Greetings and welcome to the Zeta Acquisition of Marigold Enterprise Software Business Conference call. At this time, all participants are in a listen-only mode. The question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Matthew Pfau, Senior Vice President of Investor Relations. Please go ahead.
Thank you, Operator. Hello, everyone, and thank you for joining us on today's conference call for the announcement of Zeta's entering into an agreement for the acquisition of Marigold's enterprise software business. Today's presentation and news release are available on Zeta's Investor Relations website at investors.zeta-global.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; Steve Gerber, Zeta's President; and Chris Greiner, 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 press release, contain forward-looking statements regarding our financial outlook, business plans and objectives, and other future events and developments, including statements about the growth opportunities and accretive metrics related to the Marigold enterprise software business acquisition, as well as near and long-term synergies related to the same. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected.
These risks and uncertainties include those described in the company's announcement release and other filings with the SEC and speak only as of today's date. In addition, our discussion today will include references to certain forward-looking non-GAAP financial measures, which should be considered in addition to and not as a substitute for GAAP measures.
We use these non-GAAP measures in managing our business and believe they provide useful information for our investors. As forward-looking non-GAAP measures, we do not provide a reconciliation to the closest comparable GAAP measure because of inherent uncertainty and unavailability of information without unreasonable efforts. With that, I will now turn the call over to David.
Thank you, Matthew. Good afternoon, everyone, and thank you for joining us today and on such short notice. Today, we announced an agreement to acquire Marigold's enterprise software business. The acquisition advances three levers of our strategy. First, scale with enterprises by adding over 100 global enterprise brands, including 20 of the top 100 advertisers and more than 40 Fortune 500 companies.
These brands spend billions of dollars on marketing, presenting a significant opportunity for us to cross-sell our other products. Second, use case expansion through the addition of a scaled loyalty business, a true on-ramp where AI and lifetime value meet, and global reach by increasing our presence in EMEA. The business is greater than 90% subscription, carries a cost of revenue below 30%, and is expected to be accretive to Adjusted EBITDA and Free cash flow in year one.
Let me briefly dive into an overview of Marigold's enterprise software businesses, followed by discussing its alignment with our M&A criteria. Then our President, Steve Gerber, will provide more details on the strategic rationale, and our CFO, Chris Greiner, will wrap up prepared remarks with financial details before we open the call to questions. Marigold's enterprise software platform includes Cheetah Digital, Selligent, Sailthrough, Liveclicker, and Grow. Cheetah Digital delivers enterprise-grade marketing software with global scale and includes a scaled and proven loyalty offering.
Selligent provides a flexible enterprise marketing platform to execute, analyze, and optimize customer engagement across multiple channels and has a strong presence in Europe. Sailthrough is a publisher-first marketing automation and personalization platform. By tightly integrating it with LiveIntent, Sailthrough will elevate the Publisher Cloud into a unified stack for identity, messaging, and measurement.
This is mission-critical in a post-OpenAI and Gemini world and will work in unison with our Generative Engine Optimization product, and LiveClicker delivers interactive engagement and conversation through real-time dynamic personalization. Against our publicly stated M&A criteria, the transaction meets or exceeds each threshold. First, we have a disciplined plan to fully integrate the acquisition within 12 months, with customer continuity the top priority. For Marigold's longstanding customers, the integration will be non-disruptive now and additive over time.
We will also fully integrate the data cloud into their existing platform as a benefit. Second, the acquisition will be accretive to year-one Adjusted EBITDA and Free Cash Flow and will lower our overall Cost of Revenue percentage. Further, the acquired business's revenue has high visibility and will increase our subscription revenue base. Further, the transaction price represents a less than two-times multiple on the acquired business's revenue and less than 10 times Adjusted EBITDA. Third, Marigold's enterprise software business adds over 100 global enterprise relationships that will benefit from our one Zeta model, providing significant cross-sell opportunities.
We will also have the opportunity to sell Marigold's loyalty offering into Zeta's 567 scaled customers. Fourth, the acquisition expands our EMEA footprint with entry into APAC and adds experienced customer and product teams in under-penetrated markets. Further, we are incredibly excited about the people we are adding to our Zeta team through this acquisition. And lastly, we expect cross-sell and upsell synergies to be accretive to Zeta's growth over the next several years and incremental to our Zeta 2028 targets. This acquisition is a true win-win-win.
Enterprise loyalty and messaging amplified by Zeta's data and AI, delivering high conversion, stronger retention, and predictable, profitable growth for brands while strengthening Zeta's subscription core. Now, let me turn it over to Steve Gerber, Zeta's President, to provide additional details on the business. Steve?
