Q4 2024 IZEA Worldwide Inc Earnings Call

Operator: Greetings, and welcome to the IZEA Worldwide, Inc. fourth quarter 2024 earnings call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad.

Greetings and welcome to the ICL worldwide, Inc. Fourth quarter 2024 earnings call. At this time, all participants are in a listen only mode.

And so you can watch it require operator assistance. Please press star zero on your telephone keypad.

Operator: A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star 1 on your telephone keypad. As a reminder, this conference is being recorded.

And answer session will follow the formal presentation.

Even if he placed into question queue at any time by pressing star one on your telephone keypad.

As a reminder, this conference is being recorded.

Matt Gray: It's now my pleasure to turn the call over to Matt Gray, Vice President of Marketing. Matt, please go ahead. Good afternoon, everyone, and welcome to IZEA's Earnings Call, covering the fourth quarter and a full year of 2020. I'm Matt Gray, VP of Marketing at IZEA, and joining me on the call are IZEA's Chief Financial Officer Peter Biere and IZEA's Chief Executive Officer Patrick Venetucci. Thank you for being with us today.

Speaker Change: It's now my pleasure to turn the call over to Matt Gray Vice President of marketing Matt. Please go ahead.

Speaker Change: Good afternoon, everyone and welcome to IC as earnings call covering the fourth quarter and full year of 'twenty 'twenty four I'm, Matt Gray VP of marketing at Ics and joining me on the call. Our eyes. He is chief Financial Officer, Peter Barry and I as he is chief Executive Officer, Patrick Vented Tucci. Thank.

Speaker Change: Thank you for being with us today.

Matt Gray: Earlier this afternoon, the company issued a press release detailing IZEA's performance during Q4 2021. If you'd like to review those details, all our investor information can be found online on our Investor Relations website at izea.com forward slash investor.

Speaker Change: Earlier this afternoon the company issued a press release detailing Ics performance during Q4, 'twenty 'twenty four if you will.

Speaker Change: To review those details all of our Investor information can be found online on our Investor Relations website, and I see a dotcom forward slash investors.

Speaker Change: Before we begin please take note of the Safe Harbor paragraph included in today's press release, covering <unk> 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.

Matt Gray: Before we begin, please take note of the Safe Harbor paragraph included in today's press release covering IZEA's financial 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 the disclosures contained in our SEC filings for a detailed discussion of these factors.

Speaker Change: Our results to differ materially we.

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

Matt Gray: Our commentary today will also include the non-GAAP financial measure of adjusted even. Reconciliations between GAAP and non-GAAP metrics for reported results can also be found in our earnings release issued earlier today and in our publicly available files.

Speaker Change: Our commentary today will also include 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 would now like to introduce and turn the call over to IZEA's Chief Financial Officer, Peter Biere. Peter. Thank you, Matt. And good afternoon, everyone.

Speaker Change: And with that I would now like to introduce and turn the call over twice he is chief financial Officer, Peter Barry.

Speaker Change: Peter.

Peter Barry: Thank you, Matt and good afternoon, everyone.

Peter Biere: We recently released our fourth quarter and full year 2024 results and filed our annual report on Form 10-K with the SEC. Today I'll discuss actions taken during the fourth quarter to shed unprofitable ventures and reduce future expenses. provide a high-level review of our full-year performance. review the fourth quarter operating results in more detail and highlight key components of our December 31, 2024 ballot sheet. Turning to our annual results, revenues totaled $35.9 million in 2024, declining slightly from $36.2 million, or down 1% compared to 2023. Managed services revenue for 2024 was $35.1 million, down about $683,000, or 2% from 2023.

Peter Barry: We recently released our fourth quarter and full year 2024 results.

Peter Barry: Our annual report on Form 10-K with the SEC.

Peter Barry: Today I'll discuss actions taken during the fourth quarter to shed unprofitable ventures and reduce future expenses.

Peter Barry: Provide a high level review of our full year performance.

