Earnings call transcript: IZEA Inc’s Q4 2024 revenue rises amid cost cuts

IZEA Worldwide Inc. reported a 23.7% year-over-year increase in Q4 2024 revenue, reaching $11 million. Despite this growth, the company faced a net loss of $18.9 million for the year, up from $7.4 million in 2023. The stock saw a 6.02% decline in aftermarket trading, closing at $1.95, its 52-week low. According to InvestingPro analysis, IZEA appears undervalued at current levels, though investors should note the company’s weak financial health score of 1.64 out of 5.

Key Takeaways

• Q4 2024 revenue increased by 23.7% year-over-year.
• Annual net loss widened to $18.9 million.
• Stock dropped by 6.02% in aftermarket trading.
• Cost-cutting measures saved $5.1 million annually.
• Focused on U.S. market to reduce geopolitical risks.

Company Performance

Overall, IZEA showed a mixed performance in 2024. While Q4 revenue grew significantly, total annual revenue slightly declined by 1% to $35.9 million. The company has been actively reducing costs and streamlining operations, including a 32-position workforce reduction and divestment from its Australian subsidiary. These steps aim to accelerate profitability despite the increased net loss. InvestingPro data reveals the company maintains a healthy current ratio of 4.32, with liquid assets well exceeding short-term obligations.

Financial Highlights

• Total 2024 revenue: $35.9 million (1% decline from 2023)
• Q4 2024 revenue: $11 million (23.7% increase YoY)
• Managed services revenue grew 16.3% excluding non-recurring customers
• Net loss: $18.9 million in 2024, compared to $7.4 million in 2023
• Cash and investments: $51.1 million as of 12/31/2024

Outlook & Guidance

IZEA has a managed services backlog of $14.2 million, with expectations to recognize a significant portion in the first half of 2025. The company is committed to a $10 million stock buyback program and anticipates an EPS forecast of -$0.11 for FY 2024 and $0.13 for FY 2025, with revenue projections of $35.39 million and $50 million, respectively. InvestingPro subscribers can access 12 additional key insights about IZEA’s future prospects and detailed financial health analysis in the comprehensive Pro Research Report.

Executive Commentary

CEO Patrick Beneducci emphasized, "Our mission is to make greater economy solutions for marketers," highlighting the company’s focus on efficiency and U.S. market prioritization. CFO Peter Berry added, "These strategic measures strengthen our balance sheet and position us for significantly lower cash burn and improved profitability."

Risks and Challenges

• Increasing net losses could pressure financial stability.
• Market competition in influencer marketing remains intense.
• Geopolitical and currency risks due to international exposure.
• Dependence on key clients like Nestle and Warner Brothers.
• Execution risk in strategic cost-cutting and restructuring plans.

Full transcript - IZEA Inc (IZEA) Q4 2024:

Conference Operator: Greetings, and welcome to the IZEA Worldwide Inc. Fourth Quarter twenty twenty four Earnings Call. At this time, all participants are in a listen only mode. 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.

Matt Gray, Vice President of Marketing, IZEA Worldwide Inc.: 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 Berry and IZEA’s Chief Executive Officer, Patrick Venetucci. Thank you for being with us today. Earlier this afternoon, the company issued a press release detailing IZEA’s performance during Q4 twenty twenty four.

If you’d like to review those details, all our investor information can be found online on our Investor Relations website at izea.com/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 Berry. Peter?

Peter Berry, Chief Financial Officer, IZEA Worldwide Inc.: Thank you, Matt, and good afternoon, everyone. We recently released our fourth quarter and full year twenty twenty four results and filed our annual report on Form 10 ks 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 12/31/2024 balance sheet. Turning to our annual results, revenues totaled $35,900,000 in 2024 declining slightly from $36,200,000 or down 1% compared to 2023. Managed services revenue for 2024 was $35,100,000 down about $683,000 or 2% from 2023.

