IZEA, Inc. Aktie

Ladies and gentlemen, greetings, and welcome to the IZEA First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Sandra Carbone, SVP, General Counsel and Corporate Secretary of IZEA, Inc. Please go ahead.

Good afternoon, everyone, and welcome to IZEA's earnings call covering the first quarter of 2026. I'm Sandra Carbone, SVP, General Counsel and Corporate Secretary at IZEA, and joining me on the call are IZEA's Chief Executive Officer, Patrick Venetucci; and IZEA's Chief Financial Officer, Peter Biere. Thank you for being with us today.

Earlier this afternoon, the company issued a press release detailing IZEA's performance during Q1 2026. If you would like to review those details, please visit 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 to our 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 Executive Officer, Patrick Venetucci. Patrick?

Thank you, Sandra, and good afternoon, everyone. In 2025, we made a deliberate strategic shift away from SMB accounts toward enterprise clients. Over the past 12 months, we intentionally exited a significant portion of our SMB business, which was characterized by smaller, nonrecurring and often unprofitable project work. This disciplined action reset our economic model, resulting in a net profit swing of $18.9 million during 2025. As expected, revenue in Q1 2026 declined year-over-year, primarily reflecting the impact of this transition. However, this quarter represents an important milestone, marking the completion of our exit from the SMB model and the full transition to an enterprise-focused business.

Today, our client portfolio is predominantly composed of large enterprise brands, including Warner Bros., Coursera, Nestle, Danone, Georgia-Pacific and Stellantis. We have meaningfully reduced our total number of accounts by more than 1/3, while increasing the quality and scale of our relationships. Many of our largest clients are now recurring revenue streams that are more predictable and durable than our prior SMB mix. While we did experience a temporary slowdown across our top 3 accounts in the quarter, this was more than offset by rapid growth across newer enterprise clients and contributions from new business wins. We added clients such as Hulu, ASUS, Garanimals and Emmi Roth, and our pipeline remains healthy, giving us confidence about achieving growth for the year.

Importantly, over the past 12 months, our enterprise portfolio has grown at a healthy double-digit rate, outpacing overall industry growth. By streamlining our client base, we have increased average revenue per account by more than 33% and established a more consistent and scalable profitability profile at the account level. To support this trajectory, we've added a dozen new team members to our growth organization, blending deep influencer marketing expertise with broader enterprise marketing experience. We continue to build momentum creatively and operationally.

During the quarter, we delivered standout work for brands, including Jeep, Warner Bros. and Netflix. We also launched ZED, our proprietary creator economy marketing operations platform infused with AI, which we believe will further differentiate our capabilities and drive efficiency at scale. In parallel, we have been highly active in the M&A market, engaging with a number of potential acquisition targets that would expand our capabilities and accelerate our growth strategy. As we deepen and expand our presence within these enterprise client organizations, our role continues to evolve from vendor to strategic partner. We believe this positions IZEA to become an increasingly indispensable marketing partner to some of the world's leading brands.

With that, I'll turn the call over to Peter Biere, our Chief Financial Officer, for a closer look at the financial results.

Thank you, Patrick, and good afternoon, everyone. Earlier today, we reported our first quarter 2026 results and filed our Form 10-Q with the SEC. I'll focus on the key drivers of our first quarter performance, frame our results in the context of our strategic repositioning and path to profitability and close with an update on liquidity.

As Patrick outlined, 2025 marked a deliberate reset of the business. We exited a substantial portion of lower-margin nonrecurring SMB activity and reoriented toward larger enterprise relationships while materially reducing our cost structure. This transition is nearly complete. Both contract bookings and revenues associated with noncore SMB customers will be substantially behind us after the second quarter, reducing their impact on year-over-year comparisons. While most of our cost actions are in place, we will continue to optimize our structure and capital allocation. Overall, we believe the business is on a much stronger footing, positioning us for more consistent profitable growth in the second half of 2026.

With that context in mind, I'll turn to our first quarter results. Managed services bookings were down $1.2 million year-over-year with roughly $1 million related to timing across several enterprise accounts and the remainder from noncore runoff. We expect these accounts to normalize with a more pronounced impact in the second half of 2026. As a reminder, revenue from managed service bookings is recognized over the life of the underlying contract with the period from contract signing to final revenue recognition averaging approximately 7 months.

