Q1 2024 IZEA Worldwide Inc Earnings Call
Operator: Good day, ladies and gentlemen, and welcome to Azeale Worldwide Inc.'s first quarter 2024 earnings call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press the star key followed by the number zero on your telephone keypad. Please note, this conference is being recorded. I would now like to hand the conference over to President and Chief Operating Officer, Ryan Schram. You may go ahead, sir.
Good day, ladies and gentlemen, and welcome to is he a whole squad Inc's first culture change 24 earnings call.
At this time.
So all in listen only mode.
A question and answer session will follow the formal presentation.
If anyone should your pie operator assistance during the conference. Please CHRISTUS. This chunky published all the numbers here right on the telephone keypad.
Please note this conference is being recorded.
Speaker Change: It's not having a Clarkson said Gee, President and Chief operating Officer, Ryan Schram, you May go ahead Sir.
Ryan S. Schram: Good afternoon, everyone, and welcome to IZEA's earnings call covering the first quarter of 2024. I'm Ryan Schram, President and Chief Operating Officer at IZEA, and joining me on the call are IZEA Chief Financial Officer Peter Biere and IZEA Founder, Chairman, and Chief Executive Officer Ted Murphy. Thanks for being here with us today.
Speaker Change: Good afternoon, everyone and welcome to ideas earnings call covering the first quarter of 2024, I'm, Ryan Schram, President and Chief operating officer at ICR and joining me on the call are <unk>, Chief Financial Officer, Peter Barry and I see a founder chairman and Chief Executive Officer.
Speaker Change: Ted Murphy, thanks for being here with us today.
Ryan S. Schram: Earlier this afternoon, the company issued a press release detailing IZEA's performance during Q1 2024. If you would like to review those details, all of our investor information can be found online on IZEA's Investor Relations website at IZEA.com forward slash investors. Before we begin, please take note of the Safe Harbor paragraph included in today's press release covering ISEA's financial results and be advised that some of the statements that we make today regarding our business, operations, and financial performance may be considered forward-looking, and such statements involve a number of risks and uncertainties that could cause actual results to differ materially.
Speaker Change: Earlier this afternoon the company issued a press release detailing <unk> performance during Q1 2024.
Speaker Change: If you'd like to review those details all of our Investor information can be found online and ideas Investor Relations website at <unk> Dot com forward slash investors.
Speaker Change: Before we begin please take note of the Safe Harbor paragraph included in todays press release, covering <unk> financial results and be advised that some of the statements that we made today regarding our business operations and financial performance may be considered forward looking and such statements involve a number of risks and uncertainties.
Speaker Change: Could cause actual results to differ materially we encourage you to consider the disclosures contained in our SEC filings for a detailed discussion of these factors.
Ryan S. Schram: We encourage you to consider the disclosures contained in our SEC filings for a detailed discussion of these factors. Our commentary today will also include the non-GAAP financial measure of adjusted EBITDA. Reconciliations between GAAP and non-GAAP metrics for our reported results can also be found in our earnings release issued earlier today and in our publicly available filings. And with that, I'd now like to introduce and turn the call over to IZEA's Chief Financial Officer, Peter Biere. Peter. Thank you, Ryan.
Speaker Change: Our commentary today will also include the non-GAAP financial measure of adjusted EBITDA reconciliations between GAAP and non-GAAP metrics for our reported results can also be found in our earnings release issued earlier today and in our publicly available filings.
Peter J. Biere: And with that I'd now like to introduce and turn the call over to <unk>, Chief Financial Officer, Peter Barry Peter Thank you Ryan and good afternoon, everyone.
Peter J. Biere: Thank you, Ryan, and good afternoon everyone. I'll review operating results for the quarter ended March 31st, 2024, compared to the prior year's quarter, and discuss certain balance sheet highlights. We saw strong demand for managed services during the first quarter of 2024, resulting in a 53% lift in bookings over the prior year's quarter and the highest total in seven quarters. This demand will begin to show up in revenues over the next several quarters, and we believe it bodes well for our growth resurgence.
