Q2 2024 IZEA Worldwide Inc Earnings Call

August 14, 2024

Operator: John Hickman, Peter Biere, Ryan Schram [inaudible] Peter Biere, John Hickman, Peter Biere, John Welcome to the IZEA Worldwide, Inc. Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode.

Operator: Welcome to the IZIA Worldwide Inc. 2nd quarter, 2024 earnings call. At this time, all participants are in a listen-only mode.

Speaker Change: Welcome to the IZEA Worldwide, Inc. Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode.

Operator: The question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to hand the call over to President and Chief Operating Officer Ryan Schram. Ryan, you may begin.

Operator: The question and answer session will follow the formal presentation. If anyone wants to require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker Change: The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to hand the call over to President and Chief Operating Officer Ryan Schram. Ryan, you may begin.

Ryan Schram: I will now like to hand the call over to President and Chief Operating Officer Ryan Schram. Ryan, you may begin.

Ryan Schram: Good afternoon, everyone. And welcome to IZIA's earnings call, covering the second quarter of 2024. I'm Ryan Schram, President and Chief Operating Officer at IZIA. And joining me on the call are IZIA Chief Financial Officer, Peter Biere, and IZIA Founder, Chairman and Chief Executive Officer, Ted Murphy. Thanks for being with us today.

Ryan Schram: Good afternoon, everyone, and welcome to IZEA's earnings call covering the second 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 with us today.

Ryan Schram: Good afternoon, everyone, and welcome to IZEA's earnings call covering the second quarter of 2024.

Ryan Schram: 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 with us today.

Ryan Schram: Earlier this afternoon, the company issued a press release detailing IZIA's performance during Q2 2024. If you'd like to review any of those details, all of our investor information can be found online on our investor relations website at IZIA.com forward slash investors.

Ryan Schram: Earlier this afternoon, the company issued a press release detailing IZEA's performance during Q2 2024. If you'd like to review any of those details, all of our investor information can be found online on our 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 IZEA'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.

Ryan Schram: Earlier this afternoon, the company issued a press release detailing IZEA's performance during Q2 2024.

Ryan Schram: If you'd like to review any of those details, all of our investor information can be found online on our Investor Relations website at izea.com forward slash investors.

Ryan Schram: Before we begin, please take note of the safe harbor paragraph included in today's press release, covering IZIA'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. We encourage you to consider these disclosures contained in our SEC filings for a detailed discussion of these factors.

Ryan Schram: Before we begin, please take note of the safe harbor paragraph included in today's press release covering IZEA's financial results.

Speaker Change: 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.

Ryan Schram: We encourage you to consider these 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 Isaiah's Chief Financial Officer, Peter Biere. Peter.

Speaker Change: We encourage you to consider these disclosures contained in our SEC filings for a detailed discussion of these factors.

Ryan Schram: Our commentary today will also include the non-GAAP financial measure of adjusted EBITDA. Reconciliation 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.

Speaker Change: Our commentary today will also include the non-GAAP financial measure of adjusted EBITDA.

Speaker Change: 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 Biere: And with that, I'd now like to introduce and turn the call over to IZIA's Chief Financial Officer, Peter Biere. Peter.

Speaker Change: And with that, I'd now like to introduce and turn the call over to ISEA's Chief Financial Officer, Peter Biere. Peter.

Peter Biere: Thank you, Ryan, and good afternoon, everyone. How we do operating results for the quarter ended June 30, 2024, compared to the prior year's quarter and discussed certain balance sheet highlights. We saw a strong demand for managed services during the second quarter of 2024, resulting in a 40% lift in bookings over the prior year quarter and the highest total in eight quarters. This demand is expected to be reflected in revenues over the coming quarters, and we believe it indicates a strong potential for our growth. Managed services bookings for the second quarter of 2024 total 10.3 million compared to 7.3 million the prior year's quarter, a 40.3% increase.

Peter Biere: Thank you, Ryan, and good afternoon, everyone. I'll review operating results for the quarter ended June 30, 2024, compared to the prior year's quarter and discuss certain balance sheet highlights. We saw a strong demand for managed services during the second quarter of 2024, resulting in a 40% lift in bookings over the prior year quarter, and the highest total in eight quarters. This demand is expected to be reflected in revenues over the coming quarters, and we believe it indicates a strong potential for our growth.

Speaker Change: We saw a strong demand for managed services during the second quarter of 2024, resulting in a 40% lift in bookings over the prior year quarter, and the highest total in eight quarters.

Speaker Change: This demand is expected to be reflected in revenues over the coming quarters and we believe it indicates a strong potential for our growth.

Peter Biere: Managed services bookings for the second quarter of 2024 totaled $10.3 million compared to $7.3 million in the prior year's quarter, a 40.3% increase. The increase was largely attributable to a robust sales pipeline that has continued to develop over the past several quarters. As a reminder, ISEA reports bookings net of cancellations and refunds issued within a quarter.

Speaker Change: Bandage services bookings for the second quarter of 2024 totaled $10.3 million compared to $7.3 million in the prior year's quarter, a 40.3% increase.