Revenue was $6.6 million, down from $8 million in the prior year quarter. The net decline is entirely due to our shift away from noncore customers. Our enterprise accounts continue to grow. And based on customer engagement, we expect meaningful growth in the second half of this year. Cost of revenue, which includes direct production costs, direct internal labor and certain overheads, reflects stable gross margins in both comparative periods. Operating expenses were $4.1 million for the quarter, down 3% year-over-year. Sales and marketing costs decreased by $0.2 million, primarily due to lower commission and headcount costs. G&A increased about 3% over the prior year period, driven by modestly higher payroll-related costs, partially offset by reductions in other areas. Overall, our cost structure is largely aligned with our current operating model, and we expect expenses to remain relatively stable through the balance of this year.

For the quarter, we reported a net loss of $0.8 million or minus $0.04 per share on 17.3 million shares outstanding compared to a net loss of $0.1 million in the prior year period or minus $0.01 per share on 17 million shares outstanding. The year-over-year change primarily reflects lower revenue in the quarter, partially offset by the benefits of our reduced cost structure. Adjusted EBITDA for the first quarter was minus $0.5 million compared to minus $0.1 million in the prior year quarter. A reconciliation of adjusted EBITDA to net income is included in the earnings release. As of March 31, 2026, we had $46.5 million in cash and cash equivalents and no debt, a decrease of $4.4 million from the beginning of the year. The change was primarily driven by working capital timing, including higher accounts receivable at the end of the quarter that were collected in early April and the payout of prior year incentive compensation, along with normal fluctuations in other working capital accounts.

Turning to capital allocation. The Board authorized a $10 million share repurchase program in the fall of 2024. To date, we have repurchased 523,268 shares for approximately $1.3 million, primarily under our initial Rule 10b5-1 trading plan. Our current trading plan is scheduled to expire on May 15, 2026, and we expect to adopt a new plan with updated purchase parameters based on market conditions. We continue to view share repurchases as an attractive use of capital when our stock trades below the Board's view of our intrinsic value and believe our balance sheet positions us well to support both organic growth initiatives and to pursue strategic acquisition opportunities.

Thank you for your time today. We'll now open the call for questions.

[Operator Instructions] We take the first question from the line of Kris Tuttle from Blue Caterpillar.

I've got 2, really. And one of them is now that you guys are on this solid footing, you've gotten exited that SMB business. What's the -- what would you put as kind of the top governor on your ability to grow sequentially over the course of the next year or 2? What are sort of the gating factors right now?

Kris, it's Patrick. Yes, I wouldn't say there's any meaningful gating issues. I mean, as we've said before, we're reaching higher and wider with our clients, and we're getting more assignments given to us by many of our enterprise clients. So I wouldn't call it a gating factor, but it's just kind of an issue of how fast we're getting traction, how fast can we activate the different opportunities that we have with our clients.

Okay. And does the release of ZED help you with that? Or maybe provide a little context.

Yes. No, ZED is definitely opening more doors. ZED is certainly as the demand for creator economy campaigns, not just goes up, but is going up in terms of scale, right? So we have many, many clients who are coming to us saying that the days of testing this with 5 and 10 clients are over and now they're trying to scale it up. In fact, in the past couple of weeks, I met with a CMO of a major global brand who's working with 1,000 influencers at a time. And his quote to me was that he wants to 10x that and was very interested in ZED. So ZED is certainly going to be something that's going to enable us to scale this and operate more efficiently.

Okay. And my other question was just regarding how you guys are thinking about M&A opportunities in your sector, either adjacencies vertically or horizontally. Just curious if you think it's a target-rich environment, do you think there's some things that you can do this year that may accelerate your path? I'm just curious to know how you're kind of thinking about it right now.

So the way we're thinking about it is we're looking -- we've prioritized a number of different capabilities that we would like to get, but we're also trying to stay flexible enough knowing that you can't always find exactly what you want. So we have a well-defined M&A strategy. The priorities are to add new capabilities, not necessarily just to add look-alike to get scale. The new capabilities are capabilities that would allow us to cross-sell into these enterprise clients. Where we see it going is that right now, it's very much kind of a narrow pure-play offering of creator partnerships across the industry. But in the future, what we're seeing is that enterprise clients, in particular, are looking to have a more integrated offering, integrated across content, across media, across commerce, like social commerce, for example.