Thank you, David. Our strategy is to be the indispensable platform for enterprises applying AI, turning identity, intelligence, and activation into predictable, profitable growth. This acquisition accelerates that strategy, adding three enterprise messaging franchises, a scaled loyalty business, and deeper enterprise reach in EMEA and APAC. Our job now is execution, non-disruptive today, additive over time. How we win comes down to three things: product, customers, and integration.
First, product. We will unite Zeta's data foundation, our proprietary data cloud, robust data model, and real-time connectors with Marigold's loyalty and messaging products to sharpen personalization, expand cross-channel capability, and lower total cost of ownership. Marigold's applications have operated without a native CDP. Zeta supplies the enterprise data foundation, persistent ID, and real-time signals they plug into to expand scale and increase precision. Enhancements will be modular, methodical, and seamless to the user, with benefits visible quickly in consumer experiences.
Next, customers. Marigold's blue-chip base relies predominantly on retained use cases. These enterprises are ideal for our one Zeta playbook. Introduce AI-powered acquire and grow use cases natively to deliver more value to the customer and higher RPU for Zeta. Historically, when enterprises adopt a second and third use case, revenue per customer increases two-to-four x over time. We'll use loyalty amplified by AI as an on-ramp to expand and extend within existing enterprise customers, lifting LTV and creating durable paths into additional one Zeta motions. Finally, integration. Our first principle: do no harm.
Then add incremental value by focusing on the points of least friction and greatest opportunity while retaining top talent and top customers, setting us up for transformational value creation for customers and for Zeta. The replacement cycle that began in 2023 has accelerated. AI-powered, not AI-adjacent platforms, are taking share by delivering better experiences for consumers and better outcomes for brands.
AI is the spark. Results are the fuel. That's how we turn one plus one equals four into greater opportunity for our teams and greater value for our customers. I'll now hand it off to Chris to share more on Marigold's scale and the deal terms of the transaction. Chris?
Thank you, Steve. Total consideration for the Marigold acquisition is $325 million, subject to adjustments. $200 million will be paid at close, of which $100 million will be in cash and $100 million in stock. Three months post-close, an additional $125 million will be paid, of which $50 million will be in cash and $75 million in stock, subject to adjustments for working capital, indemnity holdback, and other items.
As David mentioned earlier, the acquisition either meets or exceeds our disciplined M&A criteria. While the strategic and synergy merits discussed by David and Steve earlier make for a very compelling acquisition, I'm personally encouraged by many of the next-level financial KPIs that further strengthen our business model, namely Marigold's revenue model and cost of revenue profile.
Notably, over 90% of the acquired business's revenue is subscription and highly visible, bringing Zeta's total recurring revenue base from approximately 50% to now almost 60%. From a cost of revenue standpoint, in fiscal 2025, Marigold's cost of revenue was less than 30%, compared to 40% for Zeta in calendar 2024 and 38% year-to-date June 2025. With these two metrics in mind, our established playbook for use case expansion through one Zeta and channel expansion, along with our history of achieving integration savings, makes owning this asset at the price we paid a highly favorable outcome.
We anticipate the transaction will close late fourth quarter 2025, and at that time, we will provide details on the expected revenue contribution for the fourth quarter of 2025 and full year of 2026. To give some perspective of the business's scale, we expect the acquired business to contribute approximately $190 million to 2026 revenue with a mid- to high-teens Adjusted EBITDA margin profile. We also expect the transaction to be accretive to 2026 Free Cash Flow.
With integration synergies over time, we would expect Marigold's pace of Adjusted EBITDA margin expansion to mirror that of Zeta's, which, based on our Zeta 2028 plan, is approximately 150 basis points per year at a Free Cash Flow conversion rate equal to or greater than ours. Longer term, we expect the acquired business to have a margin profile in line or above Zeta's. Given there could be variability in the close date, we're guiding analysts to not yet include Marigold in their 2025 or 2026 estimates until the transaction closes.
We want to make sure that consensus estimates do not become a mixed bag of organic and acquisition-related revenue. So upon announcement of closing in late 4Q 2025, we will provide explicit guidance on the contribution for the fourth quarter of 2025 and full year 2026. As we have done with prior acquisitions, we plan to clearly break out organic versus acquired revenue for the first year post-transaction, just as we have with LiveIntent.
Lastly, we're reaffirming our third-quarter and full year 2025 guidance. In addition, the Marigold transaction is incremental to our previously issued Zeta 2028 plan, and we will update these targets as well. With that, let me turn the call over to the operator for Q&A. Operator?
