IZEA Worldwide, Inc.

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. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. 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 full year of 2024. I'm Matt Gray, VP of Marketing at IZEA, and joining me on the call are IZEA's Chief Financial Officer, Peter Beery, and IZEA's Chief Executive Officer, Patrick Venitucci. Thank you for being with us today. Earlier this afternoon, the company issued a press release detailing IZEA's performance during Q4 2024. 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 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. 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 reported results, can also be found in our earnings release issued earlier today and in our publicly available filings. And with that, I would now like to introduce and turn the call over to IZEA's Chief Financial Officer, Peter Beery. Peter?

Thank you, Matt, and good afternoon, everyone. 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 balance 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. 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 HUSU, 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. 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 functions. 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. 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 reductions. 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 HUSU, $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. 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. For a more detailed discussion of full-year results, please refer to our Form 10-K. 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 for managed services totaled 10.9 million in the current quarter, also growing 24% over the prior year quarter. Excluding revenues from HUSU, 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 percent to $11 million in the fourth quarter of 2024, compared to $7.6 million in the prior year's fourth quarter, excluding USU 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. 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. Most of these customers are actively using IZEA's AI tools. 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 percent compared to the prior year quarter total of $2.6 million. 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 totaled $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, 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. 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 flows. 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 investments, a 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. 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 15th, 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 25th, 2025, we purchased 385,947 shares at an average share price of $2.60, investing $1 million under the program. 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 that lie ahead. With that, I'll turn the call over to Patrick Benitucci, our Chief Executive Officer.

Patrick Benitucci 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. 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. 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 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. 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 break even on a cash basis moving forward. This combined with the underlying revenue growth that Peter referenced emboldens our financial outlook. 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 Brothers' Superman reboot, Vital Proteins, and Denon that surpassed performance goals. Our vibrant work launching the Barbie movie continued to win awards. We released several proprietary industry insight studies, including the 2025 Trust and Influencer Marketing Report. We advanced our tech product by releasing enhancements that improve campaign management efficiency. Finally, we hired our first Chief People Officer, Kerry Griffin, charged with professionalizing our talent programs to enable us to attract and develop the best talents in the industry. 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 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.

Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the 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 in the question queue. One moment, please, while we poll for questions. We've reached the end of our question and answer session. 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. 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.