And so we're actively out there having discussions. I would characterize it, as you say it, as a target-rich environment. However, with that said, there's a lot of deals according to the investment banking community that there's a bid price ask spread that sometimes is insurmountable. We're being very disciplined. We want to pay fair prices, but also don't want to overpay. We're planning on using the capital efficiently and responsibly. But we're very encouraged based on the number of active conversations that we have and relationships that we're building.

Okay. And is there any way to talk about your current numbers like apples-to-apples or same-store sales where we factor out the SMB business and the project work that you didn't want to continue on within 2026 to kind of consider like what is the core revenue and/or bookings growth look like if you strip out some of the business that you've intentionally tried to avoid?

Yes. We're not reporting to that level of detail. But as I said in my comments, over the past 12 months, our enterprise portfolio has grown at a double-digit rate. So that's our attempt at sharing with you exactly what you're asking for. And we really believe that the underlying base is fast as we can -- as soon as we can melt away this SMB project work and client base that the underlying health of the enterprise accounts as a group is really encouraging. And as I've said in the past, too, it's growing faster than the market. So that's what we're trying to get to as fast as we can.

Okay. And last thing for your consideration is should investors think that at this point, we would -- it would be -- like we'll see bookings begin to trend upwards with Q2 at this point in the trajectory?

Yes. I mean that -- obviously, we're not giving specific guidance, but that we are focused on increasing bookings. And as Peter said, there has been some timing issues that we ran into this quarter with some of our larger clients, which already good things are happening with some of these clients. So stay tuned for Q2.

[Operator Instructions] We take the next question from the line of Bill Church from TGRA Capital.

We're seeing many consumer discretionary companies stumbling and missing numbers and talking about a slower economy and that sort of thing. And I wonder if that -- to the extent you're seeing that, does that increase a higher angst on their part to hire someone like you to help them sort of double down on their message. And at the same time, I'm sure they're also looking at what the cost expenses are and maybe kicking out some that haven't been as effective. Just trying to get a sense.

Thanks for the question, Bill. Yes, I would say it varies sector by sector. In the CPG industry, we have seen tariffs and inflation, in particular, impact their business. And so some of the slowdown we referred to was a result of that. But what we're also seeing, too, is that it can't last forever, right? These are very large enterprise serious professional marketers, and they are -- already, we're seeing that they're releasing some of those. So that's why we characterized it as a slowdown. And it's not the case that we've lost any of these enterprise clients. But clearly, there are some macroeconomic environment factors at play here.

[Operator Instructions] As there are no further questions from the participants, I would now hand the conference over to Sandra Carbone for her closing comments.

Thank you, Ryan, and thank you, everyone, for joining us this afternoon. As a reminder, a replay of today's call will be available shortly on our website, izea.com/investors. We appreciate your continued interest and support and hope you'll join us for our next conference call to discuss our second quarter 2026 results.

Thank you. Ladies and gentlemen, the conference of IZEA Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.

Greetings, and welcome to the IZEA Worldwide Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Francis, Vice President, Sales and Marketing Operations. Thank you. You may begin.

Good afternoon, everyone, and welcome to IZEA's Earnings Call covering the Fourth Quarter of 2025. I'm John Francis, VP, Sales and marketing operations at IZEA -- and joining me on the call are IZEA's Chief Executive Officer, Patrick Venetucci; and IZEA's Chief Financial Officer, Peter Biere. Thank you for being with us today. .

Earlier this afternoon, the company issued a press release detailing IZEA's performance during Q4 2025. If you would like to review those details, please visit 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 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 our 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 Executive Officer Patrick Venetucci. Patrick?