Peter Biere: The increase was largely attributable to a robust sales pipeline that has continued to develop over the past several quarters. As a reminder, IZIA reports bookings net of cancellations and refunds issued within a quarter. Total revenue for the second quarter of 2024 was approximately 9.1 million, or 14.9% below the prior year quarter. Revenue a tribute to the large customer which we partnered with in 2023, referred to as the non-recurring customer. Revenue has grew a healthy 23.9% from the prior year quarter. Our managed services revenue totaled $8.9 million during the second quarter of 2024, which, moving approximately $3.3 million of revenue from our non-recurring customer in the prior year quarter, managed services revenue increased by 1.6 or 21.7% from the same period in 2023, largely driven by improving demand.

Speaker Change: The increase was largely attributable to a robust sales pipeline that has continued to develop over the past several quarters.

Speaker Change: As a reminder, ISEA reports bookings net of cancellations and refunds issued within a quarter.

Peter Biere: Total revenue for the second quarter of 2024 was approximately 9.1 million or 14.9% below the prior year quarter, excluding revenue attributable to the large customer which we parted ways with in 2023, referred to as the non-recurring customer, revenues grew a healthy 23.9% from the prior year quarter. Our managed services revenue totaled 8.9 million during the second quarter of 2024, which was 1.8 million or 16.6% lower than the second quarter of 2023.

Speaker Change: Total revenue for the second quarter of 2024 was approximately $9.1 million, or 14.9% below the prior year quarter, excluding revenue attributable to the large customer which we parted ways with in 2023, referred to as the non-recurring customer.

Rowan: Revenues grew a healthy 23.9% from the prior year quarter.

Rowan: Our managed services revenue totaled $8.9 million during the second quarter of 2024, which was $1.8 million, or 16.6% lower than the second quarter of 2023.

Rowan: Removing approximately 3.3 million of revenue from our non-recurring customer in the prior year quarter, managed services revenue increased by 1.6 or 21.7 percent from the same period in 2023, largely driven by improving demand.

Peter Biere: Removing approximately $3.3 million of revenue from our non-recurring customer in the prior year quarter, managed services revenue increased by 1.6 or 21.7% from the same period in 2023, largely driven by improving demand. It's important to note that IZEA's revenue typically lags behind bookings with an average delivery time of seven and a half months between contract signing and revenue recognition, are Managed Services Backlog, which represents unrecognized revenue for contracts that are underway, as well as recent bookings that we haven't started to invoice, totaled $15.6 million on June 30, 2024.

Peter Biere: It's important to note that IZ is revenue typically lags behind bookings, with an average delivery time of seven and a half months between contract signing and revenue recognition. Our managed services backlog, which represents unrecognized revenue for contracts that are underway, as well as recent bookings that we haven't started to end boys, total 15.6 million on June 30, 2024. This is an increase of 1.1 million versus the first quarter of 2024, and 4 million from December of 2023. Sad services revenue totaled $0.2 million in the second quarter of 2024, more than triple the total from the prior year quarter.

Rowan: It's important to note that IZEA's revenue typically lags behind bookings, with an average delivery time of seven and a half months between contract signing and revenue recognition.

Rowan: Our managed services backlog, which represents unrecognized revenue for contracts that are underway, as well as recent bookings that we haven't started to invoice, totaled $15.6 million on June 30, 2024.

Peter Biere: This is an increase of 1.1 million versus the first quarter of 2024 and 4 million from December of 2023. SAS services revenue totaled $0.2 million in the second quarter of 2024, more than triple the total from the prior year quarter.

Rowan: This is an increase of $1.1 million versus the first quarter of 2024, and $4 million from December of 2023.

Rowan: SAS services revenue totaled 0.2 million in the second quarter of 2024, more than triple the total from the prior year quarter. This growth has been driven primarily by subscriber expansion within izea.com and revenue from the Zuber and its customer base.

Peter Biere: This growth has been driven primarily by subscriber expansion within IZ.com and revenue from the Zuberance customer base. We ended the current quarter with a record number of active sad customers, a continuing positive trend. The majority of these customers are actively using IZ as IAI tools. Our total cost of revenue was 5.2 million or 56.9% of revenue in the second quarter of 2024, compared to 6.3 million or 58.5% of revenue in the prior year quarter. The current percentage cost decline represents improved margins from our ongoing customer base. Expenses other than the cost of revenue totaled $6.8 million for the second quarter of 2024, up 11.4% from $6.1 million in the prior year quarter.

Peter Biere: This growth has been driven primarily by subscriber expansion within izea.com and revenue from the Zubrin's customer base. We ended the current quarter with a record number of active SAS customers, a continuing positive trend. The majority of these customers are actively using IZEA's AI tool.

Rowan: We ended the current quarter with a record number of active SAS customers, a continuing positive trend. The majority of these customers are actively using IZEA's AI tools.

Peter Biere: Our total cost of revenue was 5.2 million for 56.9% of revenue in the second quarter of 2024, compared to 6.3 million or 58.5% of revenue in the prior year quarter. The current percentage cost decline represents improved margins from our ongoing customer base, expenses other than the cost of revenue total $6.8 million for the second quarter of 2024. Up 11.4% from $6.1 million in the prior year quarter. Sales and marketing costs totaled $3.2 million during the second quarter, up 13.2% compared to the prior quarter due primarily to higher spending on demand generation activities to drive new customer growth. General and administrative costs totaled $3.4 million during the second quarter, up 6.5% from the prior year quarter, due primarily to higher human capital costs and increased professional and contractor fees.

