IZEA Worldwide, Inc.

Thank you for standing by. This is the conference operator. Welcome to the ZEA Worldwide, Inc., third quarter 2020 earnings call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Ryan Schramm, Chief Operating Officer. Please go ahead.

Good afternoon and welcome to IZEA's Q3 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. Earlier today, the company issued a press release with details pertaining to our third quarter performance for 2020. If you'd like to review those details, all of IZEA's investor information can be found on our investor relations website at IZEA.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 ZEA'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 could differ materially from our forecast due to a number of factors, including those mentioned in our most recently filed periodic reports with the SEC. The company and our management team assume no obligations to update any forward-looking statements made in today's call. In addition, our update today will refer to certain key metrics regarding gross billings and non-debt financial measures regarding adjusted EBITDA. A detailed explanation and reconciliation of these measures is disclosed in our earnings release and in our most recent Form 10-Q available under SEC Filings in the Investors section of EISEA.com. Now with the appropriate disclosures out of the way, I'm pleased to introduce my colleague and EISEA's Interim Chief Financial Officer, Leanne Hitchcock. Leanne.

Thank you, Ryan. Good afternoon, everyone. Let's begin with a summary of our results for the third quarter ended September 30th. For the three months ended September 30th, 2020, IZEA reported total revenues of $4 million compared with $3.5 million coming from our managed service business and $522,000 coming from our SAS offerings. We saw a $44,000 or 1% decrease in our managed service revenue and a $331,000 decline in our staff service revenue in Q3 2020 as compared to Q3 2019. Although there was a slight $44,000 decline in Q3 2020 managed service revenue compared to Q3 2019, We were pleased to see revenue from managed services increase by $1 million, or nearly 41%, compared to our second quarter of 2020, which was greatly affected by the initial uncertainty surrounding COVID-19. Larger, concentrated marketers are beginning to spend again, but there is still hesitancy to spend amounts on typical annual events that may change as a result of COVID-19 uncertainties, such as back-to-school campaigns. Despite the delay in the execution of existing orders from our customers, we have seen a slight increase in net sales orders in the third quarter of 2020 compared to the second quarter of 2020, as marketers who are still advertising shifted more of their spend to influencer marketing campaigns. For Q3 2020, our gross billings decreased to $5.5 million compared to $6.7 million in Q3 2019. This 17% decline in gross billings was primarily due to a $1.1 million decline in marketplace spend and license fees from our SaaS customers, due primarily to a trend in the renewal of some of those customers and curtailed spending as marketers paused and changed their spending habits due to COVID-19 uncertainties and other factors. The reduction in SAS gross billings resulted in the $331,000 decrease in SAS service revenue in Q3 2020 as compared to Q3 2019. Our cost of revenue exclusive of amortization was $1.7 million in Q3 2020 as compared to $1.9 million in Q3 2019. As a percentage of revenue, our cost of revenue exclusive of the amortization has improved from 43% in Q3 2019 to 42% in Q3 2020, primarily due to the reduction in personnel and travel-related costs on the fulfillment of our customer marketing campaign. Our total costs and expenses were $5.3 million for Q3 2020, compared with $5.6 million for Q3 2019. If we exclude the non-cash $794,000 gain on the final settlement of our acquisition cost liabilities recorded in Q3 2019, the improvement between periods is more than $1 million as a result of the $200,000 decrease in cost of revenue, a $61,000 reduction in amortization costs as assets were fully amortized in the quarter, and over $700,000 in cost reduction efforts affecting personnel, software subscriptions, rent, travel, and marketing expenditures that were cut due to COVID-19 operating changes. We also saw reduced hosting costs by optimizing usage of our data hosting service after shutting down the TAP Influence technology platform in February 2020. Our net loss for Q3 2020 was $1.3 million or $0.03 per share compared to our net loss of $1.2 million or $0.04 per share for Q3 2019. Despite the decline in overall revenues, we were able to improve adjusted EBITDA by $531,000 or 42% to a negative $725,000 in Q3 2020 compared to a negative $1.3 million in Q3 2019. This was achieved through steps taken to curb spending during this period. To summarize, although our team is working remotely and our internal business operations are fully functional, we are still experiencing impacts from the outbreak of COVID-19 on our results of operations. We have observed changes in advertising decisions, timing, and spending priorities from our customers, which have had a negative impact on our revenue. but we have also found ways to reduce expenses and gain efficiencies in our internal operations to minimize the effect. While the disruption is currently expected to be temporary, there is a high level of uncertainty around the duration and the total economic impact, especially as marketers prepare their budgets for the future. Between June and August 2020, we raised gross proceeds of $25.7 million through the sale of 13.3 million shares of our common stock under an at-the-market offering program registered on our shelf registration statement filed with the Securities and Exchange Commission. As of September 30, 2020, we had cash on hand of $30.6 million with no amounts used on our $5 million line of credit. We expect that our cash on hand will be sufficient to cover our operating needs for the next 12 months. With that, I'll turn the call back over to Ryan.