Thank you, John, and good afternoon, everyone. At the end of 2024, the leadership team and I have made a commitment to accelerate our path to profitability. I'm pleased to announce that at the end of 2025, we delivered on that commitment. Year-on-year, we broke even increased cash, held managed services revenue relatively flat, excluding Hoozu, and grew our enterprise accounts faster than the market. We achieved a net profit swing of $18.9 million, which is not only a first for this company, but is a notable event in the context of microcap public company turnarounds. Annual revenue was $31.2 million, a 13% decrease that reflects a deliberate strategic pivot toward long-term profitability compounded by broader macroeconomic headwinds.

During the year, we successfully exited international markets and off-boarded lower-margin SMB accounts to prioritize a high potential enterprise portfolio. These internal shifts coincided with government-induced disruptions as [ DOGE ] and trade policies negatively impacted our government and retail accounts.

Looking at the fourth quarter, revenue was $6.1 million, down 45% year-over-year. More than half of this variance was a direct result of our strategic client rationalization, while the balance can be attributed to delayed bookings in the second half of the year on a few key enterprise accounts and a conservative holiday marketing environment.

Despite these strategic shifts and external headwinds, Managed services revenue, excluding Hoozu, remained resilient, finishing the year down a modest 2%. This relative stability masks significant underlying growth considering our enterprise accounts expanded well above industry growth rates. As we've strengthened and expanded our relationships with enterprise clients, we've been rewarded with more business. We have successfully scaled five enterprise accounts beyond the $1 million threshold each delivering double or triple-digit growth.

Having largely worked through the attrition of our legacy SMB accounts, we believe the client portfolio is close to being stabilized, allowing the higher growth potential of our enterprise business to take center stage. Our sales and marketing efforts are attracting new clients and our pipeline reached a new high for the year with invitations to larger pitches growing.

Lastly, we produced new work for Stellantis, Warner Bros., Georgia Pacific, Denon and many other leading brands consistently delighting our clients. Our restructured cost base was instrumental in our return to profitability this year. We achieved a 40% reduction in total operating expenses, driving a significant turnaround in cash operating profit to $0.7 million a substantial recovery from last year's $11.1 million cash operating loss.

This disciplined approach further strengthened our balance sheet, putting an end to the cash burn. By implementing advanced human capital management systems, we have institutionalized this cost discipline to ensure our profitability is both sustainable and scalable. Looking ahead, our strategy is centered on a few core pillars. We are building deeper vertical expertise and executing key account plans on our enterprise accounts to maximized value for these high-potential clients.

We are refocusing our SMB efforts on boutique accounts, clients with franchise business models so that our solution frameworks are highly repeatable. We are investing in high-tier talents who can level up our capabilities in creator strategy, media and commerce, which our enterprise clients are demanding.

At the same time, we are extremely active in M&A discussions searching for companies that can build these capabilities faster and accelerate the growth of our enterprise client portfolio. It's important to note that given our low operating margin, an acquisition could be instantly accretive. Operationally, we are preparing to launch a proprietary technology platform which will enable our account managers to manage integrated creator campaigns at enterprise scale efficiently and effectively.

This platform is infused with AI and tightly integrated with our unified operating model. In summary, we've reset the company's economic model in 2025 by creating operating leverage beyond cost reduction establishing durable breakeven economics where future revenue growth is expected to translate directly into profitability. This work has positioned the company for long-term success with a more focused client portfolio, a stronger leadership team, an engaging culture, significant client opportunity and incredible possibilities with IZEA's technology platform.

With all of this momentum and opportunity ahead of us I am optimistic about the future of this company and our ability to deliver additional value to all of our stakeholders, shareholders, clients and employees alike.

With that, I'll turn the call over to Peter Biere, our Chief Financial Officer, for a closer look at the financial results.

Thank you, Patrick, and good afternoon, everyone. This afternoon, we reported our fourth quarter and full year 2025 results and filed our Form 10-K with the SEC. I'll focus today on the key drivers behind our operating performance add more color regarding our strategic repositioning and the resulting profitability improvement and provide an update on our cash position.

All of today's comments exclude Hoozu, which we divested in December 2024. As Patrick described, we repositioned our business in early 2025 to prioritize larger recurring core enterprise accounts and reduce our exposure to lower margin project-based or high turnover client relationships.

We refer to these collectively as noncore customers. Additionally, we reduced our annual cash operating costs in 2025 by over 40% and or $10 million, while increasing our investment in enterprise account management personnel where we're seeing growth.

