IZEA Worldwide Inc

NASDAQ:IZEA

Q2-2025 Earnings Call

[Operator]

Good day, and welcome to the IZEA Worldwide Second Quarter 2025 Earnings Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Matt Gray, Vice President of Marketing. Please go ahead.

[Matt Gray, executive]

Good afternoon, and welcome to IZEA's earnings call, covering the second quarter of 2025. I'm Matt Gray, VP of Marketing at IZEA. And joining me on the call are IZEA's Chief Financial Officer, Peter Biere; 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 Q2 2025. 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 measures of adjusted EBITDA and revenues excluding divested operations. 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 like to now introduce and turn the call over to IZEA's Chief Financial Officer, Peter Biere. Peter?

[Peter Biere, executive]

Thank you, Matt, and good afternoon, everyone. This afternoon, we released our results for the second quarter and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. Today, it's my pleasure to review our operating results for the quarter ended June 30, 2025, compared to the second quarter of 2024, including some year-to-date comparisons to discuss certain balance sheet highlights and to update you on our stock buyback initiatives.

Revenue during the 3 months ended June 30, 2025, nearly all of which was Managed Services, totaled approximately $9.1 million, increasing 0.4% over the prior year quarter. The prior year quarter included $0.8 million in revenue from Hoozu, which we divested in December 2024. Excluding Hoozu, Managed Services revenue increased 12.9% in the current quarter compared to the same period last year.

Managed Services bookings is a key metric that reflects current period demand for our Managed Services. On average, booked amounts convert to recognized revenue over approximately 6 to 7.5 months. However, in some cases, the timing of revenue conversion may extend up to 12 months depending on certain factors such as customer marketing fund allocation and campaign execution.

During the second quarter of 2025, Managed Services bookings totaled $5.6 million, bringing the total bookings for the first half of 2025 to $13.1 million. This compares to $9.6 million in the second quarter of 2024 and $18.3 million for the first half of 2024, excluding Hoozu in all periods. The decline in the first half 2025 bookings was attributable to three primary factors. Roughly 1/3 of the year-over-year decline reflects a timing difference as one of our largest customers front-loaded a portion of their 2024 spend in March of that year, whereas a comparable commitment was made in the fourth quarter of 2024.

We also undertook a strategic shift towards larger, more profitable and recurring accounts, intentionally reducing our emphasis on smaller, less profitable projects. As a result, fewer internal resources were allocated to these lower-value engagements.

Finally, a number of customers have paused on a meaningful portion of their marketing budgets in response to macroeconomic pressures, including some tariff-related uncertainties affecting certain industries. As of June 30, 2025, our Managed Services backlog, representing unrecognized revenue from ongoing contracts and recent bookings not yet invoiced totaled $11.5 million.

Our total cost of revenue, including both external creative and internal labor costs totaled $4.4 million or 48% of revenue in the second quarter of 2025 compared to $5.2 million or 57% of revenue in the same quarter of the prior year. Removing Hoozu, our cost of revenue increased by approximately 1% in the second quarter of 2025 compared to the prior period.

Expenses other than the cost of revenue totaled $4 million in the second quarter of 2025, down from $6.8 million or 41.4% compared with the prior year quarter.

Sales and marketing costs totaled $1 million during the second quarter, a 70% decrease from $3.2 million in the prior year period. This decrease reflects cost savings from our targeted workforce reduction and a temporary pause in certain marketing initiatives.

General and administrative costs were $2.9 million in the second quarter, down 14.1% from the same period last year. The decrease was primarily driven by lower employee-related costs, reduced reliance on external contractors and decreased spending on professional services, software licenses and data storage fees.

We were profitable in the second quarter, generating $1.2 million in net income or $0.07 per share on 17.8 million shares compared to a net loss of $2.2 million or negative $0.13 per share on 16.4 million shares for the second quarter of 2024. Our results are particularly significant and that this is the first quarter in IZEA's history where profitability was driven by operating results.