It’s important to note that $8,100,000 of 2023 revenue came from a non recurring customer we parted ways with in late twenty twenty two. Excluding revenues from Huzu, which we divested at the end of twenty twenty four 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 $3,900,000 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 $1,200,000 in annualized savings. We also implemented further cost cutting measures across marketing and administrative functions. We took action to end on profitable international investments, divesting our Australian subsidiary Huzu, which while it accounted for $3,400,000 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 twelve months ended 12/31/2024, we reported a net loss of $18,900,000 compared to $7,400,000 in 2023, an increase of $11,500,000 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 $8,000,000 approximately $7,000,000 of which did not require cash in the current period and included a $4,100,000 non cash goodwill write off in our third quarter related to older acquisitions, a $1,900,000 Q4 non cash loss from divesting Huzu, one point three million dollars in severance and contract cancellation charges, $1,000,000 of which tied to a leadership change in our third quarter and $300,000 for targeted workforce reductions enacted in our fourth quarter and finally a $400,000 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 ks. I’ll turn now to results for the fourth quarter of twenty twenty four.

Total revenue for the fourth quarter of twenty twenty four was approximately $11,000,000 dollars or 23.7% above the prior year quarter. Revenue from managed services totaled $10,900,000 in the current quarter also growing 24% over the prior year quarter. Excluding revenues from Hulu, which were $1,100,000 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 $11,000,000 in the fourth quarter of twenty twenty four compared to $7,600,000 in the prior year’s fourth quarter excluding Uzu in both periods. As of 12/31/2024, our managed services backlog representing unrecognized revenue from ongoing contracts and recent bookings not yet invoiced totaled $14,200,000 It’s important to note that IZEA’s contract bookings typically require an average of six to seven point five months to complete the revenue cycle.

We expect to recognize a significant portion of this backlog in the first half of twenty twenty five. SaaS services revenue totaled $117,000 in the fourth quarter of twenty twenty four 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 $6,800,000 or 62% of revenue in the fourth quarter of twenty twenty four compared to $4,700,000 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 $7,300,000 in the fourth quarter of twenty twenty four, up 15.3 from $6,400,000 in the prior year quarter, approximately $700,000 related to onetime adjustments I discussed earlier.

Sales and marketing costs totaled $3,000,000 during the fourth quarter, up 14.2% compared to the prior year quarter total of $2,600,000 dollars 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 3,700,000 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 $4,600,000 or negative $0.27 per share on 17,000,000 shares compared to a net loss of $1,500,000 or negative $0.09 per share on 16,400,000.0 shares for the fourth quarter of twenty twenty three. 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 twenty twenty four, adjusted EBITDA was negative $1,500,000 compared to negative $1,100,000 for the prior year quarter. As of 12/31/2024, we had $51,100,000 in cash and investments, a decrease of $3,300,000 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 $10,000,000 of our stock in the open market subject to certain restrictions. In September 2024, we adopted a safe harbor 10b5-one plan, which will remain in place through 05/15/2025, allowing us to purchase shares without the limitations of our periodic insider trading window.

As of 12/31/2024, we have purchased 220,994 shares at an average share price of $2.7 under our program for an aggregate investment of $602,069 Through 03/25/2025, we purchased 385,947 shares at an average share price of $2.6 investing $1,000,000 under the program. We earned 500,000 in interest on our investments during the recent quarter. And 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 Beneducci, our Chief Executive Officer.

Patrick Beneducci, Chief Executive Officer, IZEA Worldwide Inc.: 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 $5,000,000 to $10,000,000 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 greater 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 breakeven 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 produced new work for Warner Brothers Superman Reboot, Vital Proteins and then on that surpassed performance goals. Our vibrant work launching the Barbie movie continued to win awards. We’ve released several proprietary industry insight studies, including the twenty twenty five 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 and A from the analyst community.

Conference Operator: Thank you. We’ll now be conducting a question and answer session. 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/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.

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