Peter Barry: The fourth quarter operating results in more detail and highlight key components of our December 31, 2024 balance sheet.

Peter Barry: Turning to our annual results.

Peter Barry: Revenues totaled $35 9 million in 2024 declining slightly from $36 2 million or down 1% compared to 2023.

Peter Barry: Managed services revenue for 2024 was $35 1 million down about 683000 or 2% from 2023.

Peter Biere: It's important to note that 8.1 million of 2023 revenue came from a non-recurring customer we parted ways with in late 2022. Excluding revenues from WHOZU, which we divested at the end of 2024, and this non-recurring customer from the year-over-year comparison, managed services revenue grew 16.3% in 2024. This demonstrates that underneath these two major changes, our core customer base continues to grow at a healthy rate.

Peter Barry: It's important to note that $8 1 million of 'twenty to 'twenty three revenue came from a nonrecurring customer we parted ways with in late 2022.

Peter Barry: Excluding revenues from <unk>, which we divested at the end of 2024.

Peter Barry: This nonrecurring customer from a year over year comparison managed services revenue grew 16, 3% in 2024.

This demonstrates that underneath these two major changes our core customer base continues to grow at a healthy rate.

Peter Biere: During the fourth quarter, we initiated changes that we expect will dramatically reduce our cash burn and shorten our path to profitability. In December 2024, we implemented targeted workforce reductions to align personnel costs with our operational needs. We eliminated 32 full-time positions across multiple departments. representing 3.9 million in annualized fully loaded costs. or 21% of total personnel expense. Additionally, we reduced contract labor, primarily within product engineering and offshore sales teams, resulting in $1.2 million in annualized savings. We also implemented further cost-cutting measures across marketing and administrative function.

Peter Barry: During the fourth quarter, we initiated changes that we expect will dramatically reduce our cash burn and shorten our path to profitability.

Peter Barry: In December 2024, we implemented targeted workforce reductions to align personnel costs with our operational needs.

Peter Barry: We eliminated 32 full time positions across multiple departments, representing $3 9 million in annualized fully loaded costs or.

Peter Barry: Or 21% of total personnel expense.

Peter Barry: Additionally, we reduced contract labor, primarily within product engineering and offshore sales teams, resulting in $1 2 million in annualized savings.

Peter Barry: We also implemented further cost cutting measures across marketing and administrative functions.

Peter Biere: We took action to end unprofitable international investments, divesting our Australian subsidiary Whozoo, which, while it accounted for $3.4 million in 2024 revenue, was unprofitable and would have required additional cash investment in 2025. We will continue to serve international customers in other regions from our North American hub, and do not anticipate a significant disruption in 2025 revenue from these regions.

Peter Barry: We took action to add unprofitable international investments divesting, our Australian subsidiary, who zoo, which while it accounted for $3 4 million in 2024 revenue was unprofitable and would've required additional cash investment in 2025.

Peter Barry: We will continue to serve international customers in other regions from our North American hub.

Peter Barry: And do not anticipate a significant disruption in 2025 revenues from these regions.

Peter Biere: For the 12 months ended December 31st, 2024, we reported a net loss of $18.9 million, compared to $7.4 million in 2023, an increase of $11.5 million. The year-over-year increase was primarily driven by strategic actions to eliminate unprofitable investments and implement cost reduction. These actions resulted in one-time charges of approximately $8 million. approximately 7 million of which did not require cash in the current period and included a 4.1 million non-cash goodwill write-off in our third quarter related to older acquisitions. a $1.9 million Q4 non-cash loss from divesting HUZU. $1.3 million in severance and contract cancellation charges, $1 million of which tied to a leadership change in our third quarter, and $0.3 million for targeted workforce reductions enacted in our fourth quarter.

Peter Barry: For the 12 months ended December 31, 2024, we reported a net loss of $18 9 million compared to $7 4 million in 2023, an increase of $11 5 million.