Rowan: Our total cost of revenue was $5.2 million, or 56.9% of revenue in the second quarter of 2024, compared to $6.3 million, or 58.5% of revenue in the prior year quarter.

Rowan: The current percentage cost decline represents improved margins from our ongoing customer base.

Rowan: Expenses other than the cost of revenue totaled $6.8 million for the second quarter of 2024, up 11.4% from $6.1 million in the prior year quarter.

Peter Biere: Sales and marketing cost totaled $3.2 million during the second quarter, up 13.2% compared to the prior year quarter, due primarily to higher spending on demand generation activities to drive new customer growth. General and administrative costs totaled $3.4 million during the second quarter, up 6.5% from the prior year quarter, due primarily to higher human capital costs and increased professional and contractor fees. Our net loss in the current quarter totaled $2.2 million or negative $0.13 per share on 16.5 million shares, compared to in that loss of $1 million or negative $0.07 per share on 15.6 million shares for the second quarter of 2023.

Rowan: Sales and marketing costs totaled $3.2 million during the second quarter, up 13.2% compared to the prior quarter, due primarily to higher spending on demand generation activities to drive new customer growth.

Rowan: General and administrative costs totaled $3.4 million during the second quarter, up 6.5% from the prior year quarter, due primarily to higher human capital costs and increased professional and contractor fees.

Peter Biere: Our net loss in the current quarter totaled 2.2 million or negative 13 cents per share on 16.5 million shares, compared to a net loss of $1 million or negative $0.07 per share on 15.6 million shares for the second quarter of 2023. Adjusted EBITDA was negative $1.6 million for the second quarter of 2024 compared to negative $0.6 million, for the prior year quarter. As of June 30, 2024, we had $56.5 million in cash and investment, a decrease of $4.3 million from the beginning of the quarter, primarily due to negative EBITDA and funding higher level of working capital. During the current quarter, we earned $634,000 in interest on our investment.

Rowan: Our net loss in the current quarter totaled 2.2 million or negative 13 cents per share on 16.5 million shares compared to a net loss of 1 million or negative 7 cents per share on 15.6 million shares for the second quarter of 2023.

Peter Biere: Adjusted EBITDA was negative $1.6 million for the second quarter of 2024, compared to negative $0.6 million for the prior year quarter. As of June 30th, 2024, we had 56.5 million cash and investments, a decrease of 4.3 million from the beginning of the quarter, primarily due to the negative EBITDA and funding a higher level of working capital. During the current quarter, we earned 634,000 interest on our investments, and lastly, we do not have any debt on our balance sheet.

Eva: adjusted EBITDA was negative 1.6 million for the second quarter of 2024 compared to negative 0.6 million for the prior year quarter

Eva: As of June 30, 2024, we had $56.5 million in cash and investments, a decrease of $4.3 million from the beginning of the quarter, primarily due to negative EBITDA and funding higher level of working capital.

Speaker Change: During the current quarter, we earned $634,000 in interest on our investments. And lastly, we do not have any debt on our balance sheet.

Ryan Schram: With cash on hand and liquidity from our investment portfolio, is required, we're in a solid position to execute on organic business growth and acquisition opportunities that lie ahead, and with that, I'll turn the call back over to Ryan.

Speaker Change: With cash on hand and liquidity from our investment portfolio as required, we're in a solid position to execute on organic business growth and acquisition opportunities that lie ahead. And with that, I'll turn the call back over to Ryan.

Peter Biere: And 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 organic business growth and acquisition opportunities that lie ahead. And with that, I'll turn the call back over to Ryan. Thanks, Peter. And good afternoon, everyone.

Ryan Schram: Thanks, Peter, and good afternoon, everyone. I'm excited to share the progress we've made in the second quarter of 2024, and to highlight the strides we're making in both our managed services and technology enablement initiatives. Isaiah is on a solid path towards achieving the three-year plan our management team laid out at the beginning of this year, and we're eager to provide you with an update on our recent performance.

Ryan Schram: I'm excited to show the progress we've made in the second quarter of 2024 and to highlight the strides we're making in both our managed services and our technology enablement initiatives. IZEA is on a solid path towards achieving the three-year plan our management team laid out at the beginning of this year. And we're eager to provide you with an update on our recent performance. Let's start with Managed Services.

Speaker Change: Thanks Peter and good afternoon everyone. I'm excited to show the progress we've made in the second quarter of 2024 and to highlight the strides we're making in both our managed services and technology enablement initiatives.

Ryan Schram: IZEA is on a solid path towards achieving the three-year plan our management team laid out at the beginning of this year and we're eager to provide you with an update on our recent performance. Let's start with managed services.

Ryan Schram: Let's start with managed services. Our managed services team made significant headway during Q2. In the quarter, we saw a strong organic growth in bookings, with our win rate recovering, as we converted a higher percentage of opportunities in our pipeline into bookings. The success in Q1 and Q2 bookings has started to translate into revenue during the second quarter, and should continue to have positive impacts on Q3 and beyond this year. We expect to be able to begin reporting year-over-year revenue growth again in the coming quarters as these bookings are recognized.

