Q1 2025 IZEA Worldwide Inc Earnings Call
Speaker Change: Greetings and welcome to the Isaiah Worldwide first quarter 2025 earnings call. At this time, all participants aren't a listen only mode. A question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Matt Gray, Vice President of Marketing. Please go ahead.
Matt Gray: Good afternoon everyone and welcome to Isaiah's earnings call covering the first quarter of 2025. I'm Matt Gray, VP Marketing at Isaiah and joining me on the call are Isaiah's Chief Financial Officer, Peter Biere and Isaiah's Chief Executive Officer, Patrick Venetucci. Thank you for being with us today.
Matt Gray: Earlier this afternoon, the company issued a press release detailing Isaiah's performance during Q1 2025. If you'd like to review those details, all our investor information can be found online on our investor relations website at izia.com for its flash investors.
Matt Gray: Before we begin, please take note of the Safe Harbor Paragraph included in today's press release covering IZS financial results and be advised that some of the statements that we make today regarding our business, operations and financial performance.
Matt Gray: 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.
Matt Gray: Our commentary today will also include the non-GAAP financial measure of adjusted EBITDA. Reconciliation between GAP 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: and with that, I would like to now introduce and turn the call over to Isaiah's Chief Financial Officer, Peter Biere. Peter?
Peter Biere: Thank you, Matt, and good afternoon, everyone. Earlier this afternoon we released our results for the first quarter and filed a quarterly report on Form 10Q with the SEC. This may be issued an informational press release announcing our intention to initiate.
Peter Biere: a tender offer to repurchase the remaining $8.7 million of our previously announced $10 million stock buyback.
Peter Biere: Today, I'll review operating results for the quarter ended March 31, 2025, compared to the first quarter of 2024, and discuss certain balance sheet highlights as well as our proposed tender offer.
Peter Biere: Total revenue for the first quarter of 2025 was approximately 8 million or 14.6 percent above the prior year quarter. Revenue for managed services totaled 7.9 million in the current quarter, growing 18.1 percent over the prior year quarter.
Peter Biere: excluding a half a million from Huzoo in the prior year quarter.
Peter Biere: rose 27.6% in the first quarter over the prior year period. Manage Services bookings, a non-GAAP measure of demand for our services declined to 7.5 million in the first quarter of 2025, compared to 9.3 million in the prior year's first quarter.
Peter Biere: One of our largest customers front loaded their 2024 contract commitments which resulted in contract timing differences.
Peter Biere: As of March 31, 2025, our Manage Services backlog, representing unrecognized revenue from ongoing contracts and recent bookings not yet invoiced, total of 14.9 million.
Peter Biere: It's important to note that Isaiah's contract bookings typically require an average of six to seven and a half months to complete the revenue cycle.
Peter Biere: SAS revenue totaled $60,953 in the first quarter of 2025 compared to $256,341 in the same quarter of the prior year.
Peter Biere: The year-over-year decline reflects our strategic decision to reduce marketing support for our SaaS offerings, while we evaluate the most effective capital allocation plan to drive long-term profitability. Our total cost of revenue was 4.4 million or 55.2% of revenue in the first quarter of 2025.
Peter Biere: Compared to 4 million or 57.1% of revenue for the prior year quarter. Reflecting lower margin who is a revenue in the prior year quarter?
Peter Biere: Expenses other than the cost revenue total 4.2 million in the first quarter of 2025, a 40% decline from 7 million in the prior year's quarter.
Peter Biere: Sales and marketing costs total $1.1 million during the first quarter of 2025, representing a 63.3% decline compared to the prior years $3.1 million total.
Peter Biere: The decrease was largely due to reduced costs related to our targeted workforce reduction, as well as a temporary pause in advertising spend and lower general contractor fees.
Peter Biere: General and administrative costs total $2.9 million during the first quarter, a 22.3% decline over the prior year quarter, primarily due to lower employee-related costs.
Peter Biere: Reduced use of external contractors and lower spending on professional services and software license piece.
Peter Biere: Our net loss in the first quarter totaled $142,800, or a negative 1 cent per share, on 16.9 million shares.
Peter Biere: Compared to in that loss of $3.3 million or negative 20 cents per share on 16.3 million shares for the first quarter of 2024.
