IZEA Worldwide, Inc.

Good afternoon, everyone, and welcome to IZEA's earnings call covering the third quarter of 2024. I'm Matt Gray, AVP of Marketing at IZEA, and joining me on the call are IZEA Chief Financial Officer Peter Beery and IZEA Chief Executive Officer Patrick Venitucci. Thanks for being with us today. Earlier this afternoon, the company issued a press release detailing IZEA's performance during Q3 2024. If you'd like to review 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 can 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. 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 would like to now introduce and turn the call over to IZEA's Chief Financial Officer, Peter Beery. Peter?

Thank you, Matt, and good afternoon, everyone. I'll review operating results for the quarter ended September 30, 2024 compared to the prior year's quarter and discuss selected balance sheet highlights. Total revenue for the third quarter of 2024 was approximately $8.8 million or 12% above the prior year quarter. Excluding revenue attributable to the large non-recurring customer with whom we parted ways in 2023, Revenues grew a healthy 27% from the prior year quarter. Demand for managed services grew 11% to $7.9 million in the third quarter of 2024 compared to $7.1 million in the prior year's third quarter. This quarter's demand was slightly lower than experienced in the first half of 2024. We believe this decline is due to timing and some reduction in marketing budgets particularly in emerging markets. It's important to note that IZEA's contract bookings take an average of seven and a half months to complete the revenue cycle. Many contracts are faster and some are longer. Our managed services backlog, a total of unrecognized revenue for contracts that are underway and recent bookings that we haven't started to invoice, totaled 14.6 million on September 30th, 2024. This is a decrease of $1 million versus the second quarter of 2024 and an increase of $3.4 million year to date. We will recognize much of this revenue in the following two to three quarters. Our managed services revenue totaled $8.6 million during the third quarter of 2024, which was $0.8 million or 10% higher than the third quarter of 2023. Removing approximately $0.9 million of revenue from our non-recurring customer in the prior year quarter, managed services revenue increased by $1.7 million or 25% from the same period in 2023, coming in part from WHZU and by strong demand in the first half of 2024. SAS services revenue totaled $206,000 in the third quarter of 2024, compared to $57,000 in the prior year quarter. Most of these customers are actively using IZEA's AI tools. Our total cost of revenue was $5.2 million or 59% of revenue in the third quarter of 2024 compared to $4.7 million or 59.3% of revenue in the prior year quarter. The current percentage cost decrease reflects improved margins within our existing customer base. Expenses other than the cost of revenue totaled $13 million for the third quarter of 2024, up 122% from $5.9 million in the prior year quarter. Sales and marketing costs totaled $2.9 million during the third quarter, up 7% to the prior year third quarter, mainly attributable to increased compensation costs, partly offset by reduced spending on demand generation activities. General administrative costs totaled $5.8 million during the third quarter, up 93% from the prior year quarter, mainly due to accrued severance and non-cash compensation expenses from the departure of two executives. The company also incurred increased cost from professional fees during the quarter. We also determined that the goodwill related to our 2019 acquisition of TAP Influence was impaired, leading to a $4 million non-cash charge in the current quarter. Our net loss in the current quarter totaled $8.8 million or negative $0.52 per share on 17 million shares compared to a net loss of $2 million or negative $0.13 per share on 15.5 million shares for the third quarter of 2023. Adjusted EBITDA was negative $2.8 million for the third quarter of 2024, compared to a negative $1.5 million for the prior year quarter. As of September 30, 2024, we had $54.4 million in cash and investments, a decrease of $2.1 million during the quarter primarily due to negative EBITDA and funding higher levels of working capital. We previously announced our commitment to buy 10 million of our stock in the open market, subject to some restrictions. On September 30th, 2024, we adopted a Safe Harbor 10b51 plan to purchase shares without restrictions related to our periodic insider restrictive window, which became active on November 1st following the required quiet period. As of November 11, 2024, we have purchased 51,503 shares at an average share price of $2.74 under our program for an aggregate investment of $142,273. We earned $0.6 million in interest on our investments during the current quarter. 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. With that, I'll turn the call over to Patrick Venitucci, our Chief Executive Officer.

Thank you, Peter, and good afternoon, everyone. I'm Patrick Venitucci, the new CEO of IZEA. Thank you for your time and attention today. On September 6th, we made several important changes both to management and the board. On the management side, Ted Murphy, founder and CEO, and Ryan Schramm, COO, departed the company. I stepped into the CEO role, leveraging my 30 plus years of industry experience and six years on IZEA's board. On the board side, we made changes to the size, composition, and committee structure of the board. We separated the chairman and CEO roles, naming Lindsey Gardner as chairman of the board. We added two new board members, Antonio Bonchristiano and Rodrigo Bascolo from GP Investments. We created a strategy and capital allocation committee chaired by John Caron. And importantly, we increased our share buyback commitment from $5 million to $10 million as a demonstration of the board's belief that Isaiah's shares are undervalued. as well as confidence in the company's ability to create more value. During my first 60 days, I went on a listening tour, held strategic workshops, and hired our first chief talent officer. My listening tour encompassed meetings with employees, clients, and shareholders. What I heard was newfound excitement and optimism about IZEA's future. Our talent base is smart, charismatic, and engaged. We have an extensive client list that includes Fortune 500 brands for which we have opportunities to do more. We have a strong culture of care, creativity, and innovation. Our tech product innovation pipeline is robust, including AI. I quickly organized several strategic workshops with our executive leadership team, which led to new ideas for growth and efficiencies. Lastly, I hired our first chief talent officer, Kerry Griffin, who has over two decades of experience and is charged with professionalizing our talent programs to enable us to attract and develop the best talents in the industry. In our business operations during Q3, we made notable accomplishments in sales, managed services, and product development. We won new business from Nestle, Danone, Coursera, and NHTSA. We produced exciting new work for one of the largest auto manufacturers. Our vibrant work launching the Barbie movie won numerous awards, including the Global Influencer Marketing Awards, the Global Agency Awards, and Global Digital Excellence Awards. We advanced our tech product by launching Izzy, a cutting-edge AI assistant for marketers making creator campaigns. Izzy harnesses IZEA's rich dataset and empowers users to make smarter, faster, and more impactful creator campaign decisions. Lastly, as recognition of IZEA's attractive culture, we won several awards for being a great place to work. Best Agency Workplace, PR Daily Top Agencies, Stevie Awards, Great Employers, and Comparably. Looking forward, we are focused on our go-to-market model, driving top-line growth and putting the company on a path to profitability. I believe we can do both and accelerate the path to profitability. there are opportunities to simplify, fortify, and focus. We are beginning to identify and shift resources from business segments that are merely growing to segments with profitable growth. Our 2025 business plan process is underway. I look forward to sharing more about our future strategic direction and initiatives at the next investor meeting. In conclusion, a transformational change happened at ISEA during Q3. We are moving fast. We're making progress. The board and management are optimistic about the future of this company and our ability to deliver additional value 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.