Peter Barry: The year over year increase was primarily driven by strategic actions to eliminate unprofitable investments and implement cost reductions.

Peter Barry: These actions resulted in one time charges of approximately $8 million.

Peter Barry: Approximately 7 million of which did not require cash in the current period.

Peter Barry: Included a $4 1 million noncash goodwill write off in our third quarter related to older acquisitions.

Peter Barry: At 1.9 million Q4, noncash loss from divesting who's who.

Peter Barry: One 3 million in severance and contract cancellation charges 1 million of which tied to a leadership change in our third quarter and <unk> 3 million for targeted workforce reductions.

Peter Barry: Enacted in our fourth quarter.

Peter Biere: And finally, a $0.4 million fourth quarter write down of abandoned capitalized software. Despite the current period's impact on our financial results, these strategic measures strengthen our balance sheet and position us for significantly lower cash burn and improved profitability moving forward.

Peter Barry: And finally, a point for the fourth quarter write down of a bad to capitalized software.

Peter Barry: Despite the current period's impact on our financial results. These strategic measures strengthen our balance sheet and position us for significantly lower cash burn and improve profitability moving forward.

Peter Biere: For a more detailed discussion of full year results, please refer to our Form 10-K.

Peter Barry: For a more detailed discussion of full year results. Please refer to our Form 10-K.

Peter Biere: I'll turn now to results for the fourth quarter of 2024. Total revenue for the fourth quarter of 2024 was approximately $11 million or 23.7% above the prior year quarter. Revenue from Managed Services totaled $10.9 million in the current quarter, also growing 24% over the prior year quarter.

Peter Barry: I'll turn now to results for the fourth quarter of 2024.

Peter Barry: Total revenue for the fourth quarter of 2024 was approximately $11 million or $23, 7% above the prior year quarter.

Peter Barry: Revenue from managed services totaled $10 9 million in the current quarter also growing 24% over the prior year quarter.

Peter Biere: excluding revenues from Huzu, which were 1.1 million in the recent quarter, and the non-recurring customer from the 2023 comparison. managed services revenue grew 21.9% in the fourth quarter over the prior year period. Managed Services Bookings, a non-GAAP measure of demand for our services, grew about 45% to $11 million in the fourth quarter of 2024, compared to $7.6 million in the prior year's fourth quarter, excluding HUSU in both periods. As of December 31st, 2024, our managed services backlog, representing unrecognized revenue from ongoing contracts and recent bookings not yet invoiced, totaled $14.2 million. It's important to note that IZEA's contract bookings typically require an average of six to seven and a half months to complete the revenue cycle.

Peter Barry: Excluding revenues from <unk>, which were $1 1 million in the recent quarter.

Peter Barry: On the nonrecurring customer from the 2023 comparison managed services revenue grew 21, 9% in the fourth quarter over the prior year period.

Peter Barry: Managed services bookings a non-GAAP measure of demand for our services grew about 45% to $11 million in the fourth quarter of 2024 compared to seven 6 million in the prior years fourth quarter, excluding Oslo in both periods.

Peter Barry: As of December 31, 2020 for our managed services backlog, representing unrecognized revenue from ongoing contracts and recent bookings not yet invoiced totaled $14 2 million.

Peter Barry: It's important to note that I see is contract bookings typically require an average of six to seven five months to complete the revenue cycle.

Peter Biere: We expect to recognize a significant portion of this backlog in the first half of 2025. SAS services revenue totaled $117,000 in the fourth quarter of 2024, compared to $111,000 in the prior year quarter.

Peter Barry: We expect to recognize a significant portion of this backlog in the first half of 2025.

Peter Barry: SaaS services revenue totaled 117000 in the fourth quarter of 2024 compared to 111000 in the prior year quarter.