Thank you. We'll now be conducting a question-and-answer session. If you'd like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up their handset before pressing the Star keys. One moment, please, while we pull for questions. Thank you. Our first question is from Arjun Bhatia with William Blair.
Yep. Perfect. Thank you, guys, and congrats on getting the deal done here. I want to maybe touch on the product side a little bit. It sounds like, Steve, you mentioned, I think Marigold doesn't have a native CDP. So obviously, that integration will help. But in terms of what kind of other functionality that Zeta brings to the table that can enhance their offerings, can you talk about do they have orchestration capabilities? Are they kind of omnichannel? Is that something that you'll also add into the equation? And then I'd be curious to hear just in terms of the maybe difficulty or how long it might take to integrate Zeta Data Cloud into Marigold business.
Thank you, Arjun. Let me start, and then I'll kick it over to Steve Gerber. To be clear, their clients are almost exclusively one use case, which is retention. So, in order to move them to acquisition and monetization, we would be fully integrating them into the Zeta Marketing Platform. As you know, Arjun, we see the CDP as the connective tissue. I think you're going to see a very quick, I would say, 90-180-day full integration with our CDP capabilities and our Data Cloud being fully integrated into the existing platform.
I think as we grow within, I would say, that same six months, we can get orchestration capabilities and omnichannel activation completely integrated. So I think it'll take us a total of about 12 months to fully integrate at the MTA level and sort of the architecture level.
I think we can have our CDP Data Cloud and marketing activation capabilities fully integrated within three to six months. Because all of them are on one use case, I think it's just an incredible opportunity for one Zeta. The numbers that Chris has put out don't include any synergies at this point. It's what we believe the core asset's going to do. We think there's upside from there, obviously. I think it's going to take us some time to get in there and get a lot of this done. Gerber, did you want to add to that?
No, I think you hit the key points, and these are big enterprises, Arjun, so this is one where we focus on continuity in the short term and opportunity in the longer term, and the way, as David said, the glide path is through our CDP and our data cloud that we are able to deliver results and use cases that they cannot today in a more seamless way, and it's through that proof that we'll be able to move more budget and more investment to us over time.
Arjun, just to finish, we really feel like the special sauce here, in addition to the customers and the scale and the recurring revenue and the low cost of sales, is the loyalty business. We're now going to be the loyalty provider to some of the largest North American and global enterprises in the world. And that data will train the algorithms that we have as proprietary to help those customers substantially better deploy their activation and monetization capabilities.
So adding our AI, which, as you know, sits core to the platform and sits core to the CDP, we think is going to be a meaningful game changer. The other opportunity is adding that as a new product or a new channel, depending on how you want to look at it, to the 567 global enterprise clients we currently have today that are scaled. So we really see this as one plus one equals four.
Yep. Perfect. That's very helpful. And David, you kind of touched on it there, but I was going to ask, it sounds like their business is very focused on EMEA, as you pointed out. But in your perspective, there's no reason that their product and their offering, once integrated, can't be sold to your kind of North America-heavy customer base. Is that fair or unfair?
Yeah. Well, 60% of their revenue is North America. So I think that it's fair to say, but it's probably not exactly accurate. I'm trying to make a joke. But this platform operates meaningfully in the United States, Mexico, and Canada today. About 35% of their revenue is EMEA, which, by the way, is more than we currently have. And we think that that's an area that we can really scale and grow because it's a new opportunity to us to really have a presence there. But this business is tried, true, platformed, and operationally scaled in the United States today. So I think that makes it even easier for us to expand their clients to additional use cases and expand our clients to their new products.
All right. Very helpful. Thank you, guys.
Thanks, Arjun.
Our next question is from Scott Berg with Needham & Company.
Hi, everyone. I hope you can hear me. Interesting acquisition. I guess two questions for me is, one, is there any customer overlap today? And then two, how do you think about the cross-sell opportunity? Is this more about taking your data products and some of the top-of-the-funnel opportunities and cross-selling it into Marigold? Is that the bigger opportunity, or do you think taking their loyalty products and selling that into the existing Zeta customer base is maybe the bigger opportunity? Thank you.
Well, Scott, I would joke and say yes. We think it's an opportunity both ways. What I would say is the larger, shorter-term opportunity is working with their brands, which include greater than 40 Fortune 500 customers and greater than 20 of the top 100 advertisers in North America today, and extending their use cases from just retention to also adding monetization and activation.
