IZEA Worldwide Inc. (NASDAQ: NASDAQ:IZEA), the premier provider of influencer marketing technology, data, and services, reported its financial results for the second quarter of 2024. The company highlighted a significant increase in Managed Services bookings, which surged by 40% over the same period last year, reaching $10.3 million. This marks the highest total in eight quarters, signaling a robust demand that is expected to translate into revenue growth in the subsequent quarters.
However, the company did experience a net loss of $2.2 million for the quarter and a 14.9% decrease in total revenue compared to the prior year's quarter. The decline in revenue was attributed to the departure of a large non-recurring customer in 2023. Excluding this factor, revenues showed a healthy growth of 23.9%.
Key Takeaways
- Managed Services bookings increased by 40.3% year-over-year to $10.3 million.
- Total revenue for Q2 2024 was $9.1 million, a decrease of 14.9% from the prior year.
- Adjusted for the loss of a large customer, revenue grew by 23.9%.
- Net loss widened to $2.2 million from $1 million in Q2 2023.
- The company ended the quarter with $56.5 million in cash and investments.
- IZEA announced the acquisition of 26 Talent and The Reiman Agency to bolster its services.
- A $5 million share repurchase program has been announced but not yet executed.
Company Outlook
- IZEA expects to report year-over-year revenue growth in upcoming quarters.
- The management team is focused on achieving a three-year plan to reach $76 million in annual revenue by 2026.
- IZEA aims for meaningful EBITDA improvement in 2025 and positive EBITDA quarters in the latter half of 2026.
Bearish Highlights
- The company's revenue in Q2 2024 lagged behind the previous year's quarter.
- Net losses increased, with a negative EBITDA of $1.6 million.
- The loss of a significant non-recurring customer impacted profitability.
Bullish Highlights
- Strong demand for Managed Services is expected to drive future revenue.
- The company has a solid cash position with no debt, enabling potential growth through acquisitions.
- IZEA is seeing efficiency gains and increased capabilities through the deployment of AI tools.
Misses
- Total revenue fell short compared to the previous year's quarter, primarily due to the loss of a large customer.
Q&A highlights
- Analysts sought clarity on the company's strategies to achieve its three-year revenue goal and improve profitability.
- Questions were raised regarding the integration and expected contributions of recent acquisitions to IZEA's overall performance.
In summary, IZEA is navigating a transition year with a focus on organic growth and strategic acquisitions. While facing challenges such as the loss of a major customer and a net loss this quarter, the company remains optimistic about its growth trajectory and is taking proactive steps to enhance its offerings and customer base. The management team is committed to reaching its revenue targets and achieving sustainable profitability in the long term.
InvestingPro Insights
In the context of IZEA Worldwide Inc.'s recent financial report, several key metrics and insights from InvestingPro provide a deeper understanding of the company's financial health and stock performance.
InvestingPro Data highlights that IZEA holds a market capitalization of $33.82 million, which reflects the market's current valuation of the company. The P/E ratio stands at -4.46, indicating that investors are willing to pay a negative price for each dollar of earnings, which aligns with the fact that the company is not currently profitable. Additionally, the revenue for the last twelve months as of Q1 2024 is reported at $34.43 million, with a concerning decline of 15.91% compared to the same period last year.
Among the InvestingPro Tips, two particularly relevant ones stand out. Firstly, IZEA is holding more cash than debt on its balance sheet, which may provide some financial stability and flexibility. Secondly, analysts do not anticipate the company will be profitable this year, which is an essential consideration for investors expecting near-term profitability.
These insights are crucial for investors who are considering the implications of IZEA's financial results and future outlook. With a volatile stock price and a recent poor performance, as indicated by a 12.66% decline in the stock price over the last month, the company's prospects require careful analysis. For those interested in a more comprehensive set of insights, InvestingPro offers additional tips on IZEA, which can be found at https://www.investing.com/pro/IZEA.
Full transcript - IZEA Inc (IZEA) Q2 2024:
Ryan Schram: Good afternoon everyone and welcome to IZEA's Earnings Call covering the Second Quarter of 2024. I'm Ryan Schram, President and Chief Operating Officer at IZEA and joining me on the call are IZEA Chief Financial Officer, Peter Biere; and IZEA Founder, Chairman and Chief Executive Officer, Ted Murphy. Thanks for being with us today. Earlier this afternoon, the company issued a press release detailing IZEA's performance during Q2 2024. If you'd like to review any of those details, all of 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 these 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'd now like to introduce and turn the call over to IZEA's Chief Financial Officer, Peter Biere. Peter?
