IZEA Worldwide Q1 2024 Earnings Call Transcript

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May 15, 2024

There are 4 speakers on the call.

Operator

Please note this conference is being recorded. I would now hand the conference over to President and Chief Operating Officer, Ryan Schramm.

Operator

You may go ahead, sir.

Speaker 1

Good afternoon, everyone, and welcome to IZEA's earnings call covering the Q1 of 2024. I'm Ryan Schramm, President and Chief Operating Officer at IZEA. And joining me on the call are IZEA's Chief Financial Officer, Peter Biere and IZEA Founder, Chairman and Chief Executive Officer, Ted Murphy. Thanks for being here with us today. Earlier this afternoon, the company issued a press release detailing IZEA's performance during Q1 2024.

Speaker 1

If you would like to review those details, all of our investor information can be found online on IZEA's Investor Relations website atizea.com

Speaker 2

/investors.

Speaker 1

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 made 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 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 Biry.

Speaker 1

Peter?

Speaker 3

Thank you, Ryan, and good afternoon, everyone. I'll review operating results for the quarter ended March 31, 2024 compared to the prior year's quarter and discuss certain balance sheet highlights. We saw strong demand for managed services during the Q1 of 2024, resulting in a 53% lift in bookings over the prior year quarter and the highest total in 7 quarters. This demand will begin to show in revenues over the next several quarters and we believe bodes well for our growth resurgence. Managed Services bookings for the Q1 of 2024 totaled $9,300,000 compared to $6,100,000 for the prior year's Q1, a 53% increase.

Speaker 3

The increase was primarily due to a strong sales pipeline that has been building over the past 6 months, both in the quantity of opportunities created and the dollar value of those opportunities. In Q1, the new opportunity dollar amount was up 105% year over year, which bodes well for coming quarters. A percentage of our new opportunity pipeline converts into bookings, which subsequently convert into revenue. As a reminder, IZEA reports bookings as a net number. Cancellations or refunds issued within a quarter are deducted from the bookings figure for that specific quarter.

Speaker 3

As a result, net bookings will always net out to revenue over time. Our total revenue for the Q1 of 2024 was approximately $7,000,000 20.4 percent below the prior year quarter. Excluding the previous year's Q1 revenue attributable to the large customer that we parted ways with in 2023 or our non recurring customer, revenue grew 32.2% from the prior year quarter. While revenue was below bookings in Q1, I want to be clear that this is a matter of timing. IZEA's revenue trails bookings with the current delivery time between bookings and revenues averaging 7.5 months.

Speaker 3

Our managed services backlog, which represents the total of unrecognized revenue for contracts that are underway as well as recent bookings that we haven't started to invoice, totaled $14,500,000 on March 31, 2024. This is an increase of $2,600,000 versus the Q4 of 2023. Looking at revenue components. Managed services revenue, including Hulu, totaled $6,700,000 during the Q1 of 2024, which was $1,800,000 or 21 0.2% lower than the Q1 of 2023. Removing approximately $3,500,000 of revenue from our non recurring in the Q1 of 2023, Managed Services revenue increased by $1,700,000 or 33.3 percent from the same period in 2023, largely driven by improving demand.

Speaker 3

SaaS services revenue totaled $300,000 in the Q1 of 2024, an increase of $21,400,000 or 9.1 percent from the prior year quarter. This growth has been driven by a combination of the acquisition of Zubrances and revenue from its customer base, along with subscriber expansion, primarily with izea.com. We concluded Q1 with a record number of active SaaS customers, a positive trend that has persisted into the Q2. The overwhelming majority of those customers are using IZEA's AI tools. Our total cost of revenue was $4,000,000 in the Q1 of 2024 or 57.1 percent of revenue compared to $6,000,000 or 68.2 percent of revenue in the prior year quarter.

