The Pomp Podcast - #1453 David Steinberg | How Short Sellers Attack Public Companies

Episode Date: December 12, 2024

David Steinberg is the founder, chairman, & CEO of Zeta Global. In this conversation, we talk about the brand new ever evolving financial market where short sellers are going after companies and the companies are fighting back, why David continues to buyback stock, narratives, truth, execution, structure of the business, and what is next for Zeta Global. ======================= The Pomp Podcast is powered by BetOnline.ag, the premier crypto-friendly place to gamble on politics and sports, casino, poker and horse racing. BetOnline.ag gives you the ability to use Bitcoin and more than a dozen altcoins to make deposits and withdraw your winnings. There are no crypto transaction fees, and processing is instantaneous and secure. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://promotions.betonline.ag/pomp⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and use PROMO CODE: POMP100 to receive a 100% matching bonus on any crypto deposit. BetOnline.ag is available in nearly every country around the world, making it the top global gaming destination for crypto users. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. What's going on, guys? Today, I've got a very special episode. It is with David Steinberg, the founder, chairman, and CEO of Zeta Global. In this conversation, we talk about a brand new,

ever-evolving financial markets where short sellers are going after companies and the companies are fighting back. In this new world, these financial battlefields are all about who has the narrative, who is allowed to bend the rules to their advantage, and then who is able to actually come out and use truth and execution to push back and say, no, we are doing exactly what we said we were going to do. This conversation is fascinating because it's a public company CEO who recently had a short report come after him. He personally lost over a billion dollars during this short report, but now he is proving that by executing, a company can simply ignore the noise and come back. Anytime that you get somebody who's in the heat of the moment and comes in

and understands what's going on and is able to explain it to us, I guarantee that there's something here for you to learn. So here's my conversation with David Steinberg. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy,

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there's ability to fight back, et cetera. You seem to be in one of these showdowns right now. Let's walk through maybe, let's start with the company. You guys just produced the best quarter, I think in company history, massive growth, but the stock is down and there's a short seller who's coming after you. So like, let's just get into what does the company do and talk about the performance before we get into what this short seller said. I mean, Anthony, talk about going deep early. I mean, we're not even getting gentle here. Listen, we are an artificial intelligence platform that helps very large enterprises to better manage their marketing. So we use AI and data to help very large enterprises create, maintain, and monetize

customers at a substantially lower price by using our software and our data than they can without it. The business has grown greater than 20% organically now for four years in a row. This past quarter, the third quarter of this year, we put up 42% organic growth, 49% EBITDA growth, and 92% free cashflow growth. Our stock was trading at 37 at the time. It traded to 44 in the aftermarket. And then a group of shorts jumped all over our stock. A report published within the next 48 hours that, quite frankly, accused us of some bad practices and data and financial reporting. Unfortunately, as a public company, we exist in a world where anybody can say anything about anybody at any time and post it on the internet.

What we did was we fought back because to your point, you're in a battle here and we filed an 8K with the Securities and Exchange Commission, which is a much higher barrier of truth than just posting a report online or posting a comment on a social media platform. And we went point by point going through how everything they had done was false. Then this week, we did a three-hour investor data summit talking about all of our data uses, our data sources, our data policies, just systematically going point by point by point and showing that this short report is completely fraudulent. So what are the shorts doing, right?

Like when you've got kind of them coming after you, I think you get a sense of what they're doing rather than thinking about it theoretically. Yeah. Is they go, they do, quote unquote, I'll put in research, maybe it's real research, maybe it's not. Well, the research shops are, there's been a few of them. The average have one employee. The employees have no real track record. They've never been investors. They're generally very, very young. And usually they are more of a shill to the firms that are trying to short you. Got it. And so when they put out these reports, my understanding is that a short seller can put a short on, they can release the report, and then at any point they can sell regardless of whether the report ends up actually being accurate or not. Totally. Yes. And they can make tens of millions of dollars doing it. But listen, shorting a stock is not in and of itself a bad thing. In many cases, it's a good thing. It keeps companies healthy. It keeps companies focused.

