IZEA Worldwide, Inc. (IZEA) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to IZEA's earnings call for the third quarter of 2026. I'm John Francis, SVP Sales and Marketing Operations at IZEA. With me today are IZEA's Chief Executive Officer, Patrick Venetucci, and IZEA's Chief Financial Officer, Peter Biere. Thanks for joining us today. Earlier this afternoon, the company put out a press release with the details of IZEA's performance during Q3 2026. If you'd like to go over those details, please head to our investor relations website at izea.com/investors. Before we begin, please take note of the safe harbor paragraph in today's press release covering IZEA's financial results, and be advised that some of the statements we make today about 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 review the disclosures in our SEC filings for a detailed discussion of these factors. Our commentary today will also include the non-GAAP financial measure of adjusted EBITDA. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings release issued earlier today and in our publicly available filings. With that, I'd now like to introduce and turn the call over to IZEA's Chief Executive Officer, Patrick Venetucci. Patrick?

Thanks, John, and good afternoon to all of you. The results for our third quarter show that IZEA keeps making headway in its shift into a creator marketing company centered on enterprise clients. Although our top-line revenue is still under what we had hoped for, we are encouraged by signals that the strategy is delivering, especially the strength of our biggest client relationships, faster contract bookings, and ongoing gains in operating efficiency. Today I want to cover four topics: how we performed financially, the momentum we see with enterprise clients, how we are doing against our strategic priorities, and what we expect for the fourth quarter and beyond. Q3 top line was $6.2 million, a 23% drop versus the prior year's comparable quarter. There are two distinct reasons behind that decrease. First, our enterprise customer base continues to show uneven spending patterns, driven by macro uncertainty, client reorganizations, and marketing budgets put on hold. Second, we intentionally stepped back from smaller, non-core accounts we served in Q3 2025, redirecting our resources toward bigger enterprise relationships, where our competitive edge is sharper and the potential for long-term growth is larger. Of note, our top three enterprise accounts grew revenue faster than the market on a quarter-over-quarter basis, demonstrating the growth potential of our enterprise model. We aim to replicate those results across a broader range of enterprise accounts. The clearest positive financial indicator in the quarter came from a steep pickup in contract bookings. Managed Services bookings rose 94% compared with a year earlier, reaching $7 million—a 54% increase sequentially from the second quarter; that gain was fueled by deeper commitments from existing enterprise clients and by a larger set of customers making substantial investments in creator marketing. Meanwhile, we maintained our emphasis on financial discipline. Total costs and expenses dropped 16% year-over-year, reflecting our continued effort to match our organization and resources to our enterprise strategy. We ended the quarter holding a solid cash balance with zero long-term borrowings, and that leaves us plenty of room financially to put money into growing the business organically as well as into buying companies strategically. The largest enterprise partnerships we have keep demonstrating how capable IZEA is and how we're viewed as a strategic partner by major global brands. In the quarter, the three biggest accounts we serve together posted the best combined revenue they've ever produced. Each of the three accounts posted growth versus the same quarter a year earlier. That shows we can strengthen ties with clients, widen the services we provide, and win a bigger portion of what they spend on creator marketing. This is the model we plan to scale: forming long-term strategic partnerships with enterprise clients, offering distinctive creator-driven solutions, and growing our business inside those accounts over time. We also advanced in building new enterprise relationships. Our sales team brought in new business from major entertainment and technology names, among them Disney's ABC, HBO Max, Hulu, and ASUS. With clients we already serve, we carried out prominent creator marketing campaigns, among them Nestlé Vital Proteins at the US Open, Lionsgate, The Hunger Games: Sunrise on the Reaping, and Ravensburger Oh My Pigeons! That wraps up the launch. These initiatives demonstrate how wide-ranging our capabilities are and how well we can carry out complex creator marketing programs for top-tier brands. Our largest accounts continue to perform strongly, but we recognize that growth across the broader enterprise portfolio has been uneven. Better retention of clients at the smaller end of our portfolio, deeper penetration within accounts, and improved conversion of new business remain key priorities. Throughout 2026, we have been restructuring IZEA around three strategic priorities: enterprise specialization, operational excellence, and technology differentiation. First, we continue to refine where we direct our go-to-market efforts. Our commercial operations are now organized around industry verticals in which we believe our expertise, client relationships, and capabilities provide us with meaningful competitive advantages. Our marketing team is increasingly in step with these priorities, using account-based campaigns that are tightly targeted. In the quarter, 27% of our target accounts engaged with our website, compared with 10% in Q1. Engagement with prospective clients is getting better, and we're now focused on converting that engagement into qualified opportunities and bookings. Second, we're putting operational systems in place to build an organization that's more efficient and more accountable. We've taken deliberate steps to simplify our structure, align talent with our strategic priorities, and manage costs. These actions have reduced our expense base while preserving the capabilities we see as essential for long-term growth. Even with all the organizational changes we've made, employee engagement is still high—over three times the average company engagement—and that's important as we keep carrying out our transformation. Third, we're putting money into technology as a way to stand apart from competitors. Since ZED launched—our proprietary AI-powered creator marketing operations platform—every new campaign has been run through ZED, and we're continuing to build out ZED's capabilities in creator intelligence, brand safety, campaign management, and workflow automation. Our longer-term vision is to use proprietary technology and AI to bring more value to clients, improve operating efficiency, and monetize this investment. As for the fourth quarter, we came into the period with strong momentum and confidence in our ability to deliver revenue growth. Because our third-quarter bookings rose substantially, we're giving a fourth-quarter revenue outlook so investors can see more clearly how that business turns into revenue. Normally we don't provide financial guidance, but we're making a one-time exception to share this view. The big jump in third-quarter bookings gives us better visibility into revenue that's coming, and steady demand from our biggest enterprise customers backs up the outlook. We expect fourth-quarter revenue to grow meaningfully both sequentially and year over year. That improvement won't fully make up for the revenue shortfall we saw earlier in the year, but we see it as a significant move toward getting back to steady growth. What we need to focus on right away is straightforward: turning our enterprise prospects into closed deals, growing our biggest accounts, building up the pipeline for new business, and staying disciplined about operations. Last, I'd like to discuss how we think about allocating capital and growing strategically. One of IZEA's key strategic assets is its balance sheet; we hold $46.4 million in cash and carry no long-term debt, which gives us the financial wherewithal to chase opportunities capable of meaningfully speeding up our transformation. We continue to seek out strategic acquisitions that would extend our capabilities, diversify our revenue sources, complement the technology we provide, and increase our scale in the creator economy. There's still a lot of fragmentation in creator marketing, and that gives us room to go after strategic acquisitions—deals that let us build a broader, more differentiated platform by combining capabilities in new ways. We remain disciplined in how we approach this, favoring targets with solid strategic fit, appealing economics, and a clear route to long-term shareholder value. In closing, even though 2026 has been a tough year, the gains we made in the third quarter give us confidence. Our biggest enterprise customers are expanding, contract bookings have picked up considerably, our cost structure is getting better, and our technology platform continues to move forward. We know that additional effort is required from us before steady expansion can be achieved throughout the whole company, yet we feel the base we are establishing increasingly matches the possibilities in front of us. Our attention stays fixed on converting this momentum into lasting top-line growth, stronger earnings, and value for shareholders over the long run. We appreciate your ongoing backing. With that said, I’ll now pass the call to Peter Biere, our Chief Financial Officer, who will examine the financial results in greater detail.