Peter J. Biere: Managed services bookings for the first quarter of 2024 totaled $9.3 million, compared to $6.1 million for the prior year's first quarter, a 53% increase. The increase was primarily due to a strong sales pipeline that had been building over the past six months, both in the quantity of opportunities created and the dollar value of those opportunities. In Q1, the new opportunity dollar amount was up 105% year-over-year, which bodes well for the coming quarters.
Peter J. Biere: I will review operating results for the quarter ended March 31, 2024, compared to the prior year's quarter and discuss certain balance sheet highlights.
Peter J. Biere: We saw strong demand for managed services during the first quarter of 2024, resulting in a 53% lift in bookings over the prior year quarter.
Peter J. Biere: The highest total in seven quarters.
Peter J. Biere: This demand will begin to show in revenues over the next several quarters and we believe bodes well for our growth resurgence.
Peter J. Biere: Managed services bookings for the first quarter of 2024 totaled $9 3 million compared to $6 1 million for the prior years first quarter, a 53% increase.
Peter J. Biere: The increase was primarily due to our strong sales pipeline that has been building over the past six months, both of the quality and quantity of opportunities created and the dollar value of those opportunities.
Peter J. Biere: In Q1, the new opportunity dollar about was up a 105% year over year, which bodes well for coming quarters.
Peter J. Biere: A percentage of our new opportunity pipeline converts into bookings, which subsequently convert into revenue. As a reminder, IZEA reports bookings as a net number. Cancellations or refunds issued within a quarter are deducted from the bookings figure for that specific quarter. As a result, net bookings will always net out to revenue over time.
Peter J. Biere: Our percentage of our new opportunity pipeline converts into bookings, which subsequently convert into revenue.
Peter J. Biere: As a reminder, Isaiah reports bookings as a net number cancellations are refis issued within a quarter are deducted from the bookings figure for that specific quarter.
Peter J. Biere: As a result, net bookings will always net out to revenue over time.
Peter J. Biere: Our total revenue for the first quarter of 2024 was approximately 7 million, 24% below the prior year quarter.
Peter J. Biere: Our total revenue for the first quarter of 2024 was approximately $7 million, 20.4% below the prior year quarter. Excluding the previous year's first quarter revenue attributable to the large customer that we parted ways with in 2023 or our non-recurring customer, revenue grew 32.2% from the prior year quarter. While revenue is below bookings in Q1, I want to be clear that this is a matter of timing. Isaiah's revenue trails bookings, with the current delivery time between bookings and revenues averaging seven and a half months. Our managed services backlog, which represents the total of unrecognized revenue for contracts that are underway, as well as recent bookings that we haven't started to invoice, totaled $14.5 million on March 31st, 2024. This is an increase of 2.6 million compared to the fourth quarter of 2023.
Peter J. Biere: Excluding the previous year's first quarter revenue attributable to the large customer that we parted ways with in 2023.
Peter J. Biere: Or are non recurring customer revenue grew 32, 2% from the prior year quarter.
Peter J. Biere: While revenue was below our bookings in Q1 I want to be clear that this is a matter of timing.
Peter J. Biere: <unk> revenue trails bookings with the current delivery time between bookings and revenues, averaging seven and a half months.
Peter J. Biere: Our managed services backlog, which represents the total of unrecognized revenue for contracts that are underway as well as recent bookings that we haven't started to invoice totaled $14 5 million on March 31 2024.
Peter J. Biere: This is an increase of $2 6 million versus the fourth quarter of 2023.
Peter J. Biere: Looking at revenue components, managed services revenue, including HSU, totaled $6.7 million during the first quarter of 2024, which was $1.8 million, or 21.2% lower than the first quarter of 2023. Removing approximately 3.5 million of revenue from our non-recurring customer in the first quarter of 2023, managed services revenue increased by 1.7 million, or 33 and a third percent from the same period in 2023, largely driven by improving demand. SAS services revenue totaled $0.3 million in the first quarter of 2024, an increase of 21.4 thousand, or 9.1%, from the prior year quarter.