Peter Biere: In the first quarter of 2025, adjusted EBIDA was negative $76,850 compared to negative $3.4 million for the prior year quarter.
Peter Biere: As a reminder, we updated our non-GAF measure of adjusted EBITDA in the fourth quarter of 2024 to exclude non-operating items, primarily interesting come from our investment portfolio.
Peter Biere: The prior year comparison was restated for comparability. You can find a reconciliation of adjusted EBITDA to net income at the bottom of our earnings release.
Peter Biere: As of March 31st, 2025, we have 52.2 million in cash and investments.
Peter Biere: an increase of 1.1 million from the beginning of the quarter.
Peter Biere: The higher cash balance reflects net reductions in working capital, primarily driven by collections of accounts receivable and positive cash flow from operations. We earned half a million dollars in interest income on our investments during the recent
Peter Biere: Lastly, we did not have any debt on our balance sheet. We previously announced our commitment to repurchase up to $10 million of our stock in the open market, which was subject to certain restrictions.
Peter Biere: Through May 9, 2025, we've purchased 469,211 shares, investing about $1.2 million from September 2024.
Peter Biere: despite consistent daily buying since November of 2024, low trading volumes and purchase restrictions have limited our buyback.
Peter Biere: Late this afternoon, we announced our intention to conduct a modified Dutch auction tender offer for up to $8.7 million of our shares which, if fully subscribed, will complete our current buyback program.
Peter Biere: The tender is planned to commence on Friday, May 16, 2025, and it will be priced from a low of $2.30 and a high of $2.80 per share based on the percentage of our 90-day volume weighted average price.
Peter Biere: With cash on hand and liquidity from our investment portfolio as required, we are a well-positioned to execute organic business growth and capitalize on future acquisition opportunities. With that, I'll turn the call over to Patrick Venetucci, our chief executive officer.
Patrick Venetucci: Thank you Peter and good afternoon everyone. When I stepped into the CEO role in September 2024, the leadership team and I made a commitment to accelerate our path to profitability. We reset the strategic direction of the company and identify opportunities to fortify, simplify and focus.
Patrick Venetucci: In Q4 2024, we activated the first phase of our plan and took several bold and decisive actions that made a positive impact on Q1 2025.
Patrick Venetucci: Geographically, we exited international markets in favor of fortifying in the U.S. By focusing on America first, we significantly reduced our international exposure and insulated our business from geopolitical risks, tariff risks, and currency risks.
Patrick Venetucci: Organizationally, we designed a new and more efficient structure that aligned with our new strategy. This enabled us to simplify our organization and make targeted workforce reductions in December which significantly improved our overall cost structure moving forward.
Patrick Venetucci: We transformed our go-to-market model by focusing on high growth market segments and our extensive client list for which we have opportunities to do more. We are obsessed with serving our top clients even better.
Patrick Venetucci: We've long had a strength to manage services and began embracing it more so than in the past.
Patrick Venetucci: We're leaning into our ability to provide critter economy services with a better articulated service offering menu and roadmap of areas where we intend to build capabilities both organically and via M&A.
Patrick Venetucci: Technologically, we began simplifying our product offerings by focusing on fewer products, consolidating features, and delivering a more intuitive customer experience.
Patrick Venetucci: There are a few other operational activities in Q1 worth highlighting. We won business from Nestle, Acer, Jeep and more. Our sales pipeline is trending up with larger opportunities from higher quality clients.
Academy Sports and Coursera to name a few.
Patrick Venetucci: We advanced our tech product by releasing enhancements that improve campaign management efficiency. Finally, we hired our first EVP of sales and marketing.
Speaker Change: Frank Carallo, who brings with him not only influencer marketing specific experience, but experiences selling broader marketing services and enterprise account management.
Speaker Change: In summary, Q-1 was an exceptional quarter and a giant step towards making good on our promise to accelerate our path to profitability.
Speaker Change: We grew revenue by double digits, nearly broke even, and generated cash all in one quarter.
Speaker Change: This is strong evidence that the transformational changes we made in Q4 2024 are working.
Speaker Change: Our new code of market model, class structure and technologies are aligning and beginning to bear fruit. We have confidence that there are even more value creation opportunities ahead of us.