As you know, those are very big and very meaningful opportunities. The beauty of adding loyalty to our clients is, yes, it's additional revenue and it's additional profit at very low cost of sales, but it also will immediately make the algorithms smarter for those clients by feeding all of their own loyalty data into our proprietary artificial intelligence models. So it'll really accelerate the flywheel on helping them to do a better job creating, maintaining, and monetizing customers. So I'd say in the short run, the bigger opportunity is adding use cases and then, by definition, channels to their clients. In the longer run, it's adding loyalty to our clients, if that makes sense, Scott.
Very helpful, David. I appreciate that. And then Chris, from a financial perspective, the only metric you really didn't talk about was maybe how fast the business is growing. How do we think about the growth rate of the Marigold solutions relative to Zeta's kind of organic growth rate this year, without LiveIntent and without the political revenues? Trying to understand if that'll also be accretive to your growth rate or not, as we think about 2026 and 2027. Thank you.
Sure, Scott. Their business was flat, to call it low single-digit growth, which was part of the reason why the multiple we paid was what it is. It's what we've been talking about in the last two questions that we've received around our ability to have the asset grow at our organic growth rate or faster, so call it mid-20s over the last six months, what we've been growing, through the upselling of more channels and the cross-selling of the Grow and acquire use cases.
So, to be clear, Scott, one of their clients moving to a true one Zeta doubles this business. Now, I'm not saying we're going to get there overnight, and that would be over a number of years because they wouldn't move all of that budget at once. But this is a very meaningful opportunity. The fact that it was flat makes sense to me in that they had sort of rolled together 10 or 12 different companies. They hadn't really integrated them, and they were operating a small to mid-size business division.
They were operating an enterprise division. They were operating another division. I think they did a really good job sort of holding everything together. But our strategy, of course, is fully integrate the asset, fully cross-sell, add all of the activation and monetization capabilities with, as you know, 14 to 15 channels that they can go across. I think you're going to see us really supercharge their growth.
And I want to be clear, we see this deal as fully accretive to our current 2028 plan. So we see no slowdown in the Zeta business. I don't want anybody to even infer that. Our business continues to grow. You saw we reaffirmed Q3. We reaffirmed this year. We are very much on track for our 2028 plan. This will simply be on top of that.
Understood. Very helpful, and congrats again. Thank you.
Thank you very much, Scott.
Our next question is from Matt hew Swanson with RBC Capital Markets.
Great. Yeah. Thank you for taking my question. Maybe just a couple on the Sailthrough, which you mentioned as part of your opening remarks, being a really interesting product they have. And then also maybe just kind of the thoughts around the Publisher Cloud, which I know is also something we built out a little bit more after LiveIntent.
Yeah, we're very excited about Sailthru. To be honest, we've known the Cheetah and Sailthru assets quite well for many, many years, and have always admired both those assets and the amazing people, which, by the way, we've gotten to know Selligent better and the other assets better, and of course, are big admirers of theirs now and very excited about the people who are there and what we're going to do together.
When you think about the Publisher Cloud, it's sort of really starting to emerge at a very difficult time for publishers, right? You're looking at a world today where, post-Gemini and post-OpenAI, the vast majority of questions that consumers are asking are now being answered on those platforms, whereas they used to be referred to publishers to answer those questions. So one of the biggest challenges publishers are having today is traffic and monetization. So now let's look at the chess pieces we put in place. Eight years ago, we bought Disqus, which is the world's largest commenting and sharing platform.
Over the last year, we've fully merged that with Live Intent, which is the number one monetization engine for electronic newsletters and publishers. You're now going to add to that the number one messaging platform for publishers in North America. So you're really looking at a Publisher Cloud that can meaningfully accelerate a publisher's traffic, can meaningfully grow their monetization, and can do so at very low cost of sales to Zeta. So I'm very, very excited about the full integration of Selligent into the Publisher Cloud. I'm sorry. I meant to say Selligent . I apologize. A lot of S's.
Thank you.
Our next question is from Zach Cummins with B. Riley Securities.
Yep. Thanks. Good afternoon. Appreciate you taking my questions. David, I just wanted to ask about the integration front. Zeta has been very successful in recent acquisition integrations, but just with having six different products that you're trying to integrate here, can you talk about maybe some of the incremental challenges that could come with this in terms of integrating this into the overall Zeta platform?
As usual, Zach, great question. What I would say is we are exceptional at this. This is probably amongst the things we do best, which is buy small, really good technology companies with great people and great tech, but don't really have the type of sales engine and integration engine that we're able to add. So when you look at the integration, the integration, which will start with the CDP integration and the data cloud integration, which will move the AI as core to what they're doing, will be quite. I don't want to say simple because I'm sure my tech people would kill me for that, but it's something that we see as one of the faster moves.
