Q3 2025 IZEA Worldwide Inc Earnings Call
Speaker #1: Ladies and gentlemen, greetings and welcome to the IZEA's third quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation.
Speaker #1: If anyone requires operator assistance during the conference call, please signal the operator by pressing star and zero on your telephone keypad. As a reminder, this conference is being recorded.
Speaker #1: It is now my pleasure to introduce your host, Sandra Carboni. SVP, General Counsel at IZEA. Please go ahead.
Speaker #2: Good afternoon, everyone, and welcome to IZEA's Good earnings call covering the third quarter of 2025. I'm Sandra Carboni, SVP, General Counsel at IZEA, and joining me on the call are IZEA's Chief Executive Officer, Patrick Venetucci, and IZEA's Chief Financial Officer, Peter Biere.
Speaker #2: Thank you for being with us today. Earlier this afternoon, the company issued a press release detailing IZEA's performance during Q3 2025. If you would like to review those details, please visit our Investor Relations website at izea.com/investors.
Speaker #2: 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.
Speaker #2: We encourage you to consider the disclosures contained in our SEC filings for a detailed discussion of these factors. Our commentary today will also include the non-GAAP financial measures of adjusted EBITDA and revenues excluding divested operations.
Speaker #2: 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.
Speaker #2: And with that, I would now like to introduce and turn the call over to IZEA's Chief Executive Officer, Patrick Venetucci. Patrick?
Speaker #3: good afternoon, everyone. Thank you, Sandra, and In Q2, I proudly announced that for the first time in the history of this company, we were profitable.
Speaker #3: This quarter, I'm pleased to announce that Q3 marks our third consecutive quarter of financial improvement. While total revenue for the quarter decreased 8% to $8.1 million, as a result of our choosing to shed unprofitable, non-recurring project work and some softness in government and retail accounts, the underlying health of our business is strong.
Speaker #3: Managed service revenue excluding Husu increased 5%. Total operating expenses decreased by 67%. Net income totaled $0.1 million compared to a net loss of $8.8 million, during Q3 last year.
Speaker #3: And cash increased by 0.8 million dollars to $51.4 million. Year to date, our managed services revenue is up 14%, and net income totaled $1.2 million.
Speaker #3: Three consecutive quarters of continuous improvement underscores that our strategic direction and transformation towards sustainable, profitable growth is firmly taking hold. Since I stepped in as CEO, our objective has been clear: fortify, simplify, and focus.
Speaker #3: During the first half of the year, we fortified our business in America, simplified many aspects of our go-to-market approach, and focused on our managed services.
Speaker #3: We segmented our managed service accounts, focusing on enterprise customers, with recurring revenue and high growth potential, instead of the long tail of transactional customers with small projects and high churn rates.
Speaker #3: As we've strengthened and expanded our relationships with enterprise clients, we've been rewarded with more business. Our enterprise accounts are now growing at double-digit rates, that are well above the industry average, and a few at triple-digit rates.
Speaker #3: Our sales and marketing efforts are attracting new clients, such as Amazon, General Motors, and Owens Corning. Plus, our pipeline reached a new high for the year, with invitations to larger pitches growing.
Speaker #3: Lastly, we produced new work for Kellogg's, Clorox, Nestlé, Danone, and many more clients. To bolster our enterprise growth strategy and momentum, we hired Steve Fennell, EVP Account Management, who joined us from Publix's group, where he has a track record of rapidly growing large enterprise accounts, such as McDonald's and Samsung.
Speaker #3: We also hired John Francis, VP Marketing and Revenue Operations, who joined our team from private equity-backed marketing services firms, where he built effective B2B growth programs.
Speaker #3: Although services this year, we continue to invest in our technology platform. Earlier this year, we we have been highly focused on began simplifying our tech product offerings by focusing on fewer products, consolidating features, and delivering a more intuitive customer experience.
Speaker #3: In Q3, we infused our technology platform with AI-powered features that provide clients with strategic insights will be announcing more about our technology development soon.
Speaker #3: and campaign performance. We opportunity ahead of us, I am optimistic about the future of this company and our ability to deliver additional value to all of our stakeholders, shareholders, clients, and employees alike.
Speaker #3: With that, I'll turn the call over to Peter Biere, our Chief Financial Officer, for a closer look at the financial results.
Speaker #4: Thank you, Patrick, and good afternoon, everyone. This afternoon, we released our results for the third quarter and filed our quarterly report on Form 10Q with the Securities and Exchange Commission.
Speaker #4: Today, I'll review our operating results for the quarter ended September 30, 2025, with year-over-year and year-to-date comparisons highlighting key balance sheet items and providing an update on our stock repurchase activity.
Speaker #4: Beginning in early 2025, we implemented a new account management model focusing our resources toward larger, more profitable, recurring accounts, while scaling back selling and delivery efforts previously devoted to lower-value project-based accounts with limited repeat business.