But when research is reported that has total lies in it and makes things up and they're short before they do it, I don't even see how that's allowed. But to me, it's not right. If there was a hedge fund that was not affiliated with your company, but they went and they put a long on, and then they went out and said a bunch of things to make people think the company was seen in a good light, and then they sold, is that legal? No. No. So you can't do it to the long side, but you can do it to the short side. I guess. I mean, they could probably put out a report that had only publicly available information. In this case, this report accused our company of doing many things that were not publicly available. What was like the most egregious thing that they accused you of? They said that we were running a signup farm for our data cloud that was immoral and illegal,

neither of which are true. So I'm going to do my best to describe what you guys do as a business, but I'm like the idiot in the room because you're actually the expert. But basically, I think that the number that I saw publicly was 2.4 billion profiles of people. And what you do is you're trying to understand who they are, what their preferences are, all this stuff and then help companies better communicate with these people based on a whole bunch of factors and one of by the way you did that shockingly well well so that was if you have

a small brain it's really easy to describe things simply there's a little more intricacy to it yet globally we have that's the but but there are 2.4 billion profiles in the united states 245 million people have opted in to be in our data cloud now what they were accusing us of is getting people to sign up without a value proposition on the other side. And in a hundred percent of the cases, if people opt into our data cloud, they're getting a value exchange. They're able to get a newsletter or they're able to use a technological product that we built or a company we bought that provides them with the service. And this is no different than lots of companies. I'll give you maybe some crude examples. No, it's just like meta. It's just like Google. I mean, it's-

Well, not even the big tech companies. If people have, let's say you have a software company that no one's ever heard of before. And you want to go and do customer kind of prospecting. People will create a white paper. They'll put it up on a website. There'll be some sort of registration and say, Hey, if you give me your information and kind of raise your hand and say, I'm interested in the service, we'll give you the white paper. Now that company has your information, you've opted in, they can communicate with you. That would be, that would be a small example, right? What's a big example? Meta, right? So if you want to use Meta, Facebook or Instagram, you have to agree to their data terms and conditions. They then use that data,

feed it into algorithms to target marketing to you. We effectively democratize the open web. 6.2 million websites use our platform today. So we're able to target people on behalf of our enterprise clients for both customer acquisition and customer retention. But if anybody ever wants to opt out of our data cloud, they can at any time. We're completely compliant with that. But the accusation was that we were running farms of signing up people where they got no value. In fact, they accused us of lying about the value, saying that job boards that we manage didn't have real jobs behind them. We put out a report showing that not only did we create hundreds of thousands of job applications on behalf of customers, we created tens of thousands of actual jobs. So these are real world examples of how there is a value exchange between the consumer and some product or service that they're receiving in exchange. So let's talk about what some of the things you guys have booked. It's a very fascinating model, right?

And I think there's a lot of people who say, hey, I didn't even know a business like this existed because you're really selling to other businesses. Yeah, we're pure B2B. So job boards, that's an interesting thing where basically if I'm looking for a job, I come in, I submit an application, there's some sort of registration. What are some other examples of things? We publish millions of newsletters, everything from a joke of the day to a business update. We own Disqus, D-I-S-Q-U-S, which is the world's largest commenting platform.

So millions and millions of people use that platform to make a comment on an article or share an article to their social graph or have friends or family like stuff. All of that flows through the Zeta data cloud. But the other really interesting thing that's differentiated between us and others, we're just using that data to build algorithms on how to target people from a marketing perspective. We're not turning around, taking that data and selling it to 16 different partners who then call them and email them. We do none of that. Our platform is solely built to use the data to build an intent-based score. Do you intend to get a new credit card?

Are you going to buy a new car? If so, what type and where? Are you going to churn off of a wireless platform? And can we build a curriculum of contact to save you? In fact, we would argue that the utilization of our data helps the consumer because we're able to help them get to products and services that they really want versus products and services that they do not want. So this was at the heart of the initial sort of report. The other accusation they made was this year, our market cap went over the point where we had to increase the type of audit we do. So, we had been getting a regular audit from Deloitte and Touche. I will point out the report that published on us said that we used EY, which-

So, they got the auditor wrong. Yeah, I mean, I can see how you get the auditor wrong. We only announce it in every single public filing we would ever do. But yeah, they got it totally- How do you really feel? Right. This is a fact, not opinion. But the truth of the matter is that we move to what's called a PCAOB audit, which is just a much higher level of audit. In that audit type, our audit firm has to specifically point out the things they spend the most time on. So they put a note into our audit that they looked at transactions where our clients can also be a potential vendor. I want to point out that after they looked at all of this, they published our audit with zero material weaknesses. So our audit was totally clean. But for those that don't know kind of how audits work, basically, they could do a bunch of digging and look at a bunch of stuff.