Peter Biere: Most of these customers are actively using IZEA's AI tool. Our total cost of revenue was $6.8 million or 62% of revenue in the fourth quarter of 2024. compared to $4.7 million or 53.1% of revenue for the prior year quarter, due primarily to a greater mix of higher cost deliveries in the current quarter. Expenses other than the cost of revenue totaled $7.3 million in the fourth quarter of 2024, up 15.3% from $6.4 million in the prior year quarter, approximately $0.7 million related to one-time adjustments I discussed earlier. Sales and marketing costs totaled $3 million during the fourth quarter, up 14.2% compared to the prior year quarter total of $2.6 million.

Most of these customers are actively using ideas AI tools.

Peter Barry: Our total cost of revenue was $6 8 million or 62% of revenue in the fourth quarter of 2024.

Peter Barry: Compared to $4 7 million or 53, 1% of revenue for the prior year quarter, due primarily to a greater mix of higher cost deliveries in the current quarter.

Peter Barry: Expenses other than the cost of revenue totaled $7 3 million in the fourth quarter of 2024 up 15, 3% from $6 4 million in the prior year quarter, approximately <unk> 7 million related to one time adjustments I discussed earlier.

Peter Barry: Sales and marketing cost totaled $3 million during the fourth quarter up 14, 2% compared to the prior year quarter total of $2 6 million.

Peter Biere: The increase was largely due to higher compensation costs, including severance costs related to our targeted workforce reduction. as well as increased spending on general contractors and contract cancellation costs, partially offset by reduced advertising expenses. General and administrative costs total $3.7 million during the fourth quarter, up 3.8% from the prior year quarter, due mostly to higher payroll, non-cash stock compensation costs, and severance costs associated with our targeted workforce reduction.

Peter Barry: The increase was largely due to higher compensation costs, including severance costs related to our targeted workforce reduction.

Peter Barry: As well as increased spending on general contractors had contract cancellation costs, partially offset by reduced advertising expenses.

Peter Barry: General and administrative costs totaled $3 7 million during the fourth quarter up three 8% from the prior year quarter, due mostly to higher payroll noncash stock compensation costs and severance costs associated with our targeted workforce reduction.

Peter Biere: partly offset by several declining cost categories. Our net loss in the fourth quarter totaled $4.6 million or negative 27 cents per share on 17 million shares. compared to a net loss of 1.5 million or negative 9 cents per share on 16.4 million shares for the fourth quarter of 2023.

Peter Barry: Partly offset by several declining cost categories.

Peter Barry: Our net loss in the fourth quarter totaled $4 6 million or negative <unk> 27 per share on 17 million shares compared to a net loss of $1 5 million or negative <unk> per share on $16 4 million shares for the fourth quarter of 2023.

Peter Biere: For our non-GAAP measure of adjusted EBITDA, we're making a calculation change to exclude any non-operating items, mostly interest income on our investment portfolio. You can find a reconciliation of adjusted EBITDA to net income at the bottom of our earnings release. We believe this will give investors a better overall picture of operating cash flow. In the fourth quarter of 2024, adjusted EBITDA was negative $1.5 million compared to negative $1.1 million for the prior year quarter. As of December 31st, 2024, we had 51.1 million in cash and investment. The decrease of $3.3 million compared to the prior year quarter, about half of which funded negative operating cash flow, and the other half funded higher levels of working capital and our stock buyback.

Peter Barry: For our non-GAAP measure of adjusted EBITA, we're making a calculation change to exclude any non operating items, mostly interest income on our investment portfolio.

Peter Barry: You can find a reconciliation of adjusted EBITDA to net income at the bottom of our earnings release.

Peter Barry: We believe this will give investors a better overall picture of operating cash flows.

Peter Barry: In the fourth quarter of 2024, adjusted EBITDA was negative $1 5 million compared to negative $1.1 billion for the prior year quarter.

Peter Barry: As of December 31, 2024, we had $51 1 million in cash and investments a decrease of $3 3 million compared to the prior year quarter.

Peter Barry: About half of which funded negative operating cash flow and the other half funded higher levels of working capital and our stock buyback.

