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 for our reported results can also be found in our earnings release issued earlier today and in our publicly available filings. 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, non-recurring, 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 Brothers., Coursera, Nestlé, 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 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, ASICS, 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 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'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, non-recurring 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 non-core 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 non-core runoff. We expect these accounts to normalize with a more pronounced impact in the second half of 2026. As a reminder, revenue for Managed Services 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 non-core 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 -$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 -$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 - $0.5 million compared to - $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 15th, 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.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you'd like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicated your line is in the question queue. You may press star and two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we'll 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've got two really. One of them is, you know, now that you guys are on this solid footing, you've gotten exited that SMB business, what would you put as kind of the top governor on your ability to grow sequentially over the course of the next year or two? You know, what are sort of the gating factors right now?
Hey, Kris. It's Patrick. Yeah, I wouldn't say there's any, you know, 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. You know, I wouldn't call it a gating factor, but it's just kind of an issue of how fast we're getting traction, you know, how fast can we activate the.
The different opportunities that we have with our clients.
Okay. Does the release of ZED help you with that?
Yeah
Maybe provide a little context for me.
Yeah. No, ZED is definitely opening more doors. ZED is, you know, certainly as the demand for creator economy campaigns, not just goes up, but is going up in terms of scale, right? We have many, many clients who are coming to us saying that the days of testing this with five 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. ZED is certainly, it's certainly gonna be something that's gonna enable us to scale this and operate more efficiently.
Okay. My other question was just regarding, you know, how you guys are thinking about M&A opportunities in your sector, either adjacencies, you know, vertically or horizontally. Just, you know, curious if you think it's a target-rich environment, you think there's some things that you can do this year that may, you know, accelerate your path. I'm just curious to know how you're kind of thinking about it right now.
The way we're thinking about it is 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 know, you can't always find exactly what you want. 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.
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. 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 wanna pay fair prices, but, you know, also don't want to overpay. We're planning on using the capital efficiently and responsibly. We're very encouraged based on the number of active conversations that we have and relationships that we're building.
Okay. Is there any way to talk about your current numbers, like apples to apples or same store sales where, you know, we factor out, you know, the SMB business and the project work that you didn't wanna continue on with in 2026 to kinda consider, like what is the core revenue and/or bookings growth look like if you strip out, you know, some of the business that you've intentionally tried to avoid?
Yeah. We're not reporting to that level of detail, but as I said in my comments, you know, over the past 12 months, our enterprise portfolio has grown at a double-digit rate. That's our attempt at, you know, sharing with you exactly what you're asking for. You know, we really believe that the underlying base is as soon as we can melt away this SMB, you know, project work and client base, that the underlying health of the enterprise accounts as a group is really encouraging. As I've said in the past too, it's growing faster than the market. That's where we're trying to get to as fast as we can.
Okay. Last thing, you know, for your consideration is, you know, should investors, you know, think that at this point, we'll see bookings begin to trend upwards with Q2 at this point in the business trajectory?
Yeah, I mean, that obviously we're not giving specific guidance, but that, you know, we are focused on increasing bookings. As Peter said, there has been some timing issues that we ran into this quarter with some of our larger clients, which already, you know, good things are happening with some of these clients. Stay tuned for Q2.
Okay, fair enough. All right. Thanks a lot, Patrick. It was good, catching up with you as always, and I'm sure we'll talk again soon. Thanks.
Thank you, Kris.
Thank you. Ladies and gentlemen. If you wish to ask a question, please press star and one. We take the next question from the line of Bill Church from TGRA Capital. Please go ahead.
Thanks for taking my question. We're seeing many consumer discretionary companies stumbling and missing numbers and talking about a slower economy and that sort of thing. 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? At the same time, I'm sure they're also looking at what the cost or expenses are and maybe kicking out some that haven't been as effective. Just trying to get a sense. Thank you.
Thanks for the question, Bill. I would say it varies sector by sector. You know, in the CPG industry, we have seen tariffs and inflation in particular impact their business. You know, some of the slowdown we referred to, you know, was a result of that. What we're also seeing too is that it can't last forever, right? These are very large enterprise, serious professional marketers, they are and already we're seeing that they're releasing some of those. That's why we characterized it as a slowdown. You know, it's not the case that we've lost any of these enterprise clients. Clearly there are some macroeconomic environment factors at play here.
Thank you.
Thank you. A reminder, if you wish to ask a question, please press star and one. As there are no further questions from the participants, I will 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. Than you for your participation. You may now disconnect your line.