Overall, results show that we're on track posting positive cash from operations and breakeven net income for the year, both of which show significant improvement over 2024 results. Our strategic reset had a significant impact on 2025 contract bookings which declined by $10.3 million or 27% year-over-year.

This decline reflects our intentional reduction in noncore customer activity, which accounted for the majority of the decline rather than weakness in our enterprise business. We ended 2025 with a $10.1 million contract backlog. Based on current pipeline opportunities and first quarter progress to date, we believe our bookings reset is largely behind us and expect to return to year-over-year bookings growth in early 2026.

Given that revenue recognition for our managed services typically trails contract bookings by roughly seven months. 2025 revenue still reflected the runoff from noncore contracts booked prior to our repositioning, the majority of which concluded by the end of the second quarter of 2025.

So we expect year-over-year revenue comparisons in the first half of 2026 to be lower, reflecting the absence of this noncore activity. We anticipate a return to year-over-year revenue growth in the second half of 2026 as revenue increasingly reflects our current mix of core enterprise engagements.

Turning to results for the fourth quarter. Managed services revenue was $6 million, down from $9.8 million in the prior year quarter, reflecting our deliberate shift away from noncore accounts toward enterprise relationships. About half of the year-over-year decline relates to the expected runoff from noncore customers as a part of the strategic client rationalization, while the remainder primarily reflects the timing of bookings from several enterprise accounts and a more cautious holiday marketing environment.

Operating expenses declined meaningfully to $4.4 million, down 40% year-over-year, driven primarily by lower sales and marketing spend and reduced employee and contractor costs, which reflect our structural cost reset.

For the quarter, we reported a net loss of $1.2 million or $0.07 per share on 17.1 million shares outstanding compared to a net loss of $4.6 million in the prior year period or $0.27 per share on 17 million shares. This significant year-over-year improvement reflects the impact of our operating reset, improved cost structure and a higher quality customer mix.

Adjusted EBITDA for the fourth quarter was negative $0.9 million compared to negative $2 million in the prior year quarter. As a reminder, in late 2024, we refined our non-GAAP definition of adjusted EBITDA to exclude nonoperating items, primarily interest income from our investment portfolio.

And we restated the prior year amounts for comparability. A reconciliation of adjusted EBITDA to net income is included in the earnings release. We earned $0.4 million of interest income during the quarter primarily from cash balances held in a money market account following the maturity of all investment securities.

And finally, we continue to operate with no debt on our balance sheet. In September 2024, we announced a commitment to repurchase up to $10 million of our common stock in the open market, subject to customary restrictions, which include regulatory limits on daily trading volume and company-imposed share price thresholds.

Through December 31, 2025, cumulative repurchases totaled 561,950 shares for an aggregate investment of $1.4 million under the program. No shares were repurchased during the fourth quarter. We remain committed to a disciplined capital allocation approach, and we'll continue to evaluate repurchase activity in light of market conditions liquidity needs and alternative uses of capital.

As of December 31, 2025, we had $50.9 million in cash and cash equivalents, a decrease of just $0.2 million from the beginning of the year. This compares favorably to the $13.1 million reduction in cash during 2024 and reflects improved operating performance and disciplined cost management.

With $50.9 million in cash and investments at year-end, we believe we're well positioned to support organic business growth initiatives and pursue our strategic acquisition plans. Thank you for your time today. At this time, we invite our investors and analysts to share their questions so that we may provide clarity and insights.

[Operator Instructions] And our first question today comes from Jon Hickman with Ladenburg Thalmann.

So could you give us a little clarity on gross margins going forward? Kind of high [ accordingly ].

Yes, we don't give specific guidance, but I think we're on the right track. There's been an increase relative to the last couple of years. But more importantly, we really have our eye on net revenue. The real goal is to focus on growing the net revenue and keeping our cost structure aligned with that?

Okay. And then kind of in line with Peter's comments about the first half of the year being lower than last year, but the second half being higher. In total, do you expect year-over-year growth in revenues?

Yes, we're aiming for growth. I mean, this is a growth market. And so we're absolutely aiming for growth.

Okay. And then one last question. You mentioned several times in acquisition strategy. So do you see like lots of targets out there? Is it lots of sellers? Or are things tight. Can you maybe elaborate on that?