And they basically say, hey, the numbers you're saying, they're correct or they're not correct. And then they say, hey, here's like areas of concern, which the material weakness is, right? Right. But this was not an area of concern. We had no areas of concern. This was an area that they specifically said, we just spent extra time on it because it's complicated and it's good. The report said, because they mentioned it, we were doing that. Now, it is interesting.

We do have some vendors who are also clients. One is the world's largest e-commerce platform. They spend millions of dollars marketing with us, and we use their web hosting service. One is the world's- Can I guess? Yeah, you might figure that one out. You know, it's three initials on the web hosting service. You know, the other is the world's fastest shipping company in the United States.

They spend millions of dollars advertising through our job boards for drivers and, you know, using our platform and we use them to ship packages. You know, these are just sort of nonsensical issues. It's also really interesting. If we were doing this, what's called round tripping, meaning we pay you, you pay us. And just so people know, there are a number of companies over the years that, especially in like the dot com bubble. Oh, I was just going to say that. They were basically investing in companies and they're like, hey, we're building out our ecosystem, but then those people are giving them the revenue right back.

NVIDIA. There's been people who are critics of NVIDIA who are claiming this stuff. So it's not specific to your industry or- No, this is something that companies get accused of, but it's why our auditors spend so much time on it and why they said it was clean. But it's very interesting. I do want to point out again, we grew free cash flow by 92% last quarter. Is that good?

Well, if you're paying someone and they're paying you back, there's no cash flow. Like it just doesn't exist, right? So the other thing that's very interesting is 40% of the Fortune 100 largest companies in the world use the Zeta marketing platform. Those guys are not going to do round trip deals with Zeta. It's just not, it was a silly and nonsensical thing. But it sounds scary. It does, correct.

Especially in a world where, again, going back to this kind of battle in financial markets, I think one of the parts that I'm actively trying to wrap my head around, I think a lot of people are, is the more that the market moves from institutional investors to a bigger percentage of retail, it now almost becomes, it doesn't matter what's true, it matters what the narrative is. And what's the momentum? Yeah. And you see, you know, there's plenty of stocks that people would yell and scream all day long and be like, that company is overvalued. But retail, it's the sweetheart of retail. And so you get it working in one direction. But also, if you can do this on the short side, where you can basically come out with, you know, scary sounding things, you're almost incentivized as a short seller to pick things that they don't understand versus things they do understand. Correct. And we have a very weird, we have a complex B2B, you know, software business. It's funny because, you know, ultimately to win the battle on our side, you just have to execute. As long as we continue to do well as a business, we'll win in the end.

We've been public now for 13 quarters, and for 13 quarters in a row, we have beat our guidance and raised our guidance for the next quarter and the calendar year we're in. This morning, we reaffirmed our guidance for the fourth quarter of this year, which will be our 14th consecutive quarter. But the shorts are able to create noise inside of a window. But what happens is a lot of companies stop focusing on executing and do nothing but focus on the attack. But what happens in that case, I'm sorry, just to finish, then they miss their numbers and then it becomes a self-fulfilling prophecy. Of course. One of the things I've always thought would be interesting is if short sellers find you're allowed to put out reports and short and do all these things, but you have to commit when you publish the report to a certain holding period. Oh, yeah. And so if you said seven days versus 12 months, that would really signal like your confidence level. And most of these shorts cover within 24 to 48 hours. Yes. If you put out a report and you say, hey, we are allowed to cover within 24 hours.

They don't even say when they can cover. No, no, no. That's what I'm saying. But if part of shorting was, hey, you're still a lot of short, right? Because it is healthy old stuff. But you have to tell us a minimum number of days, weeks, months, whatever, that you're going to hold the stock. And you are not allowed to sell before that. Obviously, if you come out and you're like, hey, we're short, we think this company is horrible, but we're only going to hold for 24 hours. People, I think, would read that very differently than like, we're going to hold for 12 months or short because we think that this company is not what it is claiming to be. And by the way, what happens is the guys who architect all this cover their shorts quickly, and they leave a lot of retail consumers holding the bag. Because what happens is, let's say we beat this quarter, raise guidance, beat next quarter, raise guidance, our stock will be right back where it was. And all of the guys who didn't cover will lose a fortune to offset against the guys who did. So, you know, once again, I don't want to sound like I'm rallying against shorts. I don't think it's an unhealthy component of the markets. What I personally don't like, forget about whether it's our company or other companies, are these reports that make this stuff up. The guys disappear, they cover their shorts, they leave a bunch of retail consumers holding the bag. And quite frankly, we have an incredible business. I'll remind you, this is our fourth year in a row of organically growing greater than 20%. Our operating margins are 20% at this point. We're generating meaningful free cashflow. We did a lot of cash. Oh yeah.