The ability to then sort of connect the ZMP to the platforms in themselves will probably start with a proprietary API integration in and out, which will allow for activation quickly, but won't fully integrate, probably for a number of months. If you look at it, we're going to do what I think we've also done in the past. This is not the first time we have bought businesses that had multiple divisions. One, loyalty will live with the Data Cloud, which will integrate there.
Two, Cheetah will integrate with the ZMP, which ultimately will come together there. Three, Selligent will integrate into the Publisher Cloud. So that will happen there. So you'll have the three largest assets from that perspective will integrate in. As it relates to Selligent, because we don't have a big platform in Europe, we're going to probably lean more heavily on them and use their technology and their people.
And then our global relationships that we've not been able to take advantage of internationally because we didn't have the assets to really take advantage of our existing global customers in EMEA, that will be, I think, a very unique opportunity to bring our existing customers to them to scale them very quickly as well. So we're sort of looking at it in four or five different parts. And when you break it into those parts, and you build the multiple work streams, it's easier to integrate them when you think of it that way. Steve Gerber, would you like to add to that?
No, I think the main point is the playbook that we have is something that is repeatable here, making sure that we do this in phases in a way that is non-disruptive for the customers while we're bringing in the components of Zeta that add incremental value.
When we start with the notion of the data foundation, which is our proprietary data combined with the customer data wrapped around our AI, it's a glide path to a faster implementation, and we're able to show impact more quickly. The three tracks that David laid out, we have expert teams ready on day one to start with this. We've already got the playbooks laid out, and we're working very closely with the teams from Marigold to make this happen as well.
Understood. Well, thanks for taking my question, and best of luck with the integration.
Thanks, Zach.
Our next question is from Elizabeth Porter with Morgan Stanley.
Great. Thanks so much. I wanted to follow up on your comments about just leveraging the EMEA customer base. As you're looking to break into this market more aggressively, is there anything that is required from a data center, data sovereignty perspective, or investment in order to capitalize the opportunity? I'm sure there's some assets that you're inheriting, but would love to just hear more about what it might take to kind of get further into this EMEA opportunity.
Thank you, Elizabeth. And I thought you would be particularly happy about the 90% subscription revenue here on multiple-year contracts, as we've heard your desire for us to get more into that. I would start by saying no. We have all of the assets we currently need in Europe. I would say, quite frankly, that the existing business has maybe even overbuilt for what they're currently doing from a capacity perspective.
So I think we have a long runway as it relates to the assets that we are getting that have been built out from an infrastructure perspective there. And remember, we are still in Western Europe already. We already have hosting assets in Western Europe. We already host our algorithms in Western Europe. And we're already fully in compliance with the EU and GDPR in Europe as a data platform.
So we host all of our clients' data for Europe in Europe. It does not come back to the United States as we're supposed to do. The ability to integrate our existing hosting assets with the data cloud and the artificial intelligence that we run natively in Europe into their platform might take a bit. As you know, that's not something we'll probably be able to turn on overnight.
But I think that's something that we will be able to get to early next year, as I think Steve has pointed out a few times. These are very large global enterprise customers. Our single biggest goal is to not disrupt them during the peak period of year for their businesses. So we plan on adding the data cloud and adding CDP capabilities quickly, but really not doing anything that would move anything around until early next year, if that makes sense.
Got it, and then just on the large, very global enterprise customers, usually those large enterprise customers have more of a direct sales motion, so anything that you're inheriting from a go-to-market kind of seller side that we should keep in mind with the acquisition?
Yeah, we're picking up a great Salesforce and picking up incredible people. My understanding is almost all, if not all, of this revenue is direct to enterprise.
Yeah, that's exactly right, David. I think when we think, Elizabeth, about some of the kind of next-level financial metrics that come with the deal, many of which we'll learn a lot more on our pathway here to closing in late Q4, but we don't have to learn a new go-to-market sales motion. The sales team at Marigold just does the sales team every single day, as you noted, is selling into these enterprises with proven budgets, very, very large scale. So our sales motion is consistent.
The visibility that we have into our revenues increases, as David mentioned, call it roughly 50% of the revenue today being recurring, now approaching 60% with the addition of Marigold. From a COGS perspective, they're at sub 30%, whereas call it Zeta's right around 40% today. So really nicely accretive there. Obviously, all of what we'll be selling through their products will be direct as well, should only further help our overall mix. And then this is right in our integration sweet spot. Our genesis was in email, and our ability to take platforms that have not yet been integrated and get them into the ZMP quickly with teams deeply embedded is what we do really well.