Sure. It's a very high priority. I'm spending a lot of time speaking with M&A targets. We're very active in the marketplace. As some of you know, I mean, this is my background. I've come from a space where I successfully was able to close quite a few deals in a short period of time. We're both tapping into my personal network of potential acquisition targets as well as working with quite a few investment bankers that specialize in this space. We're seeing good deal flow, and we're actively engaged at different stages of M&A.

So to follow up. In the past, there's been kind of a big difference between private market values and public market values. Is that -- valuations an issue for you or [indiscernible].

I agree. There definitely is a difference in valuation. It's not an issue for us. I think it points out an opportunity for investors in terms of investing in IZEA, because the equity value is not exactly what we're seeing in the private markets for IZEA. However, from our perspective, I mean, we have enough cash to be able to buy at a fair market value. We're going to be disciplined. We're doing our homework and using various valuation methodologies and so forth and making sure that any investment that we make, we have certain, we're modeling out what our return on capital would be, and we have certain hurdle rates that we're striving to achieve.

So are you interested in customers or technology, or both?

Well, more customers, I mean, we've got ample technology. As you know, we shifted our strategy to be services first supported by technology. And so our acquisition strategy really reinforces some of the things we've been outlining throughout the year. Number one, the verticalization and enterprise accounts. So if there's an ability to add to our depth of certain verticals to add enterprise grade clients with recurring revenue and strong relationships. That's one area. The second area is capabilities.

As I've also stated throughout the year, we're trying to increase our service offerings that we're able to sell to our enterprise client base. Having an integrated service offering is certainly part of our future.

And your next question comes from Kris Tuttle with Blue Caterpillar.

I think one of the things that would be really helpful right now is you guys are obviously having a lot of terrific discussions with your clients and potential clients the last couple of months. I love an update on how are they thinking about IZEA in terms of their overall context? And not strictly speaking, competition, but going to creators directly or different strategies they might employ.

I just love an update on how they're seeing you positioned relative to all the other things they have to consider and just some of your observations around that for this year.

We -- there's a massive shift happening in marketing right now that we're catching the tailwind on. And that is as television audiences have been declining. In social media audiences, have been increasing. We're at what I've coined the social singularity, meaning that the audiences have flipped -- so social audiences are now larger than television audiences.

And a lot of marketers are still structured to service the old system, the old way, which was it was television first. And they're struggling to be social first -- and the way to reach social audiences is through creators. Creators are essentially modern-day channels. And that's where IZEA comes in.

I mean we're -- we provide those kinds of solutions to marketers. We help connect the brands with the creators. But we look at it more as a marketing partnership where we help them select and curate the right combination of creators. We cut the deals with them and that helps them reach the right audiences and connect with their consumers.

Okay. All right. I got it a little bit. And then one last point on just the -- when I looked at the enterprise value today, relative to the cash, it was quite low. And I'm wondering, like is that where you look in terms of deciding when to deploy some of that buyback, given the fact that you have M&A opportunities, but it wouldn't take a lot for the enterprise value to get close to 0 again.

Yes. As in the past, we've been proponents of buybacks. Again, we believe that there's a lot of upside to this, and that's why we've done it in the past and continue to have a philosophy of doing buybacks at the right price. We're not coming out and staying in the specific price. But as I said before, I mean, we're looking at the market holistically and where we -- as John pointed out, there is a gap between what the private markets are valuing companies like ours and what the public markets are -- and so I think this is a great opportunity for investors.

And with our capital, that's certainly one of our choices is to be an investor. And in the past, we've bought back. And if it continues to be that way, we'll continue to buyback.

[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. So I'll hand the floor back to John Francis for closing remarks. Thank you.

Thank you, Diego, and thank you, everyone, for joining us this afternoon. As a reminder, a replay of today's call will be available shortly on our website, izea.com/investors. We appreciate your continued interest and support, and hope you'll join us for our next conference call to discuss our first quarter 2026 results. Thank you so much.

Thank you, and this concludes today's call. All participants may disconnect.

Ladies and gentlemen, greetings, and welcome to the IZEA's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Sandra Carbone, SVP, General Counsel at IZEA. Please go ahead.