Ryan Schram: In the quarter, we saw strong organic growth in bookings with our win rate recovering as we converted a higher percentage of opportunities in our pipeline into bookings. The success in Q1 and Q2 bookings has started to translate into revenue during the second quarter and should continue to have positive impacts on Q3 and beyond this year. We expect to be able to begin reporting year-over-year revenue growth again in the coming quarters as these bookings are recognized.

Ryan Schram: Our managed services team made significant headway during Q2. In the quarter, we saw strong organic growth in bookings with our win rate recovering as we converted a higher percentage of opportunities in our pipeline into bookings.

Ryan Schram: The success in Q1 and Q2 bookings has started to translate into revenue during the second quarter and should continue to have positive impacts on Q3 and beyond this year.

Ryan Schram: We expect to be able to begin reporting year-over-year revenue growth again in the coming quarters as these bookings are recognized.

Ryan Schram: We recently announced the acquisition of 26 Talent and the Ryman Agency. 26 Talent brings a roster of creators and a wealth of creator representation experience to Isaiah, enhancing our talent representation business in Australia. 26 talent has been tucked underneath the Hume umbrella, and we recently just launched a website and rebranded it of Hume, which now lives at Hume.com, that's h-u-m-e.com. The Ryman Agency, known for its innovative approach to talent brokerage and content creation, will further bolster Isaiah's service offerings and expand our reach in the creator economy overall. Ryman has deep relationships with athletes, celebrities, and other top-tier talent, allowing brands to quickly execute programs that may otherwise be cost-prohibitive or difficult to execute.

Ryan Schram: We recently announced the acquisition of 26 talent and the Ryman Agency. 22nd talent brings a roster of creators and a wealth of creator representation experience to Isaiah. Enhancing our talent representation business in Australia, 26 talent has been tucked underneath the Hume umbrella, and we recently just launched a new website and rebranding of Hume, which now lives at Hume.com. That's H-U-M-E dot com.

Ryan Schram: 26 talent has been tucked underneath the Hume umbrella and we recently just launched a new website and rebranding of Hume which now lives at Hume.com that's H-U-U-M-E dot com

Ryan Schram: The Ryman Agency, known for its innovative approach to talent brokerage and content creation, will further bolster Isaiah's service offerings and expand our reach in the creator economy overall. Ryman has deep relationships with athletes, celebrities, and other top tier talent, allowing brands to quickly execute programs that may otherwise be cost prohibitive or difficult to execute. These new acquisitions are pivotal in our strategy to both diversify revenue and strengthen our client portfolio. IZEA's acquisition philosophy emphasizes stable operations, manageable risk, and cost-effectiveness, and the potential for expense consolidation with post-acquisition upsides.

Ryan Schram: The Ryman Agency, known for its innovative approach to talent brokerage and content creation, will further bolster IZEA's service offerings and expand our reach in the creator economy overall.

Ryan Schram: Ryman has deep relationships with athletes, celebrities, and other top tier talent, allowing brands to quickly execute programs that may otherwise be cost prohibitive or difficult to execute.

Ryan Schram: These new acquisitions are pivotal in our strategy to both diversify revenue and strengthen our client portfolio. Isaiah's acquisition philosophy emphasizes stable operations, manageable risks, and the potential for expense consolidation with post-acquisition upside. We're in the process of migrating our recent acquisition to Isaiah's systems, processes, and proprietary technologies, and we've identified multiple areas for improvement and efficiency. We will continue to work with the management teams of those companies to both grow their businesses and contribute to Isaiah overall. Isaiah's acquisitions to date have been strategic but rather small in size. This has been a deliberate effort to institutionalize the company's emanate capabilities internally and create the framework for a full acquisition life cycle.

Speaker Change: These new acquisitions are pivotal in our strategy to both diversify revenue and strengthen our client portfolio. IZEA's acquisition philosophy emphasizes stable operations, manageable risks,

Speaker Change: and the potential for expense consolidation with post-acquisition upside.

Ryan Schram: We're in the process of migrating our recent acquisition to IZEA systems, processes, and proprietary technologies, and we've identified multiple areas for improvement and efficiency and we'll continue to work with the management teams of those companies to both grow their businesses and contribute to Isaiah overall. Isaiah's acquisitions to date have been strategic, but rather small in size.

Speaker Change: We're in the process of migrating our recent acquisition to IZEA systems, processes, and proprietary technologies.

Speaker Change: and we've identified multiple areas for improvement and efficiency and will continue to work with the management teams of those companies to both grow their businesses and contribute to IZEA overall.

Speaker Change: Isaiah's acquisitions to date have been strategic but rather small in size. This has been deliberate in an effort to institutionalize the company's M&A capabilities internally and create the framework for a full acquisition lifecycle.

Ryan Schram: This has been deliberate in an effort to institutionalize the company's M&A capabilities internally and create the framework for a full acquisition lifecycle. I'll now turn things over to our founder, chairman, and CEO, Ted Murphy. Ted.

Ted Murphy: On our turn things over to our founder, Kirman, and CEO, Ted Murphy. Ted, thank you, Ryan. We are operating against our three-year plan to reach $76 million in annual revenue by 2026. In addition to revenue, achieving sustainable profitability in this timeframe is absolutely key for management in the board, and we know it is important to our investors. Our intent is to deliver a meaningful EBITDA improvement in 2025 and begin to show EBITDA-positive quarters in the back half of 2026.

