers are carrying less in pipeline value than our most experienced sellers, while at the same time -- but they're closing, right? They're closing exactly on schedule.

So, I'm really happy with sales productivity and how things are progressing. And the health of the pipeline is very good in terms of, you know, what sits at the top and the bottom of the funnel.

Ryan MacDonald -- Needham and Company -- Analyst

Thanks for the color and congrats again.

Chris Greiner -- Chief Financial Officer

Thank you.

Operator

The next question comes from Elizabeth Porter with Morgan Stanley. Please go ahead.

Elizabeth Porter -- Morgan Stanley -- Analyst

Great. Great. Thank you so much. I just want to ask about the cadence of investments.

So, EBITDA coming in nicely ahead. You know, what's the propensity to accelerate investments just given the good return you're getting? And how do you think about that balance, especially in an environment where many tech companies seem to be pulling back? Thank you.

Chris Greiner -- Chief Financial Officer

Thanks, Elizabeth. Good to hear you. So, for us, we're going to stick to the plan that we've communicated. Our hiring cadence in sales and marketing is right along the path.

We're at 115. We've expected to be between 120, 130 quota carriers. The growth in the sales and marketing investment line in the P&L was up about 50%. That will begin to moderate because of the timing of when we made a lot of our hires last year.

But we'll continue to invest on the plan that we've communicated in sales and marketing, mostly now in the head count realm for more sellers. While at the same time, and we spoke about this in the remarks, we're getting the efficiency that we desired out of R&D and out of G&A. R&D as a percentage of revenue was down 100 basis points year over year and G&A was down more than double that, I think, like 240 basis points. So, we'll continue to get productivity in the R&D and the G&A area while continuing to invest on our plan in sales and marketing.

Elizabeth Porter -- Morgan Stanley -- Analyst

Great.

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

And as I'm sure you saw, being ahead -- as I'm -- just to finish, as I'm sure you saw, you know, being ahead 290 basis points of gross margin doesn't hurt when you're doing that. The other thing I want to point out, Elizabeth, I thought that was a great question, is the quality of people we're getting a look at right now is incredible because as other tech companies are pulling back, and we are continuing on our existing plan, we are able to find people of a substantially higher quality than perhaps we could have earlier, which is not to say our existing people aren't amazing, but if we used to have to interview 20 people to get to an amazing person, we're now getting just amazing people walking right in the door. It's been very exciting.

Elizabeth Porter -- Morgan Stanley -- Analyst

Got it. That makes a lot of sense. And then just a really quick follow-up. I just want to touch on the political campaign of this year.

I think in the past you talked about a 1 million contribution in Q3 and 3 million in Q4. Just wanted to see if there is any changes in the thought process there and how that contributes to the back half.

Chris Greiner -- Chief Financial Officer

That continues to be our assumption. We're starting to now see deal flow, we're starting to see the pipelines fill up. So that's probably, again, another good example of the conservatism we built into the forecast. But that remains our assumption about one in the third and about four in the fourth quarter.

Elizabeth Porter -- Morgan Stanley -- Analyst

Great. Thanks so much.

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

Thanks, Elizabeth.

Operator

The next question comes from Brian Schwartz with Oppenheimer. Please go ahead.

Unknown speaker

Hi. This is Camden Ladee sitting in for Brian Schwartz. Thank you for taking my question. On your CDP product, in regards to the audience enrichment that Zeta is capable of delivering by pairing the customer data with your data cloud, do you see any catalyst or risk over the near term coming from privacy legislation or data regulation that could kind of impact the enrichment that you're capable of delivering today? Thank you. 

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

Great, great question. One of the things we do when we enrich the data is we eliminate the personally identifiable information. So, what happens is we import all their first-party data into the CDP. We then remove the, you know, name, any other identifying information.

We match it and we resolve it to a Zeta ID number. Then we import what is generally an average of 1,700 incremental data attributes. This is really interesting for multiple reasons. First and foremost, it keeps us on the absolute right side of privacy.

We never share anybody's information where they can be identified with any client at any time. Then what happens is the clients, the enterprises begin to see the power of the data. If they want to activate to it, they must use the Zeta Marketing Platform because we never load the Zeta ID into any third-party activation methodology. So not only does it keep us totally on the right side of privacy, and by the way, that's not just privacy where it is today.

It's where we think privacy is going. We think the ability to keep people anonymized and opted in are going to be what privacy continues to evolve to. And, you know, by way of example, when, you know, CCPA was passed, we were compliant effectively when it passed. So, we were already in a place to be doing those things.

And we're, I think, way ahead of where things are going. This will sound a little strange, but we'd like to see a little more regulation because we already think we're such a good actor that other actors, you know, are getting a little aggressive. We'd like to see them curtailed. And that, we think would help us.

Unknown speaker

Thank you so much. That was a great color.

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

Well, thank you, everybody, for coming today. And, you know, just to sum it, I don't think in the 15 years, since John and I founded the company, I've ever seen the business executing better. You know, yes, revenue was up 28%. Yes, EBITDA was up 63%.

Yes, operating cash flow was up 93%. Yes, we raised Q3. Yes, we raised the year. Yes, we're being incredibly conservative around Q4 because right now in today's market, that's what we feel is prudent, not because we do not think we're going to, you know, have additional quarters of beating and raising, but because we're trying to be prudent and we're trying to be conservative.

The real important metric is that the business is working. Clients are coming to us. They're growing faster. Our existing clients are giving us additional wallet share, and we're winning new clients at a record pace, as you saw in our most recent results.

I have to just close by saying how incredibly proud I am of the 1,400 people who operated Zeta, who are working every day and have worked every day through a pandemic, through countless upturns and downturns over the last few years, through massive changes in the marketing and digital ecosystems. And yet, every day they show up, they do their work, they take care of our clients, and we take care of each other. I'm incredibly proud of the business that we have built and the people we have built it with. Thank you, everybody, for coming.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Scott Schmitz -- Investor Relations

David Steinberg -- Co-Founder, Chairman, and Chief Executive Officer

Chris Greiner -- Chief Financial Officer

Unknown speaker

Ryan MacWilliams -- Barclays Capital -- Analyst

Richard Baldry -- ROTH Capital Partners -- Analyst

Jason Kreyer -- Craig-Hallum Capital Group -- Analyst

Ryan MacDonald -- Needham and Company -- Analyst

Elizabeth Porter -- Morgan Stanley -- Analyst

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