Good afternoon, everyone, and welcome to IZEA's earnings call covering the third quarter of 2025. I'm Sandra Carbone, SVP, General Counsel at IZEA, and joining me on the call are IZEA's Chief Executive Officer, Patrick Venetucci; and IZEA's Chief Financial Officer, Peter Biere. Thank you for being with us today.

Earlier this afternoon, the company issued a press release detailing IZEA's performance during Q3 2025. If you would like to review those details, please visit 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 our 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 Executive Officer, Patrick Venetucci. Patrick?

Thank you, Sandra, and good afternoon, everyone. In Q2, I proudly announced that for the first time in the history of this company, we were profitable.

This quarter, I'm pleased to announce that Q3 marks our third consecutive quarter of financial improvement. While total revenue for the quarter decreased 8% to $8.1 million as a result of our choosing to shed unprofitable nonrecurring project work and some softness in government and retail accounts, the underlying health of our business is strong.

Managed Services revenue, excluding Hoozu, increased 5%. Total operating expenses decreased by 67%. Net income totaled $0.1 million compared to a net loss of $8.8 million during Q3 last year, and cash increased by $0.8 million to $51.4 million.

Year-to-date, our Managed Services revenue is up 14% and net income totaled $1.2 million. Three consecutive quarters of continuous improvement underscores that our strategic direction and transformation towards sustainable, profitable growth is firmly taking hold.

Since I stepped in as CEO, our objective has been clear: fortify, simplify and focus. During the first half of the year, we fortified our business in America, simplified many aspects of our go-to-market and focused on our managed services. We segmented our managed service accounts focusing on enterprise customers with recurring revenue and high growth potential, instead of the long tail of transactional customers with small projects and high churn rates.

As we've strengthened and expanded our relationships with enterprise clients, we've been rewarded with more business. Our enterprise accounts are now growing at double-digit rates that are well above the industry average and a few at triple-digit rates.

Our sales and marketing efforts are attracting new clients such as Amazon, General Motors and Owens-Corning. Plus, our pipeline reached a new high for the year with invitations to larger pitches growing.

Lastly, we produced new work for Kellogg's, Clorox, Nestlé, Danone and many more clients. To bolster our enterprise growth strategy and momentum, we hired Steve Bonnell, EVP Account Management, who joined us from Publicis Groupe, where he has a track record of rapidly growing large enterprise accounts such as McDonald's and Samsung.

We also hired John Francis, VP Marketing and Revenue Operations, who joined our team from private equity-backed marketing services firms, where he built effective B2B growth programs.

Although we have been highly focused on services this year, we continue to invest in our technology platform. Earlier this year, we began simplifying our tech product offerings by focusing on fewer products, consolidating features and delivering a more intuitive customer experience.

In Q3, we infused our technology platform with AI-powered features that provide clients with strategic insights and campaign performance. We will be announcing more about our technology development soon.

With all of this momentum and opportunity ahead of us, I am optimistic about the future of this company and our ability to deliver additional value to all of our stakeholders, shareholders, clients and employees alike.

With that, I'll turn the call over to Peter Biere, our Chief Financial Officer, for a closer look at the financial results.

Thank you, Patrick, and good afternoon, everyone. This afternoon, we released our results for the third quarter and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission.

Today, I'll review our operating results for the quarter ended September 30, 2025, with year-over-year and year-to-date comparisons, highlight key balance sheet items and provide an update on our stock repurchase activity.

Beginning in early 2025, we implemented a new account management model, focusing our resources toward larger, more profitable recurring accounts while scaling back selling and delivery efforts previously devoted to lower-value project-based accounts with limited repeat business. This strategic realignment reduced current year contract bookings, but has materially improved profitability and strengthened our foundation for sustainable growth.

Managed Services bookings represent a total of sales orders received during the period, net of cancellations and refunds. They are an indicator of overall demand, but are not necessarily predictive of quarterly revenue as timing varies with contract size, complexity and customer arrangements. As we continue to emphasize enterprise accounts, individual bookings are expected to become higher in value but less consistent in timing, which can impact comparability.