Thanks, Patrick, and good afternoon to all of you. Before this call, we released the results for our third quarter of 2026 and submitted our Form 10-Q to the SEC. My comments will center on what drove the quarterly figures, then I'll walk through our financial position and share the outlook for the fourth quarter. Revenue came in at $6.2 million, a decline of 23% versus the same quarter last year. Results among enterprise customers were uneven. Sales to our three biggest customers rose 21% year-over-year, and new enterprise customers also contributed; even so, softer activity in other enterprise relationships, together with the lingering year-over-year effect of moving away from non-core SMB business, more than offset those gains. Managed Services bookings for the quarter reached $7 million, 94% above the prior-year-quarter, which underpins revenue growth in the quarters ahead. Those bookings came from stronger commitments spread across a wider set of enterprise customers, both existing and new relationships. Keep in mind that revenue from Managed Services bookings is typically recognized in full over roughly seven months on average. Gross margin was 37% for the quarter, versus 49% a year earlier. The drop stems from a larger share of revenue coming from one big enterprise customer carrying relatively lower margins, plus increased internal delivery costs. Internal labor costs, unlike direct campaign costs, are less variable, since we keep the staffing in place to support the revenue growth we anticipate. Operating expenses, excluding cost of revenue, fell 26% year-over-year to $3.1 million. That reduction mainly comes from lower personnel-related costs after the cuts made over the past year. We think today's expense levels can carry higher revenue without a matching rise in operating expenses; for the quarter, our net loss was $0.4 million, compared with net income of $0.1 million in the prior-year-period. Adjusted EBITDA showed a loss of $0.2 million, versus positive adjusted EBITDA of $0.4 million last year. The weaker profitability mainly reflects lower revenue and gross margins, partly offset by our lower operating costs. For the fourth quarter, as Patrick noted, revenue should land between $7.5 million and $8.1 million, which means year-over-year growth of roughly 24%-34%. On our financial position, at September 30, 2026, cash and cash equivalents stood at $46.4 million, down $4.4 million from the start of the year. That decline reflects about $2.7 million of cash used in operations, including working capital changes, along with investments in our technology platform and share repurchases. Our balance sheet remains strong, with no long-term debt. Lastly, remember that in the fall of 2024 our board of directors approved a $10 million share repurchase program. At September 30, 2026, we had bought back roughly 909,000 shares for $2.6 million, mainly under our Rule 10b5 to 1 trading plans, including about 386,000 shares for $1.3 million since the current plan was adopted this past May; we believe our solid balance sheet leaves us well positioned to fund organic growth initiatives and to chase strategic acquisition opportunities. We appreciate you being with us today, and at this point we'd like to take questions from the call.

Pardon me. Good afternoon, gentlemen. There was a remark made — and I'm quoting here — that "you sign a Managed Services contract, and then it takes five to seven months before revenue shows up." So when I look at Managed Services bookings coming in at $7 million, which is up 94% this quarter, and then you're pointing to fourth quarter revenue up 25%, are those two separate things going on? Does the Managed Services booked this quarter land next year, while Q4 revenue reflects deals signed two quarters back?

Hi, Jeff Bronchick. This is Patrick Venetucci. Yes. I mean, clearly, booking duration varies, if you will. So, and fourth quarters, and particularly as the year winds down, some seasonality starts to kick in. So, clearly, the holidays are a big period for marketers, and they start working on those campaigns in Q3, so the duration on some of those bookings tends to run shorter. Conversely, in Q4, with some of our bigger, longer-term enterprise customers, we'll have bookings that really pertain to 2027 landing at the end of the year and carrying longer duration; so, based on when in the year bookings come in, that average duration can shift. But taken across the year, it's seven months.