In the second quarter of 2025, adjusted EBITDA was $1.3 million compared to a negative $2.2 million for the prior year quarter. As a reminder, we updated our non-GAAP measure of adjusted EBITDA in the fourth quarter of 2024 to exclude nonoperating items, primarily interest income from our investment portfolio. The prior year comparison was restated for comparability. You can find a reconciliation of adjusted EBITDA to net income at the bottom of our earnings release.

As of June 30, 2025, we had $50.6 million in cash and investments, a modest decrease of $0.4 million from the beginning of the year. Operating cash flow is positive for the year-to-date period, inclusive of normal working capital timing variances and covered approximately half of the continued investment in our stock repurchase programs.

We previously announced our commitment to repurchase up to $10 million of our stock in the open market, subject to certain restrictions. During the second quarter of 2025, we purchased a total of 121,788 shares at an average price per share of $2.29 under our programs for an aggregate investment of $0.3 million. Through August 8, 2025, we've purchased 523,268 shares, investing $1.3 million since the beginning of our current programs in September 2024.

We earned $0.5 million of interest on our investments during the recent 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 well positioned to execute organic business growth and capitalize on future acquisition opportunities.

With that, I'll turn the call over to Patrick Venetucci, our Chief Executive Officer.

[Patrick Venetucci, executive]

Thank you, Peter, and good afternoon, everyone. Less than a year ago, the leadership team and I made a commitment to accelerate our path to profitability. Today, I'm proud to announce that we have delivered on that commitment. For the first time in the history of this company, we are profitable.

In our effort to fortify, simplify and focus, we successfully reduced the cost structure back in Q4 2024 without sacrificing growth in the first half of 2025. This demonstrates that we have designed and activated a better business model, a model that puts America first and limits our international exposure, a model built for higher growth and more profitable market segments, a model that serves our top customers even better powered by our proprietary technology, a model that's attracting capable talent and M&A opportunities, a model that we believe to be sustainable.

In addition to the financial accomplishments, there are a number of operational activities in Q2 worth highlighting. We won new business from Jeep, Nestlé, Kellogg's and more. Our sales pipeline is full of leads with larger opportunities and higher-quality clients.

We produced exciting new work for Jeep, F1: The Movie, Superman and Owens Corning to name a few. We kicked off a new tech initiative that will enhance our campaign management product and inject even more AI into our business processes. Finally, we hired our first VP Talent acquisition, Cecilia Peralta, to attract more leaders and elevate our brand among talent in the industry.

In summary, Q2 was another exceptional quarter in which we achieved our financial commitments. We continue to grow revenue by double digits, achieved profitability and generated cash from operations. This is strong evidence that our new model works and positions us to continue to deliver results. We see and are pursuing a number of additional value creation opportunities ahead of us. For this reason, we 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.

[Operator]

[Operator Instructions] And your first question today will come from Jon Hickman with Ladenburg Thalmann.

[Jon Hickman, analyst]

Nice quarter. Can you hear me okay?

[Patrick Venetucci, executive]

Yes, we can.

[Jon Hickman, analyst]

So I have three questions. First of all, you mentioned M&A activity. Could you like elaborate -- are you actively talking to people?

[Patrick Venetucci, executive]

We are. We're actively talking to people. And as I've said in the past, this is definitely part of our ambition, but we're being strategic about it. We're being choiceful about what our strategy is. And we're also making sure that we have integration readiness as well. So the first half of the year, as you know, we put a number of processes and so forth in place just trying to make sure that we have a platform that is ready to integrate. So we're basically both ready from a financial capital perspective and from an operational perspective, and we're actively out there talking with folks.

[Jon Hickman, analyst]

Okay. What about valuations in the -- I mean, Ted used to talk about that they were -- the private markets valuations were very expensive compared to your valuation.