Peter J. Biere: Looking at revenue components managed services revenue, including <unk> totaled $6 7 million during the first quarter of 2024, which was $1 8 million or 21, 2% lower than the first quarter of 2023.
Removing approximately $3 5 million of revenue from our nonrecurring customer in the first quarter of 2023.
Peter J. Biere: Services revenue increased by $1 7 million or 33, 3% from the same period in 2023.
Largely driven by improving demand.
Peter J. Biere: Okay.
Peter J. Biere: SaaS services revenue totaled $3 million in the first quarter of 2024, an increase of 21 4000 or nine 1% from the prior year quarter.
Peter J. Biere: This growth has been driven by a combination of the acquisition of exuberance and revenue from its customer base, along with subscriber expansion primarily on izea.com. We concluded Q1 with a record number of active SAS customers, a positive trend that has persisted into the second quarter. The overwhelming majority of those customers are using IZEA's AI tools.
Peter J. Biere: This growth has been driven by a combination of the acquisition of <unk> and revenue from its customer base, along with subscriber expansion, primarily with Isaiah Dot com.
Peter J. Biere: We concluded Q1 with a record number of active SaaS customers a positive trend that has persisted into the second quarter.
Peter J. Biere: The overwhelming majority of those customers are using <unk> AI tools.
Peter J. Biere: Yeah.
Peter J. Biere: Our total cost of revenue was $4 million in the first quarter of 2024, or 57.1% of revenue, compared to $6 million or 68.2% of revenue in the prior quarter. The higher cost of revenue in the prior quarter is attributable to our non-recurring customers. Expenses other than the cost of revenue totaled $7 million for the first quarter of 2024, up 14.4% from 6.2 million in the prior year quarter. Sales and marketing costs totaled $3.1 million for the first quarter, up 27.1%.
Peter J. Biere: Our total cost of revenue was $4 million in the first quarter of 2024, or 57, 1% of revenue compared to $6 million or 68, 2% of revenue in the prior year quarter.
Peter J. Biere: The higher cost of revenue in the prior year quarter is attributable to our nonrecurring customer.
Peter J. Biere: Expenses other than the cost of revenue totaled 7 million for the first quarter of 2024.
Peter J. Biere: Up 14, 4% from $6 2 million in the prior year quarter.
Peter J. Biere: Sales and marketing costs totaled $3 1 million for the first quarter up 27, 1% to the prior year quarter due primarily to higher spending on demand generation activities to drive bookings growth and brand awareness.
Peter J. Biere: Compared to the prior year quarter, due primarily to higher spending on demand generation activities to drive bookings growth and brand awareness. General and administrative costs totaled $3.8 million during the first quarter, up 11.1% from the prior year quarter, due primarily to higher human capital and non-cash, stock-based compensation costs. Our net loss in the current quarter totaled $3.3 million, or $0.20 per share, on 16.3 million shares, compared to a loss of $2.8 million, or $0.18 per share, on $15.6 million shares.
Peter J. Biere: General and administrative costs totaled $3 8 million during the first quarter up 11, 1% for the prior year quarter, due primarily to higher human capital and noncash stock based compensation costs.
Peter J. Biere: Our net loss in the current quarter totaled $3 3 million or <unk> <unk> per share of $16 3 million shares compared to a loss of $2 8 million or <unk> 18 per share on $15 6 million shares.
Peter J. Biere: Adjusted EBITDA was negative 2.8 million for the first quarter of 2024 compared to negative 2.2 million for the prior year quarter. As of March 31, 2024, we had $60.8 million in cash and investments, a decrease of $3.4 million from the beginning of the quarter, primarily due to negative EBITDA and some additions to working capital. We earned $666,305 in interest on our investments during the quarter, up about 16.5% over the prior year, which reflects improved interest rates.
Peter J. Biere: Adjusted EBITDA was negative $2 8 million for the first quarter of 2024 compared to negative $2 2 million for the prior year quarter.