We have. So when I looked at the numbers before we came in here, that cash, right. We have, we have a lot of cash. Yeah. And you are based on projections plus what you've already done, et cetera, probably going to do, you know, maybe nine figures of free cashflow, right. Or maybe eight figures, whatever. Right.

No, no. Nine. I think nine figures of free cashflow over the next 12 months. And okay. You know, it's, it's a, that's not a small business. No. I mean, we're not a small company. We'll do, at the middle of our range this year, we'll do almost a billion dollars.

In revenue. In revenue. Next year, we've already said we're comfortable with a minimum 20% growth rate. Okay. So short report comes out, right? And I think you said the stock was at like $37, $38. $37. Trades up to $44 in the aftermarket.

In the aftermarket, yep. Short sellers come in. And I'm guessing, but I don't want to assume, Short sellers don't write these reports in five minutes. No, they've been working on it for a while. But they know your earnings are coming out. And so there's probably some lining up around that time, et cetera. They come out, stock falls.

Yes. How far does it fall? It went to 17. From 44 to 17. Well, the aftermarket 44, but yeah. Even 37 to 17. From 37 to 17. That's a pretty good short.

Well, they made real money. I give them credit. Okay. Now it's traded back up. It's getting there. Right. Not from 17, we're back up some. But you guys did something that I thought was very interesting.

I remember a story of Brad Jacobs. Brad Jacobs is a pretty good entrepreneur who's rolled a bunch of industries, et cetera. And he's told a story publicly where he was about to acquire a company and short report came out, stock dropped significantly. And he says, we're not acquiring that company anymore. We're going to take the cash on our balance sheet. We're going to go and buy back our stock. And if we're so, you know, if you guys say we're so stupid, thank you so much for the gift. You're going to go buy this.

You announced, if I remember the number correctly, a hundred million dollar stock buyback. Yep. And the idea just being, well, if you loved it at 37 at 17 is pretty cheap. I call it two for one. Okay. It's like buy one share, get one share free. So not only did we announce a hundred million dollar corporate buyback, but myself and my management team have personally bought millions of dollars worth of the stock in the open market.

We see this as a very unique opportunity. Now, we own a large percentage of the company already, which means we're already very much in tune with shareholders. And this puts us even more in tune. So, you know, we will continue to use our cash to buy back shares. And by the way, if we go through the $100 million and the stock still stays low, we'll do more. We feel like buying our stock back at these rates is the best possible use of capital. And by the way, if you want to see, does a management team believe in its business? Meaning, if I'm round-tripping and I'm making the data up, why would I invest millions of dollars of my own money with my management team? And why would I use $100 million of cash on my balance sheet to buy the stock back?

I'd have to be insane, which I am not. Well, my kids might think I am, but other than that. Once the short report comes out and you guys kind of fight back with the $100 million corporate buyback. Well, we started with the truth. Well, yeah, but it's all. Like, here's our rebuttal, here's our stock buyback, all the stuff. Do they go away or are they still talking? Well, here's a great example.

The stock started to recover and then there was an announcement that Omnicom was buying IPG. And then the shorts started making up a rumor that that was horrible for us. It just so happens that Omnicom and IPG are both clients of Zeta Today. So the merger of those two companies will be a net positive to our company. And we believe it's very good for the industry. We're big fans of what, you know, John and Philippe are building in their firms and very big fans of those two companies being together. So it's just so the stock sells off based on that, not quite as much as it did the first

time, but it's just the noise that just becomes a whole thing. Yeah, it's crazy. So once you're in the short hair or the crosshairs of the short sellers, what can you do to get out? Execute. You just have to, you know, continue to beat your guidance, raise your guidance and generate meaningful free cash flow because the answer- Oh, like build a real company. Yeah, right. You know, it's funny because, you know, you look at it and I forget the exact number, but the vast majority of the companies that have been hit by the research firm that hit us, and I mean, like, I think over 80%, their stock is back where it was within six months.