For the 9 months ended September 30, 2025, Managed Services bookings, excluding Hoozu, declined 26% to $18.2 million compared to the prior year period and contract backlog decreased from $15.5 million at the beginning of the year to $7.1 million at quarter end. The decline primarily reflects the company's strategic focus on higher-quality recurring accounts, along with more cautious marketing spend among certain enterprise and agency clients amid broader economic uncertainty, including tariff impacts.

Revenue from Managed Services, excluding Hoozu, increased 14% for the 9 months ended September 30, 2025, compared to the prior year period, while overall growth slowed 5% in the current quarter. Growth in both comparative periods was driven by expansion among enterprise customers, partly offset by a reduction in smaller nonstrategic accounts that we intentionally deemphasized.

Our total cost of revenue, including both external creative and internal labor costs totaled $4.2 million or 51% of revenue in the third quarter of 2025 compared to $5.2 million or 59% of revenue in the same quarter of the prior year. Excluding Hoozu, the cost of revenue declined approximately 5% year-over-year, reflecting improved margin mix in the current period.

Operating expenses other than the cost of revenue totaled $4.3 million for the third quarter, down $8.7 million or 67%, compared to $13 million in the prior year quarter.

Sales and marketing expenses were $1.1 million, down 62% from the prior year period, reflecting workforce reductions and a temporary pause in certain marketing initiatives.

General and administrative expenses declined 49% to $3 million, primarily due to lower employee-related costs, reduced use of external contractors and decreased spending on professional services, software licenses and data storage. The prior year period also included a $4 million noncash charge related to goodwill impairment from an acquisition we made in 2019.

We achieved profitability for the third quarter, generating net income of $0.1 million or $0.01 per share on 18.7 million shares compared to a net loss of $8.8 million or negative $0.52 per share on 17 million shares in the third quarter of 2024. This marks only the second quarter in the company's history in which profitability was achieved through operating performance and the third consecutive quarter of financial improvement, underscoring that our transformation continues to be underway.

Adjusted EBITDA for the third quarter of 2025 was $0.4 million compared to negative $3.4 million in the prior year quarter. As a reminder, we revised our non-GAAP definition of adjusted EBITDA in late 2024, excluding nonoperating items such as interest income from our investment portfolio and restated prior year results for comparability. A reconciliation of adjusted EBITDA to net income is available at the bottom of our earnings release.

As of September 30, 2025, we had $51.4 million in cash and investments, an increase of $0.3 million from the beginning of the year. This modest increase contrasts with an $8.8 million reduction in cash in the prior year period and reflects the benefits of improved operating performance and disciplined cost management.

Operating cash flow is positive for the year-to-date period, inclusive of normal working capital timing variances.

In September 2024, we announced a commitment to repurchase up to $10 million of our common stock in the open market, subject to customary restrictions, including regulatory limits on daily trading volume and company-imposed share price thresholds. Through September 30, 2025, cumulative repurchases totaled 561,950 shares for an aggregate investment of $1.4 million under the program. No purchases were made during the third quarter.

We also earned $0.5 million of interest on our investments during the recent quarter. And finally, we continue to operate with no debt on our balance sheet.

With cash on hand and liquidity, we remain well positioned to support organic business growth initiatives and pursue strategic acquisition opportunities.

Thank you for your time today. And at this time, we invite our investors and analysts to share their questions so that we can provide clarity and insight.

[Operator Instructions] As there are no questions in the queue, I now hand the conference over to IZEA's SVP and General Counsel, Sandra Carbone, for closing comments.

Thanks so much, Ryan, and thank you, everyone, for joining us this afternoon. As a reminder, a replay of today's call will be available shortly on our website, izea.com/investors.

We appreciate your continued interest and support and hope you'll join us for our next conference call to discuss our fourth quarter 2025 results.

Thank you. Ladies and gentlemen, the conference of IZEA, Inc., has now concluded. Thank you for your participation. You may now disconnect your lines.

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.

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?

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.

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

Nice quarter. Can you hear me okay?

Yes, we can.

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

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.

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.

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.

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?

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.

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?

Well, I think...

Or should they be about flat?

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.

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.

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

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.

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

Yes. We're investing in her...

Is she mostly after marketing talent?

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.

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

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.

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