Speaker #4: realignment reduced current year contract This strategic bookings. But as materially improved profitability and strengthened our foundation for sustainable growth. Managed services bookings represent a total of sales orders received during a period net of cancellations and refunds.
Speaker #4: They aren't an indicator of overall demand, but are not necessarily predictive of quarterly revenue, as timing varies with contract size, complexity, and customer arrangements.
Speaker #4: As we continue to emphasize enterprise accounts, individual bookings are expected to become higher in value, but less consistent in timing. Which can impact comparability.
Speaker #4: For the nine-month ended September 30, 2025, managed services bookings excluding Husu declined 26% to $18.2 million, compared to the prior year period. And contract backlog decreased from $15.5 million at the beginning of the year to $7.1 million at quarter end.
Speaker #4: The decline primarily reflects the company's strategic focus on higher-quality recurring accounts, along with more cautious marketing spend among certain enterprise and agency clients amid broader economic uncertainty, including tariff impacts.
Speaker #4: Revenue from managed services excluding Husu increased 14% for the nine-month ended September 30, 2025, compared to the prior year period, while overall growth slowed 5% in the current quarter.
Speaker #4: Growth in both comparative periods was driven by expansion among enterprise customers. Partly offset by a reduction in smaller non-strategic accounts that we intentionally de-emphasized.
Speaker #4: Our total cost of revenue, including both external creative and internal labor costs, totaled $4.2 million, or $51% of revenue in the third quarter of 2025, compared to $5.2 million, or $59% of revenue in the same quarter of the prior year.
Speaker #4: Excluding Husu, the cost of revenue declined approximately 5% year-over-year, reflecting improved margin mix in the current period. Operating expenses other than the cost of revenue totaled $4.3 million for the third quarter, down 8.7 million, or $67%, compared to $13 million in the prior year quarter.
Speaker #4: Sales and marketing expenses were $1.1 million, down 62% from the prior year period, reflecting workforce reductions and a temporary pause in certain marketing initiatives.
Speaker #4: General and administrative expenses declined 49% to $3 million, primarily due to lower employee-related costs, reduced use of external contractors, and decreased spending on professional services, software licenses, and data storage.
Speaker #4: The prior year period also included a $4 million non-cash charge related to goodwill impairment from an acquisition we made in 2019. We achieved profitability for the third quarter, generating net income of $0.1 million, or $0.01 per share, on 18.7 million shares, compared to a net loss of $8.8 million, or negative $0.52 per share, on 17 million shares in the third quarter of 2024.
Speaker #4: This marks only the second quarter in the company's history in which profitability was achieved through operating performance. And the third consecutive quarter of financial improvement, underscoring that our transformation continues to be underway.
Speaker #4: Adjusted EBITDA for the third quarter of 2025 was $0.4 million, compared to negative $3.4 million in the prior year quarter. As a reminder, we revised our non-GAAP definition of adjusted EBITDA in late 2024, excluding non-operating items such as interest income from our investment portfolio and restated prior results for comparability.
Speaker #4: Our reconciliation of adjusted EBITDA to net income is available at the bottom of our earnings release. As of September 30, 2025, we had $51.4 million in cash and investments, an increase of $0.3 million from the beginning of the year.
Speaker #4: This modest increase contrasts with an 8.8 million dollar reduction in cash in the prior year period, and reflects the benefits of improved operating performance and discipline cost management.
Speaker #4: Operating cash flow is positive for the year-to-date period, inclusive of normal working capital timing variances. In September 2024, we announced a commitment to repurchase up to $10 million of our common stock in the open market, subject to customary restrictions, including regulatory limits on daily trading volume and company-imposed share price thresholds.
Speaker #4: Through September 30, 2025, cumulative repurchases totaled $561,950 shares, for an aggregate investment of $1.4 million under the program. No purchases were made during the third quarter.
Speaker #4: We also earned $0.5 million of interest on our investments during the recent quarter. Finally, we continue to operate with no debt on our balance sheet.
Speaker #4: With cash on hand and liquidity, we remain well-positioned to support organic business growth initiatives. And pursue strategic acquisition opportunities. Thank you for your time today, and at this time, we invite our investors and analysts to share their questions so that we can provide clarity and
Speaker #4: insight. Thank
Speaker #1: you. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad.
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Speaker #1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions.
Speaker #1: Ladies and gentlemen, if you wish to ask a question, please press * and 1. A reminder: Ladies and gentlemen, if you wish to ask a question, please press * and 1.
Speaker #1: As there are no questions in the queue, I now hand the conference over to IZEA's SVP and General Counsel, Sandra Carboni, for closing comments.
Speaker #3: Thanks so much, Ryan. And thank you, everyone, for joining us this afternoon. As a reminder, a replay of today's call will be available shortly on our website, izea.com/investors.
Speaker #3: We appreciate your continued interest and support, and hope you'll join us for our next conference call to discuss our fourth quarter 2025 results.