Peter Biere: We previously announced our commitment to repurchase up to 10 million of our stock in the open market subject to certain restrictions. In September 2024, we adopted a Safe Harbor 10B51 plan, which will remain in place through May 15, 2025, allowing us to purchase shares without the limitations of our periodic insider trading window. As of December 31st, 2024, we have purchased 220,994 shares at an average share price of $2.70 under our program for an aggregate investment of $602,069. Through March 25, 2025, we purchased 385,947 shares at an average share price of $2.60. investing $1 million under the program.

Peter Barry: We previously announced our commitment to repurchase up to $10 million of our stock in the open market subject to certain restrictions.

Peter Barry: In September 2024, we adopted a safe harbor can be five one plan, which will remain in place through may 15th 2025 allow.

Peter Barry: Allowing us to purchase shares without the limitations of our periodic insider trading window.

Peter Barry: As of December 31, 2024, we have purchased 220994 shares at an average share price of $2 70 sets under our program for an aggregate investment of 600 in $2069.

Peter Barry: Through March 25th 2025, we purchased 385947 shares at an average share price of $2 60 invest.

Peter Barry: Investing 1 million under the program.

Peter Biere: We earned $0.5 million in interest on our investments during the recent quarter. And lastly, we did 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 at Lionhead.

Peter Barry: We earned <unk> 5 billion in this interest on our investments during the recent quarter.

Peter Barry: Lastly, we did not have any debt on our balance sheet.

Peter Barry: With cash on hand, and liquidity from our investment portfolio as required.

Peter Barry: We're in a solid position to execute on organic business growth and acquisition opportunities that lie ahead.

Patrick Venetucci: With that, I'll turn the call over to Patrick Venetucci, our Chief Executive Officer. Thank you, Peter. And good afternoon, everyone.

Peter Barry: With that I'll turn the call over to Patrick bedded to achieve our Chief Executive Officer.

Speaker Change: Thank you Peter and good afternoon, everyone. As a reminder, last September we made several important changes both to management and the board I stepped into the CEO role and we changed the composition and committee structure of the board.

Patrick Venetucci: As a reminder, last September, we made several important changes both to management and the I stepped into the CEO role and we changed the composition and committee structure of the board. We also increased our share buyback commitment from $5 million to $10 million as a demonstration of the board's belief that IZEA shares are undervalued, as well as confidence in the company's ability to create more value.

Speaker Change: We also increased our share buyback commitment from $5 billion to $10 million as a demonstration of the board's belief that Acs shares are undervalued as well as confidence in the company's ability to create more value.

Patrick Venetucci: In Q4, after spending time listening to employees, clients, and shareholders, I reset the strategic direction of the company. Our mission is to make greater economy solutions for more. These solutions range from services to technologies to a market.

Speaker Change: In Q4, after spending time listening to employees clients and shareholders I reset the strategic direction of the company. Our mission is to make creator economy solutions for marketers. These solutions range from services to technologies to a marketplace coming.

Patrick Venetucci: Coming out of our business planning process, we identified opportunities to fortify, simplify, and focus. Geographically, we are focusing on America first and reducing our international exposure to insulate our business from geopolitical risks, tariff risks, and currency risks. Technologically, we are simplifying our product to deliver a more intuitive customer experience. We are shifting our go-to-market model to focus on high-growth market segments, building on our extensive client list for which we have opportunities to do more.

Speaker Change: Coming out of our business planning process, we identified opportunities to fortify simplify and focus.

Speaker Change: Geographically, we are focusing on America, first and reducing their international exposure to insulate our business from geopolitical risks tariff risks and currency risks.

Speaker Change: Technologically we are simplifying our product to deliver a more intuitive customer experience.

Speaker Change: We are shifting our go to market model to focus on high growth market segments building on our extensive client list for which we have opportunities to do more.

Patrick Venetucci: As a result of this new strategic direction, we redesigned our organizational structure and made targeted workforce reductions in December. While these reductions increased our personnel expenses in the short It significantly improves our cost structure and accelerates our goal to break even on a cash basis moving forward. This, combined with the underlying revenue growth that Peter referenced, emboldens our financial outlook.