Speaker Change: I'll now turn things over to our Founder, Chairman, and CEO , Ted Murphy. Ted. Thank you, Ryan. We are operating against our three-year plan to reach $76 million in annual revenue by 2026.

Ted Murphy: Thank you, Ryan. We are operating against our three-year plan to reach $76 million in annual revenue by 2026. In addition to revenue, achieving sustainable profitability in this time frame is absolutely key for management and the board, and we know it is important to our investors. Our intent is to deliver a meaningful EBITDA improvement in 2025 and begin to show EBITDA positive quarters in the back half of 2022. 2024 is a transition year for us.

Speaker Change: In addition to revenue, achieving sustainable profitability in this time frame is absolutely key for management and the board.

Speaker Change: and we know it is important to our investors. Our intent is to deliver a meaningful EBITDA improvement in 2025 and begin to show EBITDA positive quarters in the back half of 2026.

Ted Murphy: 2024 is a transition year for us. We continue to experience lower revenue comparisons after parting ways with a large customer last year. But this is now over. We expect to begin seeing year-over-year revenue growth in the third quarter. The loss in revenue has been hurting our profitability as well, but we're progressing nicely forward as we fill the revenue gap with more profitable customers. The bookings growth we've seen this year is beginning to show in higher revenues.

Ted Murphy: We continue to experience lower revenue comparisons after parting ways with a large customer, But this is now over. We expect to begin seeing year-over-year revenue growth in the third quarter. The loss in revenue has been hurting our profitability as well, but we're progressing nicely forward as we fill the revenue gap with more profitable customers. The bookings growth we've seen this year is beginning to show in higher revenue. We have also been taking measures to reduce some human capital resources and other expenses where appropriate.

Speaker Change: 2024 is a transition year for us. We continue to experience lower revenue comparisons after parting ways with a large customer last year. But this is now over. We expect to begin seeing year-over-year revenue growth in the third quarter.

Speaker Change: The loss in revenue has been hurting our profitability as well, but we're progressing nicely forward as we fill the revenue gap with more profitable customers.

Speaker Change: The bookings growth we've seen this year is beginning to show in higher revenues.

Ted Murphy: We have also been taking measures to reduce some human capital resources and other expenses where appropriate. In Q2, we made a slew of technology announcements ranging from our AI-influencer marketing assistant Izzy to new budgeting and workflow tools. While these technologies can be licensed by customers, I want to emphasize that our core focus near-term is making our own people and processes more efficient through technology enablement. Izzy A Managed Services is our first and best customer. With each new release, we help our team accomplish more and with less, better leveraging our costs while our end customers enjoy a better experience.

Speaker Change: We have also been taking measures to reduce some human capital resources and other expenses where appropriate.

Ted Murphy: In Q2, we made a slew of technology announcements, ranging from our AI Influencer Marketing Assistant, Izzy, to new budgeting and workflow tools. While these technologies can be licensed by customer, I want to emphasize that our core focus near term is making our own people and processes more efficient through technology enablement. IZEA Managed Services is our first and best customer. With each new release, we help our team accomplish more with less, better leveraging our costs while our end customers enjoy a better experience.

Speaker Change: In Q2, we made a slew of technology announcements, ranging from our AI influencer marketing assistant, Izzy, to new budgeting and workflow tools.

Speaker Change: While these technologies can be licensed by customers, I want to emphasize that our core focus near term is making our own people and processes more efficient through technology enablement.

Speaker Change: IZEA Managed Services is our first and best customer.

Speaker Change: With each new release, we help our team accomplish more with less, better leveraging our costs while our end customers enjoy a better experience.

Ted Murphy: We have fewer FTEs today than we did at our peak in 2016, but we are generating more than four times the annual revenue. Revenue per FTE continues to be a focus of ours, and the best way to boost output is through an ongoing focus on automations in every job capacity. Last year, we began rolling out AI tools to everyone on our team. The self-reported efficiency gains, not to mention the increased capabilities, have been felt in every department and seen by our end customers. We believe technology and specifically AI enablement throughout our enterprise is a critical piece of our three-year plan.

Ted Murphy: We have fewer FTEs today than we did at our peak in 2016, but we are generating more than four times the annual revenue. Revenue per FTE continues to be a focus of, and the best way to boost output is through an ongoing focus on automations in every job, Last year we began rolling out AI tools to everyone on our team. The self-reported efficiency gains, not to mention the increased capability, have been felt in every department and seen by our end customers.

Speaker Change: We have fewer FTEs today than we did at our peak in 2016, but we are generating more than four times the annual revenue.

Speaker Change: Revenue per FTE continues to be a focus of ours.

Speaker Change: And the best way to boost output is through an ongoing focus on automations in every job capacity.

Speaker Change: Last year we began rolling out AI tools to everyone on our team. The self-reported efficiency gains, not to mention the increased capabilities, have been felt in every department and seen by our end customers.

Ted Murphy: We believe technology, and specifically AI enablement throughout our enterprise, is a critical piece of our three-year plan. However, expense management and efficiency gains alone will not drive us to sustainable profitability, certain baseline costs will continue to increase with inflation, such as health care costs and fees associated with being a public company.