Peter Biere: Thank you, Ryan and good afternoon everyone. I'll review operating results for the quarter ended June 30, 2024 compared to the prior year's quarter and discuss certain balance sheet highlights. We saw a strong demand from Managed Services during the second quarter of 2024, resulting in a 40% lift in bookings over the prior year quarter and the highest total in eight quarters. This demand is expected to be reflected in revenues over the coming quarters and we believe it indicates a strong potential for our growth. Managed Services bookings for the second quarter of 2024 totaled $10.3 million compared to $7.3 million in the prior year's quarter, a 40.3% increase. The increase was largely attributable to a robust sales pipeline that has continued to develop over the past several quarters. As a reminder, IZEA reports bookings net of cancellations and refunds issued within the quarter. Total revenue for the second quarter of 2024 was approximately $9.1 million or 14.9% below the prior year quarter. Excluding revenue attributable to the large customer, which we parted ways with in 2023, referred to as the non-recurring customer, revenues grew a healthy 23.9% from the prior year quarter. Our Managed Services revenue totaled $8.9 million during the second quarter of 2024, which was $1.8 million or 16.6% lower than the second quarter of 2023. Removing approximately $3.3 million of revenue from our non-recurring customer in the prior year quarter, Managed Services revenue increased by $1.6 million or 21.7% from the same period of 2023, largely driven by improving demand. It's important to note that IZEA's revenue typically lags behind bookings with an average delivery time of seven and a half months between contract signing and revenue recognition. Our Managed Services backlog, which represents unrecognized revenue for contracts that are underway as well as recent bookings that we haven't started to invoice, totaled $15.6 million on June 30th, 2024. This is an increase of $1.1 million versus the first quarter of 2024 and $4 million from December of 2023. SaaS Services revenue totaled $0.2 million in the second quarter of 2024, more than triple the total for the prior year quarter. This growth has been driven primarily by subscriber expansion within izea.com and revenue from the Zuberance customer base. We ended the current quarter with a record number of active SaaS customers, a continuing positive trend. The majority of these customers are actively using IZEA's AI tools. Our total cost of revenue was $5.2 million, or 56.9% of revenue in the second quarter of 2024 compared to $6.3 million, or 58.5% of revenue in the prior year quarter. The current percentage cost decline represents improved margins from our ongoing customer base. Expenses other than the cost of revenue totaled $6.8 million for the second quarter of 2024, up 11.4% from $6.1 million in the prior year quarter. Sales and marketing costs totaled $3.2 million during the second quarter, up 13.2% compared to the prior year quarter, due primarily to higher spending on demand generation activities to drive new customer growth. General and administrative costs totaled $3.4 million during the second quarter, up 6.5% from the prior year quarter, due primarily to higher human capital costs and increased professional and contractor fees. Our net loss in the current quarter totaled $2.2 million or negative $0.13 per share on 16.5 million shares compared to a net loss of $1 million or negative $0.07 per share on 15.6 million shares for the second quarter of 2023. Adjusted EBITDA was negative $1.6 million for the second quarter of 2024 compared to negative $0.6 million for the prior year quarter. As of June 30th, 2024, we had $56.5 million in cash and investments, a decrease of $4.3 million from the beginning of the quarter, primarily due to negative EBITDA and funding higher level of working capital. During the current quarter, we earned $634,000 in interest on our investments. 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. And with that, I'll turn the call back over to Ryan.