Speaker 3

The higher cost of revenue in the prior year quarter is attributable to our non recurring customer. Expenses other than the cost of revenue totaled $7,000,000 for the Q1 of 2024, up 14.4 percent from $6,200,000 in the prior year quarter. Sales and marketing costs totaled $3,100,000 for the Q1, up 27.1 percent to the prior year quarter due primarily to higher spending on demand generation activities to drive bookings growth and brand awareness. General and administrative costs totaled $3,800,000 during the Q1, up 11.1% from the prior year quarter, due primarily to higher human capital and non cash stock based compensation costs. Our net loss in the current quarter totaled $3,300,000 or $0.20 per share on 16,300,000 shares compared to a loss of $2,800,000 or $0.18 per share on 15,600,000 shares.

Speaker 3

Adjusted EBITDA was negative $2,800,000 for the Q1 of 2024 compared to negative $2,200,000 for the prior year quarter. As of March 31, 2024, we had $60,800,000 in cash and investments, a decrease of $3,400,000 from the beginning of the quarter, primarily due to negative EBITDA and some additions to working capital. We earned $666,305 in interest on our investments during the quarter, up about 16.5% over the prior year, which reflect improved interest rates. 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 both organic business growth and acquisition opportunities that lie ahead.

Speaker 3

With that, I'll turn the call back over to Ryan.

Speaker 1

Thanks, Peter. Our management remarks will be rather concise this quarter, given that our most recent call with you was just about 6 weeks ago. In Q1, managed service bookings at IZEA saw a notable upswing in year over year growth. This surge was fueled by a strong pipeline established during the Q4 of 2023, which carried over into Q1 of 2024, setting a new company record. This growth isn't just monetary though.

Speaker 1

It's also reflected in the increased number of opportunities overall, which aligns with our strategy to diversify IZEA's revenue streams. Our intent is to have a more balanced customer base moving forward with more clients in more sectors in more geographies. Our comprehensive marketing strategy, coupled with our investment in demand generation, is also proving to be highly effective. We're witnessing a notable impact with sustained year over year growth in our pipeline, which has continued here in the Q2. Q2 has commenced with promising momentum as well with IZEA welcoming new managed service customers and expanding key existing customer relationships.

Speaker 1

While managed services remains the company's primary revenue driver, SaaS revenue is showing signs of recovery as well. As we wrapped up Q1, IZEA hit a new record number of active SaaS customers, a trend that continues positively into the Q2. I'd now like to turn the call over to IZEA's Founder, Chairman and CEO, Ted Murphy for his remarks. Ted?

Speaker 2

Thank you, Ryan. We are excited about the organic growth in bookings and continued potential we are seeing in Managed Services, along with the beginning of a recovery cycle with SaaS. In December, we successfully acquired Hulu and Zubrince, advancing IZEA's M and A strategy that I outlined last year. These acquisitions demonstrate our commitment to strategic alignment with our core focus on the creator economy. Integrating Hulu and Zubrances brings new segments and expertise, fostering promising synergies, which we are starting to realize.

Speaker 2

Our acquisition philosophy emphasizes stable operations, manageable risks and post acquisition upside. Over the next 2 years, we aim to accelerate our acquisition strategy, expanding our global reach and providing additional customer diversification. We are starting with smaller transactions and intend to grow the size of our targets over time. Today, we have filed a $75,000,000 shelf registration. We do not intend to immediately make use of our shelf.

Speaker 2

We believe our stock is currently undervalued and we have a very strong balance sheet to support ongoing operations and near term acquisitions. However, having a shelf available provides the company with additional financial flexibility and the option to seize creator economy acquisition opportunities of all sizes as we look forward over the next 3 years. While there has been some recovery in our share price since the start of the year, we are still trading at near cash value, ascribing 0 to little value at all to the operating company. I want to reiterate that we have no debt, no warrants outstanding, no preferred stock outstanding, and we are poised to grow. I am confident in that growth and believe we will reach $76,000,000 in annual revenue by the year 2026.

Speaker 2

The Board and management are committed to creating value for our shareholders and we want to be clear that proactive measures of all types remain on the table. We appreciate your support and believe IZEA is worth much more than what is reflected in our current market cap. Thank you all for your time today. I would now like to open the call for Q and A from the analyst community.

Operator

Thank you, sir. At this point, we have no questions from the lines. I will now hand over to Ryan Schram for closing remarks.

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Earnings Conference Call
IZEA Worldwide Q1 2024
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