Speaker Change: We believe technology and specifically AI enablement throughout our enterprise is a critical piece of our three-year plan.

Ted Murphy: However, expense management and efficiency gains alone will not drive us to sustainable profitability. Certain baseline costs will continue to increase with inflation, such as health care costs and fees associated with being a public company. Sustainable profitability must ultimately be achieved by way of revenue growth through a diverse mix of customers and service.

Speaker Change: However, expense management and efficiency gains alone will not drive us to sustainable profitability. Certain baseline costs will continue to increase with inflation, such as healthcare costs and fees associated with being a public company.

Ted Murphy: Sustainable profitability must ultimately be achieved by way of revenue growth through a diverse mix of customers and services. Hence, our strategy for growth remains two-pronged. On the one hand, we are committed to driving organic growth by enhancing our product offerings, improving customer experiences, and entering new markets. On the other hand, we are actively exploring further acquisitions that complement our existing services and bring valuable new capabilities and markets to our portfolio. Customer diversification is essential to our strategy. It reduces our reliance on single clients, making us less vulnerable to fluctuations in specific client relationships or industries.

Speaker Change: Sustainable profitability must ultimately be achieved by way of revenue growth through a diverse mix of customers and services.

Ted Murphy: Our strategy for growth remains too prompt. On one hand, we are committed to driving organic growth by enhancing our product offerings, improving customer experiences, and entering new markets. On the other hand, we are actively exploring further acquisitions that complement our existing services and bring valuable new capabilities and markets to our portfolio. Customer diversification is essential to our strategy. It reduces our reliance on single clients, making us less vulnerable to fluctuations in specific client relationships or industries. Over the next three years, our aim is to attract a broader range of clients across various sectors and regions, fostering long-term partnerships with Isaiah.

Speaker Change: Our strategy for growth remains two-pronged. On one hand, we are committed to driving organic growth by enhancing our product offerings, improving customer experiences, and entering new markets.

Speaker Change: On the other hand, we are actively exploring further acquisitions that complement our existing services and bring valuable new capabilities and markets to our portfolio.

Speaker Change: Customer diversification is essential to our strategy.

Speaker Change: It reduces our reliance on single clients, making us less vulnerable to fluctuations in specific client relationships or industries.

Ted Murphy: Over the next three years, our aim is to attract a broader range of clients across various sectors and regions, fostering long-term partnerships with IZEA. This strategy will enhance our stability, predictability, and profitability. We previously announced a $5 million share repurchase program, while we have been unable to execute against this buyback to date due to the restrictive windows mentioned in the announcement. We intend to be active buyers when our trading windows are open.

Speaker Change: Over the next three years, our aim is to attract a broader range of clients across various sectors and regions, fostering long-term partnerships with IZEA.

Ted Murphy: This strategy will enhance our stability, predictability, and profitability.

Speaker Change: This strategy will enhance our stability, predictability, and profitability.

Ted Murphy: We previously announced a $5 million share repurchase program. While we have been unable to execute against this buyback to date due to the restrictive windows mentioned in the announcement, we intend to be active buyers when our trading windows are open. We believe our stock is undervalued, and this repurchase program reflects our confidence in the company's future growth and value creation potential. This move underscores our commitment to returning value to our shareholders and our belief in the long-term prospects of Isaiah with the capital on hand.

Speaker Change: We previously announced a $5 million share repurchase program.

Speaker Change: While we have been unable to execute against this buyback to date due to the restrictive windows mentioned in the announcement,

Speaker Change: We intend to be active buyers when our trading windows are open.

Ted Murphy: We believe our stock is undervalued, and this repurchase program reflects our confidence in the company's future growth and value creation potential. This move underscores our commitment to returning value to our shareholder, and our belief in the long-term prospects of IZEA with the capital on hand. In conclusion, we are excited about the progress that we are making both in managed services and tech enablement. We are confident in our ability to reach our revenue goals and deliver long-term value to our shareholders. The board and management are committed to proactive measures to ensure we achieve our strategic objectives.

Speaker Change: We believe our stock is undervalued and this repurchase program reflects our confidence in the company's future growth and value creation potential.

Speaker Change: This move underscores our commitment to returning value to our shareholders and our belief in the long-term prospects of IZEA with the capital on hand.

Ted Murphy: In conclusion, we are excited about the progress that we are making both in managed services and tech enablement. We are confident in our ability to reach our revenue goals and deliver long-term value to our shareholders. The board and management are committed to proactive measures to ensure we achieve our strategic objectives.

Speaker Change: In conclusion, we are excited about the progress that we are making both in managed services and tech enablement.

Speaker Change: We are confident in our ability to reach our revenue goals and deliver long-term value to our shareholders. The board and management are committed to proactive measures to ensure we achieve our strategic objectives.

Ted Murphy: Thank you for your time today.

Operator: Thank you for your time today. I will now open the call for Q&A from the analyst community. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Ryan Schram: I will now open the call for Q&A from the analyst community. Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tonal indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Thank you.

Speaker Change: Thank you for your time today. I will now open the call for Q&A from the analyst community.

Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Speaker Change: The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: One moment, please, while we poll for your question. Thank you. I'm showing no questions at this time.

Speaker Change: One moment, please, while we poll for your questions.