Yeah. As you can tell, Elizabeth, we're very excited about this.
Great. Thank you.
Thank you.
Our next question is from DJ Hines with Canaccord Genuity.
Hey, good evening, guys. Congrats on the deal. So, David, the grow and acquire cross-sell story is very clear. Where I have a little less visibility is on the loyalty side and what your 567-scale customers are already doing there today. Is this still a white space opportunity? Is there incumbent tech in there that needs to be replaced? How many of those customers need to run loyalty programs? Any color along those lines would be helpful and interesting.
That's a great question. It's certainly not white space, to be honest. I think taking them from one use case to two or three use cases is white space and can be a meaningful scaler to our business quickly. I think, as it relates to loyalty, by definition, our scaled customers are scaled. They're big businesses. They're either going to be doing this internally, which I think is an easier sale, or they might be working with one of the other loyalty platforms out there.
I think the way we will bring this to bear is we will, once again, take a page out of everything we've done. We will be able to provide that service of loyalty solutions to our enterprise clients at a substantially lower cost than they are currently paying to existing standalone vendors. Second, it will make the algorithms that are figuring out the intent-based score for their current use cases, whether it's acquisition, retention, or monetization, substantially smarter. And you know this better than anybody, DJ.
Today, for every dollar that is invested into our software and data, we return between $5 and $7 in revenue. My shorter-term goal - I shouldn't say short. My goal is to, on a sooner versus longer perspective, get that to $10 for every dollar they invest. Clients who move their loyalty over to Zeta, for those use cases, are going to see those types of returns because that's how much smarter the algorithms will get when they start to get the SKU-level data, not just the credit card basket data, which is what we get from most of our partners today, if that makes sense.
No, it does. It makes perfect sense. And then, David, you hit on this a little bit, but I just want to kind of hammer the point home. Investors can be, at times, a pessimistic bunch. One of the questions we often get asked when M&A like this hits is whether, in this case, Zeta is doing something like this to mask any deterioration in the core business. You guys have been preparing that?
Yeah, I would say that's why three times, and I will now say it a fourth, that is not the case. This was an opportunistic deal for us to pick up some of the greatest companies in the marketing technology space at a very reasonable cost. To point out, we are paying on the existing business less than 10 times EBITDA and below two times revenue. So I think this was a unique opportunity to pick up incredible tech, incredible customers, incredible people at a reasonable cost. But I want to be clear.
We are reaffirming Q3. We are reaffirming the year. We are reaffirming our 2028 plan. And this will be accretive to that. And as you know, DJ, our 2028 plan requires a 20% organic compounded growth rate between now and 2028. This deal will be on top of that.
DJ, just like we did with LiveIntent, we'll continue to break out once we have the final details post the closing. We will provide to you and our investors not only the fourth quarter stub revenue, whatever ends up being, depending on the close date, or if it goes beyond that, we don't expect it to, but it could, as well as the quarterly breakdown of 2026 revenues. We'll break that as a separate line item in our guidance as well. Just, again, full transparency, the organic business continuing to be at the rates that David set.
Yep. Perfect. Very clear. Look forward to seeing you guys at Zeta Live in New York next week.
We are very excited. Obviously, this has been a busy few weeks for us leading up to this and Zeta Live next week, which is shaping up to be the best event I think we'll have ever hosted.
Our next question is from Richard Baldry with Roth Capital Partners.
Thanks. I'm curious to what degree any of the component pieces you're buying could be leveraged by the global agencies that you've had a lot of success with in the last couple of years.
I always love when you're curious, Rich, so I appreciate that. Absolutely, yes. I think the loyalty offering in particular will be very interesting to a number of the large holdcos. One or two of them have their own offering, and they're going to continue to focus on theirs, which makes total sense to me. I think that there's a meaningful opportunity to do that because when you look at how much smarter the algorithms get when they're ingesting that loyalty data, it is really, really exciting. I think that'll be sort of the biggest one in the US.
Now, I think in Europe, it's going to be very interesting because, as you know, all of our large holdco clients are also in Europe. This is going to give us a really supercharged team over there. Selligent does have omnichannel capabilities today, which we'll be enhancing. They just have not been selling them to any of the agencies. So I think this will be a meaningful opportunity to grow our agency relationships, which have flourished in the United States and Canada. I think it'll give us a meaningful opportunity to really supercharge them in EMEA.
Now, last one for me would be, why the two-step payout period, the three-month delay? I'm sort of curious what the driver behind that is, because you clearly have enough cash on the balance sheet to do this in one step. Thanks.
