IZEA Worldwide, Inc.

Good day and welcome to the IZEA, Inc. First Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question,

Good afternoon and welcome to IZEA's Q1 2020 Earnings Call. I'm Ryan Schramm, Chief Operating Officer at IZEA, and joining me today is IZEA Interim Chief Financial Officer Leanne Hitchcock and IZEA Chairman and Chief Executive Officer Ted Murphy. Thanks for being with us this afternoon. Earlier today, the company issued a press release with details pertaining to our first quarter performance for 2020. If you'd like to review those details, all of our investor information can be found on our investor relations website at dezea.com forward slash investors. Before we begin, please take note of the Safe Harbor paragraph that appears at the end of the press release covering the company's financial results. and be advised that during the course of today's earnings call, our management team will discuss IZEA's business outlook and make forward-looking statements. These statements are predictions based on our team's expectations as of today that are subject to inherent risks and uncertainties and should not be unduly relied upon. Actual events, results, or trends to differ materially from our forecast due to a number of factors, including those mentioned in our most recently filed periodic reports with the SEC. Thank you for joining us. Thank you, Ryan, and good afternoon, everyone. On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus, also known as COVID-19, as a global pandemic,

and recommended containment and mitigation measures worldwide. On Friday, March 13th, we directed all of our staff to work from home effective the next business day on Monday, March 16th, and they are continuing to do so for the foreseeable future. All of our business operations and ability to support our customers are fully functional while our employees are working from remote locations. However, we have begun to see impacts on our operations due to changes in advertising decisions, Timing and spending priorities from our customers, which may result in a negative impact to our bookings and revenue in current and future quarters. While the disruption is currently expected to be temporary, there is uncertainty around the duration and total economic impact. Total revenue in our first quarter of 2020 was flat year over year at $4.8 million, with $4.1 million coming from our managed service business and $583,000 coming from our SaaS business. We saw a 258,000 or 7% increase in our Q1 2020 managed service revenue as a result of increased sales orders, which we called bookings, in the second half of 2019. This increase in bookings led to increased revenues in Q1 2020 as managed service bookings typically convert to future revenue over the next 3 to 12 months. Our revenue from SAS services decreased by $333,000 in Q1 2020 as compared to Q1 2019, primarily as a result of lower spend levels from our SaaS marketers and as a result of competitive pricing efforts which reduced our margins on those spends and on our licensing fees. Our SaaS marketers also curtailed spending in March 2020 as a result of COVID-19. For Q1 2020, our gross billings on these revenues decreased to 6.1 million compared to 7.8 million in Q1 2019. This 22% decline in gross billings was primarily due to lower marketplace spend from the former TAP Influence and eBuyLine platform customers as they transitioned to IZEA-X in Q1 2020 and due to the churn during renewal of some of those customers throughout 2019. Our cost of revenue, exclusive of amortization, held at $2.1 million in Q1 2020 compared to Q1 2019. As a percentage of revenue, our cost of revenues exclusive of amortization increased from 44% in Q1 2019 to 45% in Q1 2020. Our total cost and expenses were $10.9 million for Q1 2020, compared with $6.5 million for Q1 2019. In March 2020, the reduction in our projected revenue as a result of COVID-19 and the continuation of a market capitalization below our carrying value with uncertain chances for recovery given the volatility of the capital markets surrounding COVID-19 caused a triggering event which required us to perform an interim assessment of goodwill, which resulted from our prior acquisitions. Based on this assessment, we recorded a $4.3 million impairment of goodwill in the three months ended March 31, 2020. This increase in cost and expenses was reduced by a loss of $191,000 associated with our first quarter 2019 settlement on a portion of our accrued acquisition costs that did not recur in 2020. Our net loss for Q1 2020 was $6.2 million, or $0.18 per share, Thank you for joining us. and a $73,000 increase in advertising and marketing efforts in the first quarter of 2020 compared to the same period in 2019. On March 31, 2020, we had cash on hand of nearly $5.6 million, inclusive of approximately $1.2 million in funds we received from our line of credit using our qualified receivables as collateral. In late April, We received a loan of $1.9 million under the Payroll Protection Program to help us retain our employees through the downturn in the market as a result of COVID-19. As we disclosed in our quarterly report filed earlier today, based on what we know today regarding our current plans and cost reductions, we expect that with our cash on hand, coupled with funds from the SBA loan and our line of credit on receivables, we will have sufficient capital to cover our operating needs for the next 12 months. With that, I'll turn the call back over to Ted.