So, like, they're literally driving down the stock price, shorting it, making noise in that period. But when they hit high-quality companies like our company, they're just – in the end, the stock's going to go up. The problem is they're going to have already made their money. And they're going to leave retail investors holding the ball, the ones who stay short. The guys who stay long, they'll win because many of our great long only institutional shareholders have- There's average now. Yeah. They've just looked at it as a buying opportunity. I forget the exact quote, but effectively as Warren Buffett has said, right? When others are scared, be greedy. And we've seen some of our large institutional clients really build their positions over the last few weeks. Now, as this plays out, the company lost billions of dollars of market cap. What happened? Yeah, very rapid. I don't know exactly how much of the company you own, but you own a lot.

Yes, I do. On paper, you lost a lot of money. I did. During this. What's your reaction? Are you mad? Are you sad? Do you cry?

Do you call up the short seller and say, fuck you? Like, what's the reaction? You know, you wouldn't mind the last one. Maybe all of them. No, I didn't. Listen, here's the thing. I never thought I would make as much money as I currently have, and I never thought I would make or lose as much money as I make and lose on a regular basis. This will sound a little crazy.

I try not to look at the stock because when it goes up, I'm not that happy, and when it goes down, it really fucking pisses me off. So, like, I feel like if I can focus on running a great company, the stock price will take care of itself. I got an incredible call the day that this started going on. A very old, very dear friend of mine named Michael Milken, who, of course, is a financial genius legend, called me. And I picked up the phone. You know, please hold for Mike. I said, Mike picked up. He said, hello, David.

I said, hi, Michael, how are you? He said, how you doing? I said, well, Mike, I'm doing shitty today. How are you? And he, of course, started laughing. He said, David, I have three questions for you. I said, okay, Mike, what are they? He said, how much money do you have in the bank?

I said, well, as of the end of last quarter, $418 million in cash. Okay. Do you generate meaningful free cash flow? Yes, Mike. we will generate over $100 million in free cash flow over the next 12, 13 months. How much debt do you have? Well, we have $200 million drawn, but we have an incremental $350 million available on our line of credit today. He's like, so you have $800 million approximately in liquid assets and debt available today. I'm like, yes. He said, then go back to work

because none of this matters. This will all just be noise. Now, if you need to raise money or you're over levered, it could be a problem. But as it relates to the number of shares I have multiplied by the price that it went down, yeah, lost a lot of money on paper, but- Did you look to know what the number is? Yeah. I mean, you know- What's the number? Come on. No, it's close. It was over a billion?

Yeah. Yeah. I think- Over 2 billion? No. No. I think at the low point, I probably lost a billion. a billion yeah you know t boone's pickens doesn't he say uh the first billion is the hardest he's not around yeah yeah but the quote lives forever you know one of the one of the great weekends of my life was spent at t boone's ranch no way with him and his then wife years ago but yeah what did you guys do so it was it was around a he was doing a health thing and you know they were it was it was we were talking about neural networks and brains and you know i'm sort of an ai guy so i

got invited to that a number of years ago but yeah i mean listen i still have plenty left uh and uh you know my come on come on you lost a billion dollars in a single day i think it was i think it was two or three days but but it's paper so you don't have it's not like you know money that leads you to bank account but still there that's a unique experience a lot that no one you know will really go through other than somebody who's got a billion well that's right good news is we had more than one. So, that was a good thing. So, when that happens, obviously, you can't not look at the stock price because somebody on your team is like, hey, there's a short report. Yeah. Let's be clear. It would have been irresponsible of me not to know what the

stock was. And I say this in all transparency, I really didn't care about that. What I really cared about were the 2,000 employees that work for our company that go home every night and feed their families and shelter their families, they collectively lost a lot. And to them, it's really, really meaningful. And I worried about our employees and could we keep them together because of some of the accusations. I was worried about our customers. If we're committing you know, data fraud or whatever it is they accused us of. We were very nervous about losing customers. Now, we're three weeks later. This morning, when we did our investor data summit, I publicly announced that we have not lost one customer over this. In fact, our largest global

client since the publishing of this report has now renewed for another three years with us. And we won an RFP with a Fortune 100 company that we were awarded all after the publishing of this report. In addition to that, we did dozens and dozens of calls. Because to me, the big question is not about the shorts and them attacking me. That's short-term news. What really matters is can we continue to run an exceptional company? And, you know, what we did was we built a plan that we now call our Emerge Stronger Plan. How do we use this crisis, right? As Winston Churchill said, never waste a crisis. It's the single biggest opportunity to implement change. So we built a five pillar plan. And number one is build a deeper and more meaningful relationship with our customers. So we've spoken to dozens of our customers. Remember, these are Fortune 500 companies. And the calls have taken a very similar pattern. They start with what's going on here. They're very inquisitive. By the middle of the call, they move to empathy. God, I'm really sorry you guys are dealing with this.

