IZEA Worldwide, Inc. Q1 FY2026 Earnings Call

Ladies and gentlemen, greetings, and welcome to the ICF First Quarter 26 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please signal the operator by pressing *0. 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 am Sandra Carbone, SVP, General Counsel, and corporate secretary at IZEA. And joining me on the call are IZEA's chief executive officer, Patrick James Venetucci, and IZEA's chief financial officer, Peter J. Biere. Thank you for being with us today. Earlier this afternoon, the company issued a press release detailing IZEA's performance during Q1 26. 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 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 James 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 26 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 Brothers, Coursera, Nestle, Danone, Georgia Pacific, and Stellantis. We have meaningfully reduced our total number of accounts by more than one-third 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 three 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 have added 12 new team members to our growth organization, bringing 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 Brothers, 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 will turn the call over to Peter J. 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 26 results and filed our Form 10-Q with the SEC. I will 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 pivot 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 2026. With that context in mind, I will turn to our first quarter results. Managed Services bookings were down $1,200 thousand 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 more pronounced impact in 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 seven 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 $200 thousand, 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 $800 thousand, or -$0.04 per share on 17.3 million shares outstanding, compared to a net loss of $100 thousand in the prior year period, or -$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 -$500 thousand compared to -$100 thousand 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 2024. To date, we have repurchased 523 thousand 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 will now open the call for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. You may press *1 if you would like to enter the queue. To remove your question from the queue, press *2. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. We take the first question from the line of Kris Tuttle from Blue Caterpillar. Please go ahead.

Hey. Thanks very much for taking my questions. I have got two, really. One of them is, now that you guys are on this solid footing and you have exited that SMB business, what would you put as the top governor on your ability to grow sequentially over the course of the next year or two? What are the gating factors right now? And does the release of ZED help you with that? Also, I'm curious about how you are thinking about M&A opportunities in your sector, either adjacencies vertically or horizontally. Do you think it is a target-rich environment and are there things you can do this year to accelerate your path? Finally, is there any way to talk about your current numbers apples-to-apples or same-store sales where you factor out the SMB business and the project work that you intentionally tried to avoid in 2026, to consider what the core revenue or bookings growth look like if you strip out some of that business? And should investors think that bookings will begin to trend upwards with Q2 at this point in the business trajectory?

Hey, Kris. It is Patrick. I would not say there are any meaningful gating issues. As we have said before, we are reaching higher and wider with our clients, and we are getting more assignments from many of our enterprise clients. It is a matter of how fast we are getting traction and how quickly we can activate the different opportunities that we have with our clients. ZED is definitely opening more doors. As the demand for greater economy campaigns scales up, many clients are no longer testing with five or ten creators; they are trying to scale. In the past couple of weeks I met with a CMO of a major global brand who is working with 1,000 influencers at a time and said he wants to 10x that and was very interested in ZED. So ZED will enable us to scale and operate more efficiently. Regarding M&A, we are prioritizing a number of different capabilities that we would like to acquire while staying flexible. We have a well-defined M&A strategy. The priorities are to add new capabilities, not just look-alike businesses to get scale. We seek capabilities that would allow us to cross-sell into enterprise clients. Right now, the industry is largely a narrow pure-play offering of creator partnerships, but enterprise clients are increasingly looking for a more integrated offering across content, media, and commerce, such as social commerce. We are actively having discussions and I would characterize the market as target-rich, but there is often a bid-ask spread that can be insurmountable. We are being very disciplined; we want to pay fair prices and do not want to overpay. We will use capital efficiently and responsibly, and we are encouraged by the number of active conversations and relationships we are building. We are not reporting apples-to-apples same-store metrics at this level of detail, but as I said in my prepared remarks, over the past 12 months our enterprise portfolio has grown at a double-digit rate. We believe that as the SMB project work melts away, the underlying health of the enterprise accounts as a group is very encouraging and is growing faster than the industry. On whether bookings will trend upwards in Q2, we are not giving specific guidance, but we are focused on increasing bookings. Peter mentioned there were timing issues this quarter with some larger clients; we are already seeing good things with some of these clients, so stay tuned for Q2.

Thank you. We take the next question from the line of Bill Church from TGRA Capital. Please go ahead.

Thanks for taking my question. We are seeing many consumer discretionary companies stumbling and missing numbers and talking about a slower economy. To the extent you are seeing that, does it increase the likelihood that they would hire someone like you to help them double down on their message? At the same time, I am sure they are also looking at costs and maybe cutting providers that have not been effective. Just trying to get a sense. Thank you.

Thanks for the question, Bill. It varies sector by sector. In the CPG industry, tariffs and inflation have in particular impacted business, and some of the slowdown we referenced was a result of that. However, that cannot last forever. These are large enterprise professional marketers, and we are already seeing some of those temporary conservations release. That is why we characterized it as a slowdown rather than a loss of enterprise clients. Clearly, macroeconomic factors are at play, but we are encouraged by ongoing engagement from our clients.

Thank you. A reminder, if you wish to ask a question, please press *1. As there are no further questions from the participants, I would now hand the conference back 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 will join us for our next conference call to discuss our second quarter 26 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.