Yeah. It's not about the cash. I think the real answer here, and Chris said it subtly in his prepared remarks. There's going to be a number of adjustments that could drive that number down based on working capital, based on the strategic plan around transition. I've always felt it's easier to pay somebody less if they don't deliver what they say, versus clawing it back.
And this was really my insistence on making sure that you had the ability to do that. I am not questioning the Marigold team in any way, shape, or form. It's just we haven't closed the deal yet. And until we get the deal closed, and then you've got two or three months to look at collections, working capital, free cash flow, which, as you know, is very important to us, there'll be adjustments either up or down in that.
That was really the main function. Traditionally, we've structured our deals. I can't remember a deal we've done without some level of structure. Normally, they would include some type of either an earnout, which we would be able to claw back from, or some type of a note payable. In this case, in order to get the deal done at the multiples we paid for it, they needed the money to come a bit faster. And this was the happy medium we came up with, if that makes sense.
Got it. And maybe one more. Because there is a stub business being left behind, and I think in the SMB space are a lot of their sort of senior exec people who are not necessarily sort of VP or presidents running the divisions you're buying, are they being left with that entity so you kind of don't have the drag of some of those salaries coming across the tape?
So what I would say is they were run as separate businesses already, although we're not taking any of their sort of corporate SG&A, to your point, which we were happy about. The top 20 employees of this asset that we're buying, Marigold Enterprise, we are wrapping our arms around.
We're super excited about them, but we didn't end up taking a lot of what you would have considered corporate overhead because of that, and we were pleased by that. Now, we're also big fans of Michael and his team, who we think are going to do an exceptional job in the SME space, and we are, of course, rooting for them. They've kept the people they need to run that business and most of the corporate overhead.
Got it. Congratulations.
Thank you, Richard. We're, as you can tell, very, very excited about this one.
Our next question is from Koji Ikeda with Bank of America.
Yeah. Hey, guys. Thanks so much for taking the questions. I wanted to go back to the loyalty side of the business. This definitely is the most interesting part of the acquisition. And so a couple of questions here. Number one, any way to size up how big of the revenue mix loyalty-related revenue is? Question number one. And question number two, what is giving you the confidence that you could replace any sort of loyalty incumbents being used out there by the larger enterprises?
And then question number three is, who do you view as the competition that you're going after with an enterprise loyalty management? Is it something like an Oracle CrowdTwist or something like a Yotpo? Just trying to understand what the opportunity is you're going after here.
Yeah. So first of all, we're not going to break the numbers out. I wish I could, but it's meaningful. It's a scaled real business, and it's delivering services today to most of their Fortune 500 customers. So this has really got a scale to it. What I would say is that from a replacement perspective, we've looked at the capabilities of the product versus the other capabilities out there. And what we have found with a lot of our existing customers is they're doing a lot of their loyalty themselves.
And it's not really efficient, and it's not really driving the type of value to the other components of their business. So it's sitting in a bit of a silo. And most of our clients are using a loyalty platform. So we feel like we are very uniquely positioned to sell this product into our existing customers. Although, as I said a bit earlier, I think the faster opportunity to hyperscaling this is in moving their customers from one use case to two or three. I think our ability to move loyalty in, I think where we're competing with other customers, we can come in at a substantially lower price because we have other business relationships with them and deliver a superior product and service.
So as you know, I like to say the key to running a great business is sell a better product than your competitors at a lower price while being nice to them while you do so. Tends to be a model that's worked for us as a business. I think that will work with us here. As it relates to sort of the big, big opportunity, as I said, I think the faster opportunity is multiple use cases to their customers, but I do think selling these products in will long-term be very successful. Gerber, would you like to touch on competitors and/or add anything?
So as we look at this, loyalty as a capability or a function is mature, but there's not a Salesforce or Adobe here. And I think coming back to the notion of AI-powered loyalty, in many ways, reinventing this space as it becomes more than just earn and burn, and it really becomes the center point of customer engagement. And that's how we're thinking about it. As you know, we really are focused on differentiation and trying to find a side door, often where we land, we expand, and we extend. And as we'll talk about next week, we also embed. And loyalty is the perfect example of an embedded offering.
Loyalty is also, and I want to be clear, it's a more important asset as a connective tissue than just standalone revenue. Because when you look at loyalty, the stickiness is insane. The other thing that's really incredible is the level of information that then feeds the algorithms to make all of the use cases better. How do you better retain, monetize, and acquire customers than seeing every single piece of SKU-level data down to a deterministic individual? Now, of course, that stays private to that enterprise. We're not sharing that with other enterprises. It's their private data. But the ability to move that to activation or to retention or monetization is game-changing, Koji.