By the end of the call, I would tell you, Anthony, the vast majority of calls have ended with, what more can we do together? And out of those calls, this quarter, we've received 20 increases in business from existing clients for this quarter, 20 upsells from clients literally in the last three weeks. So when you build a great company, and people say to me all the time, how are you growing 42%? How are you doing all these things? Well, you build a superior product that you can sell at a lower price than your competitors. I know it sounds stupid, but you do. You also want to have a good relationship with your customers, right? So for us, that relationship is now translating into incremental business because they're saying to us, we want to show support for you while you're under this attack. And once again, we are at the forefront of the artificial intelligence movement. Right now, there's a lot of noise around it, but there's not a lot of companies that are able to deliver real world AI products that deliver on the power of AI, right? What does AI really do for business? It helps you run it more efficiently, meaning lower costs, and it helps you scale faster.

Our platform, the Zeta Marketing Platform, is purpose-built to do both. We help enterprises massively lower their cost to market while accelerating revenue growth. And what are the technologies that you're using to do this? Are you just using the off-the-shelf models and you guys are customizing it or how does this work? No, so first of all, we have our own small and mid-sized language models that we've developed internally. It's funny. you'll laugh about this, Anthony. We went public in June of 2021. Good and bad time?

Bad time. But it doesn't matter. Bottom line, we went public on the New York Stock Exchange. And just like everybody else, you put your banner on the side of the New York Stock Exchange, right? Our banner in June of 2021 said data plus AI equals intent. And Anthony, I'm telling you, I had people all day saying, who's Al and why is he in charge of your data? Nobody had any idea what we were talking about. Our competitors are dealing with 10 to 15-year-old technology, and they're rolling out AI and AI agents over the last seven, eight months. We've been programming and put AI as native to our application layer, meaning it's at the center of our software starting seven years ago. We're already on the third version of our AI agent studios.

Like we're lapping these guys. But the reality is that's why we're growing 42%. It's not, you just don't wake up in the morning and grow by those rates at scale. We're going to grow faster this year than we did last year. Because really what happened, it's interesting, is when OpenAI came out, who's also a partner, We use a number of the large language models because it's cheaper to use them and do it in an enterprise way where you have no data exhaust, meaning we can keep our clients' data private. We build our own small and midsize language models. But when OpenAI came out, we're going to look back 10 years from now, and that was the renaissance moment, the starting line.

And it's when data went, I'm sorry, when AI went from science fiction to boardroom conversation. And every board of directors went to every CEO and said, what's our AI strategy? And every CEO went to every CIO, CTO, CMO and said, what's our AI strategy? And we were there. Using the AI, do you guys, like, what is the impact on the business? Are you hiring less people? Is it making you more efficient? And that's what's leading to more, you know, kind of free cash flow. What else? Because I've talked to, I don't want to say what it is, but this is one of the top maybe three executives at one of the large card businesses. They're probably a client, but keep going.

I almost 100% positive they are. And he runs, you know, I don't know, maybe a division of 10, 15,000 people. And in his specific division, he's like, dude, we're testing all these different AI things, whatever. And he's like, I got a new problem. He's like, as we figure out the AI stuff, my new problem is what do I do with all my people? Because he's like, we don't necessarily need to fire them. We're very profitable. But they got free time now.

So what else are they going to work on? Well, the problem is that he's probably going to need to fire those people and hire other people. Right. So let me give you a great statistic for Zeta in particular. Over the last three years, we've grown our business at approximately a 25% compounded organic growth rate. We've grown our global headcount by less than 4% by using AI. And that is leverage. When we go into our clients, we're able to do multiple things.