Speaker Change: As a result of this new strategic direction, we redesigned our organizational structure and made targeted workforce reductions in December while these reductions increased our personnel expenses in the short term it significantly improves our cost structure and accelerates our goal to breakeven on a cash base.

Speaker Change: It's moving forward.

Speaker Change: This combined with the underlying revenue growth that Peter referenced Emboldens, our financial outlook.

Patrick Venetucci: There are a few other operational activities in Q4 worth highlighting. We won new business from Nestle, Academy Sports, National Highway Traffic Safety Association, Navy Federal Credit Union, and more. We've produced new work for Warner Bros. Superman Reboot, Vital Proteins, and Danone that surpassed performance. Our vibrant work watching the Barbie movie continued to win awards.

Speaker Change: There are few other operational activities in Q4 with highlighting we won new business from Nestle Academy Sports National Highway traffic Safety Association.

Speaker Change: Leaving federal credit Union and more we produced new work for Warner Brothers, Superman reboot vital proteins, and then on that surpassed performance goals.

Speaker Change: Our viibryd work watching the Barbie movie continues to win awards, we released several proprietary industry insights studies, including the 2025 Trust and Influencer marketing report we.

Patrick Venetucci: We released several proprietary industry insight studies, including the 2025 Trusted Influencer Marketing. We advanced our tech product by releasing enhancements that improve campaign management efficiency.

Speaker Change: We advanced our tech product by releasing enhancements that improve campaign management efficiency.

Patrick Venetucci: Finally, we hired our first Chief People Officer, Kerry Gray. charged with professionalizing our talent programs to enable us to attract and develop the best talents in the world.

Speaker Change: Finally, we hired our first chief people Officer, Kieran Griffin charged with Professionalizing, our talent programs to enable us to attract and develop the best talents in the industry Inc.

Patrick Venetucci: In conclusion, a transformational change happened at IZEA in 2024. Our path to profitability is accelerating as a result of the bold and decisive actions taken in Q4. The board and management are optimistic about the future of this company and our ability to deliver additional value to all of our shareholders, clients, and employees.

Speaker Change: In conclusion, a transformational change happened in Asia in 2024, our path to profitability is accelerating as a result of the bold and decisive actions taken in Q4, the board and management are optimistic about the future of this company and our ability to deliver additional.

Speaker Change: No value to all of our stakeholders shareholders clients and employees alike. Thank.

Patrick Venetucci: Thank you for your time today.

Speaker Change: Thank you for your time today, and we'll now open the call for Q&A from the analyst community.

Operator: I will now open the call for Q&A from the analysts. Thank you. We'll now be conducting a question and answer session. If you'd like to be placed into question queue, 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 if you'd 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. Once again, that's star 1 to be placed into question queue. One moment please while we poll for questions.

Speaker Change: Thank you well now be conducting a question and answer session.

Speaker Change: It'd be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Speaker Change: You May press star two if you'd like to move to a question from the queue for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys once again Thats star one to be placed into question.

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

Speaker Change: Okay.

Operator: We've reached the end of our question and answer session.

We reached end of our question and answer session I'd like to turn the floor back over for any further or closing comments.

Matt Gray: I'd like to turn the floor back over for any further or closing comments. Thanks so much, Kevin. And thank you everyone for joining us this afternoon. As a reminder, you can find IZEA's investor relations information on our investor relations website found at izea.com forward slash investors. Thanks for joining us and have a nice evening. Thank you.

Speaker Change: Thanks, So much Kevin and thank you everyone for joining us. This afternoon. As a reminder, you can find ideas investor relations information on our Investor Relations website found at <unk> Dot Com sports slash investors. Thanks for joining us and have a nice evening.

Speaker Change: Thank you that does conclude today's teleconference. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.

Operator: That does conclude today's teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.