Thank you.
Our next question is from Jackson Ader with KeyBank.
Hey, great. Good evening, guys. Thanks for taking our questions. Actually, just following up on that last comment, Steve, that you made, where, at least in loyalty, there's no Salesforce here, there's no Adobe here, there's no real major incumbent. I'm just curious, either David or Steve, if you are able to kind of execute on this integration and the rollout over the next 12 to 18 months, what budget dollars will be accruing to you? And what are those customers, those big customers, where are they spending those budget dollars today?
I think the single biggest answer to your question, Jackson, is it's probably the single biggest opportunity we have to move their existing customers from one use case to two or three. Because when you take that loyalty data and you plug it into the CDP, which seamlessly connects into the ZMP for activation today, and you not only are feeding their CRM data, you're not only merging it with our data cloud, which you know we do, you're then adding in the loyalty data that is going to meaningfully enhance the algorithms' capabilities around who to target, when to target them, where to target them to drive substantially higher return on investment.
So to me, you're taking dollars from other places they would be spending marketing, which I think we're already doing, right? We grew mid-30s last quarter in an environment where the ecosystem's growing 10% or 12%. Now, that was, I think, 26% organic. So you're growing, call it 16% above the market right now by taking market share from where other competitors are spending.
I'm sorry, where our clients are spending dollars with our competitors that are not efficiently being deployed. I think the opportunity to hit their customers with those same capabilities and then enhancing them with loyalty data, both for our customers and their customers, is going to meaningfully drive our growth for many years to come.
Okay. And then a very quick follow-up. I mean, there's been a lot of discussion and excitement about the loyalty, but given that you're acquiring a bunch of different products or brands here from Marigold, any kind of idea on the puts and takes, things that are maybe growing faster than the overall average that's coming along with all of this business? Thanks.
I think it's hard for me to do that across all six assets. What I would say is we believe that we will grow this business at or above our own organic growth rate, not just for next year, but for many years to come, and I think that when we look at the business itself, we're very excited about the personalization engine, which is sitting down there that nobody has brought up. We think that's going to be very powerful. We're obviously very excited about the Publisher Cloud, and we're very excited about cross-selling products and services to both sides of the aisle here.
I think, once again, we reaffirm our 2028 plan. There is nothing changing in the Zeta core business. We're growing at the pace we've talked about. We've now reaffirmed Q3. We've reaffirmed the year. We're reaffirming 2028. This is an incredible opportunity to achieve additional scale with a higher visibility into our forward business. You've now got what Chris said will be $190 million next year, almost all of which is subscription revenue at a substantially lower cost of goods sold than our current business. That takes our recurring business from around 50% to around 60%. It's a metric that I think we'll be able to continue to grow as it relates to the company once it's merged in.
Understood. Thank you.
Thank you. Our last question is from Clark Wright with D.A. Davidson.
Awesome. Thank you. Quick one for me. How does this deal impact your prior buyback plans and the progress that you've already made in terms of dilution?
So to be clear, and we'll have some more information on this at the investor conference, it doesn't change our ability to do that. As Rich said earlier, we have a lot of cash. We generate a lot of cash. We'll use cash on our balance sheet to do this deal, and that will leave us meaningful capital to continue to buy stock back. As I sort of joke, last year, our stock was $38 a share. Since then, we've grown the business mid-30s. We've grown EBITDA by greater than 50%. We've grown free cash flow by greater than 70%. We see the current pricing as still meaningfully discounted to where the stock we believe would be more fairly valued.
Clark, even though the guidance this year for dilution of between 4% and 6% was normal course and excluded M&A, even with this deal, presuming it closes before the end of the year, we will still be inside of that 4%-6% range.
Which, to reiterate, our guidance for dilution of 4%-6% was for employees. It was not including M&A. We're now saying we can get to those numbers, including M&A.
Awesome. Appreciate that color and then last one for me. What were the key factors you were considering when evaluating building versus buying in terms of this loyalty program? I assume there was a conversation prior to this deal announcement that went on of whether or not you could build out the capabilities. So I guess what was kept in mind ultimately before making this purchase decision?
This is a scaled loyalty platform already embedded into multiple Fortune 500 customers. To have built this would have been very, very difficult from a time and energy and technological perspective at a time when we're very, very focused on building out our agentic workflows, fully focused on AI development, and making sure we stay ahead of everybody else that's out there. This was simply a faster path.
Thank you.
Thank you. There are no further questions at this time. This does conclude today's conference. We thank you for your participation. You may now disconnect.