First of all, our platform can disintermediate seven different existing vendors today. Mm-hmm. So they're consolidating from seven or eight vendors down to one partner. Two, we're able to use AI to lower their marketing cost, in most cases, by half. So if you spend $50 to create a customer without us, we can help you do it for $25, just by way of example. It doesn't. We charge on a software basis, just to be clear. We charge a software fee, and then when they use our platform, a utilization fee kicks in after they hit their minimums. But the whole model is to help use our data and our AI to better target. Because if somebody's not interested in your products and they're not in market, why waste

money marketing to them? Yeah, 100%. Right? So you've got the vendor consolidation, you've got the marketing targeting, where you're taking the 50% out of people who are not in market and will not qualify for your products and services. And then it starts a flywheel. Because we plug into the client's customer relationship management system, or CRM, we're able to see everybody who buys. And then the algorithm gets smarter. And it knows who to target of the 245 million people who are opted

into our data cloud. And we do all that in an environment where we keep the consumer's data totally private we never share the personal information of those individuals even with the enterprise client so you're basically you're going to whatever client you're saying hey in your customer database you have clients you know one two three all the way through i don't know two million we think client 1,342,731 they're most likely to buy right now send them an email It's actually better than that. What we do is we take the enterprise's first party data and we put it into what's called a consumer data platform or CDP, which is like a little private data environment that we built. We then match that data. Let's say they have 2 million active customers. We match it with the data that we have on those same people. So we might add 5,000 incremental data elements, demographic data, transactional data, credit data, research data, search data, all of that. And then what the algorithm does is it starts to look at who are their most valuable customers and what did they do in the 30, 60, 90 days prior to buying from them.

We then look at the 240 million, let's say they have 5 million customers, we have 245, there's 240 million incremental people. Who's doing those exact same things? And let's target them. It works the same way on churn management. So we have a client who's a very large global wireless company. We look at every one of their customers every moment of every day. We see that customer 45789 has begun the process of exploring buying a new wireless phone. They search the keywords. They've read articles on the topic. We see that they've begun research on switching carriers. we're then able to build the curriculum of contact and we've helped that carrier massively lower their churn by knowing exactly what the customer wants and making sure that our client can get it to them before they change because once they change i mean this is the future of all communication and in a weird way i guess like the social media platforms are doing this just for showing tweets or boast or whatever you guys are instead saying hey maybe you want this thing and you said something earlier that i think is under uh appreciated which is people don't mind ads

if they actually are valuable for sure well here's the thing but if i get an ad for makeup right i'm like ah this is jarring it is and in fact it's funny because we were going from through some examples this morning in our data and investor summit which by the way is online if anybody cares to watch it, of very jarring ads that were sent to people who it just makes no sense. What people have to understand is almost all of the content that you consume on the internet, on TV, on the radio is created because of advertising. If you don't have marketing on that content, they cannot afford to pay those reporters. They cannot afford to keep managing that social media platform. So if you accept that you're going to have to see ads,

you might as well see ads that are totally relevant to you and not irrelevant. And that's what our whole platform is based on, to help the consumer see stuff that is better for them while helping enterprises to lower cost of marketing and CRM. We think of ourselves as sort of helping both sides of the equation. I mean, it makes complete sense for me. So what's next? You guys have a stock price that's starting to come back. You got a great business.

It's throwing off free cash flow. It's not back to where it was before. You've got this great product. Haven't lost any customers. Where do you go from here? Well, I mean, right now we are laser focused on execution, right? We are at the forefront of what we think is going to be the biggest marketing cloud replacement cycle in the history of marketing clouds, right? Because most large enterprises have worked with the same marketing partner for 10-some-odd years.

Those partners cannot put AI at the heart of their platforms. They can talk about AI all they want, but they have a marketing platform. platform, they can't put AI into the existing architecture and they're not throwing it out. So they have to step out to an algorithm to do a query. That algorithm then does a data dip into a data repository to go back to the algorithm, which creates the answer or the intelligence, and then tells the marketing cloud to do something. Because we rolled out our completely new architecture in 2021, we completely rebuilt our platform from 2017 to 2021, and that's when we rolled it out, we put AI at the center of the platform

along with data. So a great example is Forrester, which is sort of the important rating service in software. If you look at their report on marketing automation, we are the furthest to the right and the highest in the leader quadrant. I can't say we're the leader, but if you look at it, It certainly looks like we're very separate. It's an attractive position to be in. It's a good position. Maybe you might even say it's the number one position. But the reality is they said that we solve the most complex marketing problems and we make them simple because we put AI and data as native to the application layer.