Peter J. Biere: As of March 31, 2024, we had $68 million in cash and investments.
Kris: Kris a $3 4 million from the beginning of the quarter, primarily due to negative EBITDA add some additions to working capital.
Kris: We earned $666305 in interest on our investments during the quarter up about 16, 5% over the prior year.
Kris: Which reflect improved interest rates.
Peter J. Biere: Lastly, we do not have any debt on our balance sheet. With cash on hand and liquidity from our investment portfolio as required, we're in a solid position to execute on both organic business growth and acquisition opportunities that lie ahead. With that, I'll turn the call back over to Ryan.
Kris: Lastly, we did not have any debt on our balance sheet.
Kris: Yes.
Kris: With cash on hand, and liquidity from our investment portfolio as required we're in a solid position to execute on both organic business growth and acquisition opportunities that lie ahead.
Ryan: With that I'll turn the call back over to Ryan.
Ryan S. Schram: Thanks, Peter. Our management remarks will be rather concise this quarter, given that our most recent call with you was just about six weeks ago. In Q1, managed service bookings at IZEA saw a notable upswing in year-over-year growth. This surge was fueled by a strong pipeline established during the fourth quarter of 2023, which carried over into Q1 of 2024, setting a new company record. This growth isn't just monetary, though; it's also reflected in the increased number of opportunities overall, which aligns with our strategy to diversify IZEA's revenue stream.
Ryan: Thanks, Peter our management remarks will be rather concise this quarter given that our most recent call with you was just about six weeks ago.
Ryan: In Q1 managed service bookings that as you saw notable upswing in year over year growth. This surge was fueled by a strong pipeline established during the fourth quarter of 2023, which carried over into Q1 of 2024, setting a new company record.
Ryan: This growth isn't just monetary though it's also reflected in the increased number of opportunities overall, which aligns with our strategy to diversify <unk> revenue streams.
Ryan S. Schram: Our intent is to have a more balanced customer base moving forward, with more clients, in more sectors, in more geography. Our comprehensive marketing strategy, coupled with our investment in demand generation, is also proving to be highly effective. We're witnessing a notable impact with sustained year-over-year growth in our pipeline, which has continued here in the second quarter. Q2 has commenced with promising momentum as well, with IZEA welcoming new managed service customers and expanding key existing customer relationships.
Ryan: Our intent is to have a more balanced customer base moving forward with more clients in more sectors in more geographies.
Ryan: Our comprehensive marketing strategy, coupled with our investment and demand generation is also proving to be highly effective.
Ryan: We are witnessing a notable impact with sustained year over year growth in our pipeline, which has continued here in the second quarter.
Ryan: Q2 has commenced with promising momentum as well with Isaiah welcoming new managed service customers and expanding key existing customer relationships.
Ryan S. Schram: While managed services remains the company's primary revenue driver, SAS revenue is showing signs of recovery as well. As we wrapped up Q1, IZEA hit a new record number of active SAS customers, a trend that continues positively into the second quarter. I'd now like to turn the call over to Ted Murphy, for his remarks. Ted. Thank you, Ryan. We are excited about
Ryan: While managed services remains the Companys primary revenue driver SaaS revenue is showing signs of recovery as well as.
Ryan: As we wrapped up Q1, I see a hit a new record number of active SaaS customers.
Ryan: Trend that continues positively into the second quarter.
Edward H. Murphy: I'd now like to turn the call over to <unk>, founder Chairman and CEO, Ted Murphy for his remarks Ted.
Edward H. Murphy: We are excited about the organic growth in bookings and continued potential we are seeing in managed services, along with the beginning of a recovery cycle with SAS. In December, we successfully acquired Huzu and Zuberance, advancing IZEA's M&A strategy that I outlined last year. These acquisitions demonstrate our commitment to strategic alignment with our core focus on the creator economy. Integrating Whozoo and Zubrin brings new segments and expertise, fostering promising synergies, which we are starting to realize.