Ryan Schram: I'd now like to have a call back over to Ryan Schram for any closing remarks. Thanks so much Darryl and thank you everyone for joining us this afternoon. As a reminder, you can find all of Isaiah's investor relations information on our investor relations website.

Speaker Change: [inaudible]

Ryan Schram: I'm showing no questions at this time.

Ryan Schram: I'd now like to have a call back over to Ryan Schram for any closing remarks. Thanks so much, Darrell, and thank you everyone for joining us this afternoon. As a reminder, you can find all of Isaiah's investor relations information on our Investor Relations website. That's at izia.com forward slash investors.

Speaker Change: Thank you. I am showing no questions at this time. I would now like to hand the call back over to Ryan Schram for any closing remarks.

Operator: That's at, Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day. Music Music

Ryan Schram: Thanks so much Daryl and thank you everyone for joining us this afternoon. As a reminder you can find all of IZEA's investor relations information on our investor relations website that's at IZEA.com forward slash investors. Thanks for joining us and have a nice evening.

Ryan Schram: Thanks for joining us, and have a nice evening.

Operator: Thank you.

Operator: This doesn't include today's teleconference. We appreciate your participation. May disconnect your lines at this time. Enjoy the rest of your day.

Speaker Change: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Speaker Change: [music]

Operator: Welcome to the IZIA Worldwide Inc. 2nd quarter, 2024 earnings call. At this time, all participants are in a listen only mode. The question and answer session will follow the formal presentation. If anyone wants to require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Ryan Schram: I will now like to hand the call over to President and Chief Operating Officer Ryan Schram. Ryan, you may begin. Good afternoon, everyone. And welcome to IZIA's earnings call, covering the second quarter of 2024. I'm Ryan Schram, President and Chief Operating Officer at IZIA. And joining me on the call are IZIA Chief Financial Officer, Peter Biere, and IZIA Founder, Chairman and Chief Executive Officer, Ted Murphy. Thanks for being with us today.

Ryan Schram: Earlier this afternoon, the company issued a press release detailing IZIA's performance during Q2, 2024. If you'd like to review any of those details, all of our investor information can be found online on our investor relations website at IZIA.com forward flash investors. Before we begin, please take note of the safe harbor paragraph included in today's press release, covering IZIA'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.

Ryan Schram: And such statements involve a number of risks and uncertainties that could cause actual results to differ materially. We encourage you to consider these disclosures contained in our SEC filings for a detailed discussion of these factors. Our commentary today will also include the non-gape financial measure of adjusted EBIDA, reconciliation between gap and non-gape metrics for our reported results can also be found in our earnings release issued earlier today, and in our publicly available filings.

Peter Biere: And with that, I'd now like to introduce and turn the call over to IZIA's Chief Financial Officer, Peter Biere. Peter. Thank you Ryan and good afternoon everyone.

Peter Biere: How we do operating results for the quarter ended June 30, 2024, compared to the prior years quarter and discussed certain balance sheet highlights. We saw a strong demand for managed services during the second quarter of 2024 resulting in a 40% lift in bookings over the prior year quarter and the highest total in eight quarters. This demand is expected to be reflected in revenues over the coming quarters and we believe it indicates a strong potential for our growth, managed services bookings for the second quarter of 2024 total 10.3 million compared to 7.3 million the prior years quarter of 40.3% increase. The increase was largely attributable to a robust sales pipeline that has continued to develop over the past several quarters. As a reminder, IZIA reports bookings net of cancellations and refunds issued within a quarter.

Peter Biere: Total revenue for the second quarter of 2024 was approximately 9.1 million or 14.9% below the prior year quarter. Revenue a tribute to the large customer which we partnered with in 2023, referred to as the non-recurring customer. Revenue has grew a healthy 23.9% from the prior year quarter. Our managed services revenue totaled $8.9 million during the second quarter of 2024, which moving approximately $3.3 million of revenue from our non-recurring customer in the prior year quarter, managed services revenue increased by 1.6 or 21.7% from the same period in 2023, largely driven by improving demand.

Peter Biere: It's important to note that IZ is revenue typically lags behind bookings with an average delivery time of seven and a half months between contract signing and revenue recognition. Our managed services backlog which represents unrecognized revenue for contracts that are underway, as well as recent bookings that we haven't started to end boys, total 15.6 million on June 30, 2024. This is an increase of 1.1 million versus the first quarter of 2024, and 4 million from December of 2023.

Peter Biere: Sad services revenue totaled $0.2 million in the second quarter of 2024, more than triple the total from the prior year quarter. This growth has been driven primarily by subscriber expansion within IZ.com and revenue from the Zuberance customer base. We ended the current quarter with a record number of active Sad customers, a continuing positive trend. The majority of these customers are actively using IZ as IAI tools.

Peter Biere: Our total cost of revenue was 5.2 million or 56.9% of revenue in the second quarter of 2024, compared to 6.3 million or 58.5% of revenue in the prior year quarter. The current percentage cost decline represents improved margins from our ongoing customer base.

Peter Biere: Expenses other than the cost of revenue totaled $6.8 million for the second quarter of 2024, up 11.4% from $6.1 million in the prior year quarter. Sales and marketing cost totaled $3.2 million during the second quarter, up 13.2% compared to the prior year quarter, due primarily to higher spending on demand generation activities to drive new customer growth. General and administrative costs totaled $3.4 million during the second quarter, up 6.5% from the prior year quarter, due primarily to higher human capital costs and increased professional and contractor fees.