Speaker Change: Because we continue to believe that Isaiah's shares are undervalued, we're continuing our $10 million share repurchase program, and we plan to initiate a tender offer on Friday, May 16, 2025, to encourage completion of our repurchase goal.
Speaker Change: We are optimistic about the future of this company and our ability to deliver additional values to all of our stakeholders, shareholders, clients, and employees alike. 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. A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star 2 to remove yourself from the queue. For participants using speaker equipment it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: First question comes from John Hickman with Latinburg Film and please go ahead.
John Hickman: Hey, I don't Peter, could you give us a little bit of or elaborate on a little bit what you think gross margins might be for kind of the remaining of the remainder of the here?
John Hickman: Well, as you know, we're not giving guidance, but with that said, I think our margins are fairly steady. They go up and down a little bit within a band, depending on how things mix.
John Hickman: If you saw margins in the fourth quarter drop a bit, we're back up.
John Hickman: and of course we've cleared out some of the really low margin stuff so I would imagine that you could say margins will be stable through the rest of the year.
John Hickman: and your cost-cutting measures are they essentially over? I could use this a good-
level for going forward.
Well, so first of all, some of the costs.
John Hickman: are structural and they'll be that way going forward. We trimmed quite a bit of head count and that's the biggest, obviously the biggest expense item on our
John Hickman: That doesn't mean we're not going to hire more people. What it means is we brought our costs down to a level that our business could afford.
John Hickman: Our goal is to make money so we still have to get
John Hickman: More pop line synergy and grow costs slower and we're in a good position to manage ourselves that way, but you know, I would say
John Hickman: For this year, the cost structure you're looking at is probably pretty good. We'll probably add people going into the summer and early fall, but you should also see the business rise a bit to pay for that.
We're trying to be really tight and make our objectives good. Thank you.
Speaker Change: Okay, and then any comments on, you know, the economy has been kind of hurt
I'll jump in here, Peter. Hey, John , it's Patrick.
Speaker Change: Yeah, we're, you know, I think just as with everyone else, there is a lot of uncertainty in the world, but with that said, our pipeline is actually growing and more importantly, the quality of the clients that we're speaking with.
are increasing, we're reaching higher into organizations.
Speaker Change: We're having more substantial conversations with our enterprise customers, the deal sizes as we're talking about our bigger...
so, you know...
I think it's more a question of short-term versus long-term. There's...
Speaker Change: It doesn't require the upfront commitments that some of the competing marketing choices do. This is more controllable, it's marketing spend that you can turn on and off more readily. It's something you can shift around on a tactical basis.
Speaker Change: in a more agile way. So I think, you know, we're like everyone else, we don't have a crystal ball, but we're seeing a lot of good signs and some signs that may even offset the risks that are out there.
Speaker Change: Okay, and then can you elaborate any more on your like M&A opportunities? Like is it a target Richard Mark of environment?
comfort zone, that kind of thing.
Speaker Change: We have not aggressively pursued it yet because we wanted to get the organization to a point of readiness. We want to make sure we're organizationally ready.
Speaker Change: so that we can integrate with the right partner. With that said, we have been...
Speaker Change: Looking at some opportunities opportunistically as we have had a number of unsolicited in-bounds
Speaker Change: We are ramping up our relationships with investment bankers and more aggressively looking ahead now that
Speaker Change: We've gotten through some of these structural changes and as you can see we've got a good cost structure.
to build off of-
Speaker Change: and in terms of valuations right now, it really depends which areas we go into. You know, there are some areas where I think it's reasonable or other areas.
Speaker Change: that are a little hot, right now the creator economy is hot and quite frankly.
Speaker Change: We, as part of the reason we're doing the share by back, we think we're very much undervalued right now, but all in all, I would say whatever we do moving forward, we're going to be reasonable about it, and we're not going to overpay.
in the market.
Okay. Thank you. That's it for me. Appreciate it.
Matt Gray: Thanks, John . Thank you. I would like to turn this floor over to Matt Gray for closing remarks.
Matt Gray: Thanks so much, Stacey, and thank you everyone for joining us this afternoon. As a reminder, you can find all of Isaiah's investor and information on our investor relations website, lasia.com forward slash investors. Thanks for joining us and have a nice evening.
Speaker Change: This concludes today's teleconference. He made his connection live at this time, and thank you for your participation.