Edward H. Murphy: Ryan we are excited about the organic growth in bookings and continued potential we are seeing in managed services.
Edward H. Murphy: Along with the beginning of a recovery cycle with SaaS.
Edward H. Murphy: In December we successfully acquired who do and zoo brands advancing ideas M&A strategy that I outlined last year. These.
Edward H. Murphy: These acquisitions demonstrate our commitment to strategic alignment with our core focus on the creator economy.
Edward H. Murphy: Integrating who Zealand Zubrin springs, new segments and expertise.
Edward H. Murphy: Fostering promising synergies, which we are starting to realize.
Edward H. Murphy: Our acquisition philosophy emphasizes stable operations, manageable risks, and post-acquisition upside. Over the next two years, we aim to accelerate our acquisition strategy, expanding our global reach and providing additional customer diversification. We are starting with smaller transactions and intend to grow the size of our targets over time. Today, we have filed a $75 million shelf registry. We do not intend to immediately make use of our shelves.
Edward H. Murphy: Our acquisition philosophy emphasizes stable operations manageable risks and post acquisition upside.
Edward H. Murphy: Over the next two years, we aim to accelerate our acquisition strategy.
Edward H. Murphy: Expanding our global reach and providing additional customer diversification.
Edward H. Murphy: We are starting with smaller transactions and intend to grow the size of our targets over time.
Edward H. Murphy: Today, we have filed a $75 million shelf registration.
Edward H. Murphy: We do not intend to immediately make use of our shelf.
Edward H. Murphy: We believe our stock is currently undervalued, and we have a very strong balance sheet to support ongoing operations and near-term acquisitions. However, having a shelf available provides the company with additional financial flexibility and the option to seize creator economy acquisition opportunities of all sizes as we look forward over the next three years. While there has been some recovery in our share price since the start of the year, we are still trading at near cash value, ascribe zero to little value at all to the operating company.
Edward H. Murphy: We believe our stock is currently undervalued and we have a very strong balance sheet to support ongoing operations and near term acquisitions.
Edward H. Murphy: However, having a shelf available provides the company with additional financial flexibility and the option to see creator economy acquisition opportunities of all sizes as we look forward over the next three years.
Edward H. Murphy: While there has been some recovery in our share price since the start of the year, we are still trading at near cash value.
Edward H. Murphy: Scribing zero to little value at all to the operating company.
Edward H. Murphy: I want to reiterate that we have no debt, no warrants outstanding, no preferred stock outstanding, and we are poised to grow. I am confident in that growth and believe we will reach $76 million in annual revenue by the year 2026. The board and management are committed to creating value for our shareholders, and we want to be clear that proactive measures of all types remain on the table. We appreciate your support and believe IZEA is worth much more than what is reflected in our current market. Thank you all for your time today. I would now like to open the call for Q&A from the analyst community.
Edward H. Murphy: Want to reiterate that we have no debt no warrants outstanding no preferred stock outstanding and we are poised to grow.
Edward H. Murphy: I'm confident in that growth and believe we will reach $76 million in annual revenue by the year 2026.
Edward H. Murphy: The board and management are committed to creating value for our shareholders and we want to be clear that proactive measures of all types remain on the table.
Edward H. Murphy: We appreciate your support and believe idea is worth much more than what is reflected in our current market cap.
Edward H. Murphy: Thank you all for your time today I would now like to open the call for Q&A from the analyst community.
Speaker Change: Thank you Sir.
At this point, we have no questions from the lines I will now hand over to Roger Schrum for closing remarks.
Ryan S. Schram: Tim and our latest press releases at Zia Dot com forward slash investors.
Ryan S. Schram: Have a great evening.
Operator: Thank you. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your line.
Speaker Change: Thank you ladies and gentlemen that concludes today's event. Thank you for attending and you may now disconnect your lines.
Operator: At this point, we have no questions from the lines. I will now hand over to Ryan Schram for closing remarks.
Ryan S. Schram: and our latest press releases at izea.com forward slash investors. Have a great evening. Thank you. Ladies and gentlemen.
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