Ryan Schram: Thanks Peter and good afternoon everyone. I'm excited to share the progress we've made in the second quarter of 2024 and to highlight the strides we're making in both our Managed Services and technology enablement initiatives. IZEA is on a solid path towards achieving the three-year plan our management team laid out at the beginning of this year and we're eager to provide you with an update on our recent performance. Let's start with Managed Services. Our Managed Services team made significant headway during Q2. In the quarter, we saw strong organic growth in bookings with our win rate recovering, as we converted a higher percentage of opportunities in our pipeline into bookings. The success in Q1 and Q2 bookings has started to translate into revenue during the second quarter and should continue to have positive impacts on Q3 and beyond this year. We expect to be able to begin reporting year-over-year revenue growth again in the coming quarters as these bookings are recognized. We recently announced the acquisition of 26 Talent and The Reiman Agency. 26 Talent brings a roster of creators and a wealth of creator representation experience to IZEA, enhancing our talent representation business in Australia. 26 Talent has been tucked underneath the Huume umbrella, and we recently just launched a new website and rebranding of Huume, which now lives at huume.com, that's H-U-U-M-E.com. The Reiman Agency, known for its innovative approach to talent brokerage and content creation, will further bolster IZEA's service offerings and expand our reach in the creator economy overall. Reiman has deep relationships with athletes, celebrities, and other top-tier talent, allowing brands to quickly execute programs that may otherwise be cost prohibitive or difficult to execute. These new acquisitions are pivotal in our strategy to both diversify revenue and strengthen our client portfolio. IZEA's acquisition philosophy emphasizes stable operations, manageable risks, and the potential for expense consolidation with post-acquisition upside. We're in the process of migrating our recent acquisition to IZEA systems, processes, and proprietary technologies. And we've identified multiple areas for improvement and efficiency and we'll continue to work with the management teams of those companies to both grow their businesses and contribute to IZEA overall. IZEA's acquisitions to-date have been strategic, but rather small in size. This has been deliberate in an effort to institutionalize the company's M&A capabilities internally and create the framework for a full acquisition life cycle. I'll now turn things over to our Founder, Chairman and CEO, Ted Murphy. Ted?
Ted Murphy: Thank you, Ryan. We are operating against our three-year plan to reach $76 million in annual revenue by 2026. In addition to revenue, achieving sustainable profitability in this time frame is absolutely key for management and the Board and we know it is important to our investors. Our intent is to deliver a meaningful EBITDA improvement in 2025 and begin to show EBITDA-positive quarters in the back half of 2026. 2024 is a transition year for us. We continue to experience lower revenue comparisons after parting ways with a large customer last year, but this is now over. We expect to begin seeing year-over-year revenue growth in the third quarter. The loss in revenue has been hurting our profitability as well, but we're progressing nicely forward as we fill the revenue gap with more profitable customers. The bookings growth we've seen this year is beginning to show in higher revenues. We have also been taking measures to reduce some human capital resources and other expenses where appropriate. In Q2, we made a slew of technology announcements ranging from our AI influencer marketing assistant, IZZY, to new budgeting and workflow tools. While these technologies can be licensed by customers, I want to emphasize that our core focus near term is making our own people and processes more efficient through technology enablement. IZEA Managed Services is our first and best customer. With each new release, we help our team accomplish more with less, better leveraging our costs while our end customers enjoy better experience. We have fewer FTEs today than we did at our peak in 2016, but we are generating more than 4 times the annual revenue. Revenue per FTE continues to be a focus of ours and the best way to boost output is through an ongoing focus on automations in every job capacity. Last year, we began rolling out AI tools to everyone on our team. The self-reported efficiency gains, not to mention the increased capabilities, have been felt in every department and seen by our end customers. We believe technology and specifically AI enablement throughout our enterprise is a critical piece of our three-year plan. However, expense management and efficiency gains alone will not drive us to sustainable profitability. Certain baseline costs will continue to increase with inflation, such as healthcare costs and fees associated with being a public company. Sustainable profitability must ultimately be achieved by way of revenue growth through a diverse mix of customers and services. Our strategy for growth remains two-pronged. On one hand, we are committed to driving organic growth by enhancing our product offerings, improving customer experiences, and entering new markets. On the other hand, we are actively exploring further acquisitions that complement our existing services and bring valuable new capabilities and markets to our portfolio. Customer diversification is essential to our strategy. It reduces our reliance on single clients, making us less vulnerable to fluctuations in specific client relationships or industries. Over the next three years, our aim is to attract a broader range of clients across various sectors and regions, fostering long-term partnerships with IZEA. This strategy will enhance our stability, predictability, and profitability. We previously announced a $5 million share repurchase program. While we have been unable to execute against this buyback to-date due to the restrictive windows mentioned in the announcement, we intend to be active buyers when our trading windows are open. We believe our stock is undervalued and this repurchase program reflects our confidence in the company's future growth and value creation potential. This move underscores our commitment to returning value to our shareholders and our belief in the long-term prospects of IZEA with the capital on hand. In conclusion, we are excited about the progress that we are making both in Managed Services and in tech enablement. We are confident in our ability to reach our revenue goals and deliver long-term value to our shareholders. The Board and management are committed to proactive measures to ensure we achieve our strategic objectives. Thank you for your time today. I will now open the call for Q&A from the analyst community.
End of Q&A:
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