Yeah, it makes a ton of sense. What have you learned through this process of getting attacked by the short sellers? I mean, listen, I've learned first and foremost that this is not a fun process. Second, you need to make sure you bring in the world's greatest people to help you, which we have. Third, be proactive. You know, this whole narrative, just sit back and this will pass. It just doesn't make sense to me. Now, listen, you don't want to be, you know, I hate to be too esoteric here, but you don't want to be jousting at windmills, right? You want to be very, very tactical. This is what they said. Here's an 8K with the Securities and Exchange Commission showing exactly why what they said is wrong. We then did a full webinar with William Blair and Associates going through how they were wrong. We then did a data and investor summit for three hours showing why we are a trusted partner to 40% of the Fortune 100. Why we have not lost one client over this. Why we're growing our business last quarter at 42%.

Because we have built a superior product and we help our clients fix their biggest problems. We're going to continue to focus on that, right? We're going to roll out our next version of AI very soon. At our Zeta live conference in September, we rolled out our mobile intelligence product, which will now allow us to do everything we do on the internet and on connected television, we can now do in mobile. It's crazy. Um, is anything in your life changed since all this happened? Oh, I mean, no, no. I mean, you mean, did it affect me personally? Like, yeah, well, it has to affect you in some degree. It maybe sharpens your focus. It, you know, it makes you, you said, don't waste a crisis to get you really engaged with

the team. Like there's all these, you know, things that I think have to change, right? Here's what I would tell you. I love what I do every day but I am as fucking energized as I have ever yeah of course yeah oh no we're gonna win this is not like a question all right and then I've always wanted to ask someone this but I never had the opportunity so you're the guy I'm gonna ask uh not sure that's good but crisis happens yes who do you call like do you is there like a is there like a 9-1-1 CEO number that you call? You know, it's funny. There isn't. But I called Mike Milken because Mike's a

30-year friend and mentor of mine to talk through it. And he gave me some really good advice. I have a very good friend who has been through this. I called him and said, who'd you use for crisis communications? Who did you use for these different functions? And we put together a council. And the other thing that you'd figure out is this happens to more companies than you realize, right? It's just almost weird to me that, I mean, every CEO I've spoken to over the last three weeks, and that includes one who runs a $25 billion market cap company and another who runs a $35 billion private company. company but ran a public company before this. I have not met a CEO yet who hasn't been through this, which, by the way, I think is one of the reasons so many of our clients have been apathetic. Because they probably went through it themselves. They've all been through it at some point, you know, not while they were a Fortune 500 company,

but as they grew along the way. So, you know, big business opportunity is building a crisis communications company to help CEOs with this. And we should definitely name it CEO 911. I'm going to give you definitely credit for that. But it feels like it's happening for the first time when it happens to you, which for me it was. And you have to make sure you stay calm. And your people need to see you calm. Your people need to see you lead from the front. And my partner, Steve Gerber, who is our president and COO, and my CFO, Chris Greiner, and my CFO, I'm sorry, my general counsel, Steve Vine. I think the four of us plus the rest of my ELT is partners. I don't think of them as employees. We really do this stuff together. And I would say that one day

they're going to look back on this and there'll be a Harvard case study on this situation. I'm Not sure the whole case study will be about us, but we will be in it. I love it. Where can we send people to find you on the internet or find out more about the company? Well, ZetaGlobal.com. I mean, we have a great investor relations site. We have a lot of information online. We did this investor data summit today.

It was a three-hour thing. It's long, but it's online to watch it. It was all on video. We published a 15-page response that we 8K'd that is on our investor relations site. Listen, I will say again, we are incredibly proud of the business we built and the people that are with us building it. And we are going to emerge from this crisis stronger than we entered it. And that's something that at some level, this has been a bit of a gift in that it's a wake-up call and it's showing us that we have to do better at many things, which we do. We openly own that we made some mistakes on transparency and other things that if we had put information out there, they wouldn't have been able to make this stuff up.

And we've begun the process of fixing that. We're going to continue to do that. But ultimately, if we beat and raise our 14th quarter, our 15th quarter, our 16th quarter, our 17th quarter, the stock will go back to where it should be. Yeah. Makes a ton of sense. Well, thank you for coming to do this. I know you got a lot of things going on and it's probably not fun right now to be talking about this all the time, but I think people really learn a lot from it. And also I think it's fascinating as the world kind of shifts and these financial markets become somewhat of these battlefields to see you

guys you know kind of in the heat of it at the moment is it's always great to talk so it is it is definitely the heat of the moment and i really appreciate you having me on anthony