[Patrick Venetucci, executive]

Well, we're going to be reasonable. We're not going to overpay, and we'll -- we want to be fair on both ends of it. But we're certainly not going to chase deals and try to overpay. I mean, we're going to be very responsible about how we use our capital. And I think we're in a position to work out deals that can be accretive and be a win-win for all parties.

[Jon Hickman, analyst]

Okay. So my next question has to do with your bookings for Q1 or Q2. So how are we -- can you elaborate or talk about kind of the down sequential bookings versus growth going forward in revenues?

[Patrick Venetucci, executive]

Yes. As Peter said, there's really three issues that were driving the decline. One was simply a timing issue on a significant client. And that booking, if you equalize it for timing, is actually up. So -- and then if you strip that out and look at the other two issues, the second issue does have to do with our intentional shift away from these unprofitable accounts. So some of this was -- it's just very much a matter of the change in model as we move from a model that was more transactional to a model that's more enterprise and relationship-oriented with a lot more upside and certainly profitable going to the higher end of the market.

The quantity over quality is changing. And so we believe in the long-term success of this model and the impact it's going to have on revenue. And then the third is the economic -- macroeconomic environment right now. As we all know, just with tariffs and government, things like that, we did see some pausing and some uncertainty of some of our clients. But on the other hand, we have a number of industries, different verticals that we are in that are up not just double digits, but even triple digits. So it's a portfolio.

[Jon Hickman, analyst]

Okay. And then lastly, maybe this is for Peter. But operating expenses going forward, are they -- should the Q2 numbers kind of -- do you expect much growth in the next couple of quarters?

[Peter Biere, executive]

Well, I think...

[Jon Hickman, analyst]

Or should they be about flat?

[Peter Biere, executive]

Yes. What I think is we've said that we cut costs that we don't expect to repeat until they need to fuel growth. The exception there might be marketing costs, which previously, we spent marketing costs to drive demand. Going forward, we'll continue to do that at a low rate, but we're pausing on that for now. My guess is that quarter 2 costs look about like they're going to look -- and we also -- we have some efficiencies and there's some headroom for us to grow without growing costs. So we're going to be judicious about that and keep our eye on the bottom line.

[Patrick Venetucci, executive]

Yes. I would just add to that, that I really want to underscore on that the change in our business model, we permanently lowered our cost structure, and we're proving out that we can be profitable. And we intend to scale this efficiently. So as revenues grow, obviously, expenses will grow, but we're being disciplined in making sure that there's a relationship to it and that it grows in parallel.

[Jon Hickman, analyst]

Is there any way I can get any revenue guidance from you for the remainder of the year? Just thought I'd ask.

[Peter Biere, executive]

You don't get if you don't ask. We're not going to give guidance. I think the public statement that we made both in the earnings release and the liquidity section of the 10-Q, of the MD&A is that we have a good pipeline, relationships are strengthening and we're adding large customers. We think that's going to support our growth going forward. And -- but that it could be uneven. So with that in mind, that further emphasizes our eye on our cost to make sure that they stay with a healthy relationship.

[Jon Hickman, analyst]

Okay. Just one more question. The VP of Talent Acquisition, that person works fully for you? I mean, she's full time for IZEA?

[Patrick Venetucci, executive]

Yes. We're investing in her...

[Jon Hickman, analyst]

Is she mostly after marketing talent?

[Patrick Venetucci, executive]

No, all sorts of talent. Yes, as we've been -- yes, we believe that this is not just a technology-driven industry, but a talent-driven industry as well. And so this is more about positioning ourselves for future growth to make sure that we're out in the market, establishing relationships with talent so that as we grow, we're able to do that seamlessly. And we'll be making announcements in the future about new talents that are joining us.

[Operator]

This will conclude our question-and-answer session. I would like to turn the conference back over to Matt Gray for any closing remarks.

[Matt Gray, executive]

Thanks so much, Nick, and thank you, everyone, for joining us this afternoon. As a reminder, IZEA's Investor Relations information is available at izea.com/investors. Have a great evening.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.