Peter Biere: Our net loss in the current quarter totaled $2.2 million or negative $0.13 per share on $16.5 million shares, compared to in that loss of $1 million or negative $0.7 per share on $15.6 million shares for the second quarter of 2023. Adjusted EBITDA was negative $1.6 million for the second quarter of 2024, compared to negative $0.6 million for the prior year quarter.

Peter Biere: As of June 30th, 2024, we had 56.5 million cash and investments, a decrease of 4.3 million from the beginning of the quarter, primarily due to the negative EBITDA and funding higher level of working capital. During the current quarter, we earned 634,000 interest on our investments, and lastly, we do not have any debt on our balance sheet.

Ryan Schram: With cash on hand and liquidity from our investment portfolio is required, we're in a solid position to execute on organic business growth and acquisition opportunities that lie ahead, and with that, I'll turn the call back over to Ryan. Thanks Peter and good afternoon everyone. I'm excited to share the progress we've made in the second quarter of 2024, and to highlight the strides we're making in both our managed services and technology enablement initiatives. Isaiah is on a solid path towards achieving the three-year plan our management team laid out at the beginning of this year, and we're eager to provide you with an update on our recent performance.

Ryan Schram: We recently announced the acquisition of 26 talent and the Ryman Agency. 26 talent brings a roster of creators and a wealth of creator representation experience to Isaiah, enhancing our talent representation business in Australia. 26 talent has been tucked underneath the Hume umbrella, and we recently just launched a website and rebranded it of Hume, which now lives at Hume.com, that's h-u-m-e.com.

Ryan Schram: These new acquisitions are pivotal in our strategy to both diversify revenue and strengthen our client portfolio. Isaiah's acquisition philosophy emphasizes stable operations, manageable risks, and the potential for expense consolidation with post-acquisition upside. We're in the process of migrating our recent acquisition to Isaiah's systems, processes, and proprietary technologies, and we've identified multiple areas for improvement and efficiency, and we'll continue to work with the management teams of those companies to both grow their businesses and contribute to Isaiah overall. Isaiah's acquisitions to date have been strategic but rather small in size.

Ryan Schram: This has been deliberate an effort to institutionalize the company's emanate capabilities internally and create the framework for a full acquisition life cycle.

Ted Murphy: On our turn things over to our founder, Kirman and CEO, Ted Murphy. Ted, thank you, Ryan. We are operating against our three-year plan to reach $76 million in annual revenue by 2026. In addition to revenue, achieving sustainable profitability in this timeframe is absolutely key for management in the board and we know it is important to our investors. Our intent is to deliver a meaningful EBITDA improvement in 2025 and begin to show EBITDA-positive quarters in the back half of 2026.

Ted Murphy: 2024 is a transition year for us. We continue to experience lower revenue comparisons after parting ways with a large customer last year. But this is now over. We expect to begin seeing year-over-year revenue growth in the third quarter. The loss in revenue has been hurting our profitability as well but we're progressing nicely forward as we fill the revenue gap with more profitable customers. The bookings growth we've seen this year is beginning to show in higher revenues.

Ted Murphy: With each new release, we help our team accomplish more and with less, better leveraging our costs while our end customers enjoy a better experience. We have fewer FTEs today than we did at our peak in 2016 but we are generating more than four times the annual revenue. Revenue per FTE continues to be a focus of ours and the best way to boost output is through an ongoing focus on automations in every job capacity.

Ted Murphy: Last year we began rolling out AI tools to everyone on our team. The self-reported efficiency gains not to mention the increased capabilities have been felt in every department and seen by our end customers. We believe technology and specifically AI enablement throughout our enterprise is a critical piece of our three-year plan. However, expense management and efficiency gains alone will not drive us to sustainable profitability. Certain baseline costs will continue to increase with inflation such as health care costs and fees associated with being a public company. Sustainable profitability must ultimately be achieved by way of revenue growth through a diverse mix of customers and service.

Ted Murphy: This move underscores our commitment to returning value to our shareholders and our belief in the long-term prospects of Isaiah with the capital on hand. In conclusion, we are excited about the progress that we are making both in managed services and tech enablement. We are confident in our ability to reach our revenue goals and deliver long-term value to our shareholders. The board and management are committed to proactive measures to ensure we achieve our strategic objectives.

Ted Murphy: Thank you for your time today.

Ryan Schram: I will now open the call for Q&A from the analyst community. Thank you.

Operator: We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tonal indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Thank you.

Operator: I'm showing no questions at this time.

Ryan Schram: I'd now like to have a call back over to Ryan Schram for any closing remarks. Thanks so much, Darrell, and thank you everyone for joining us this afternoon. As a reminder, you can find all of Isaiah's investor relations information on our investor relations website. That's at izia.com forward slash investors.

Operator: Thanks for joining us and have a nice evening. Thank you. This doesn't include today's teleconference. We appreciate your participation. May disconnect your lines at this time.

Operator: Enjoy the rest of your day.

Q2 2024 IZEA Worldwide Inc Earnings Call

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