IZEA Worldwide, Inc.

Good afternoon, everyone, and welcome to IZEA's Q3 2021 earnings call. I'm Ryan Schramm, President and Chief Operating Officer at IZEA. And with me on today's call is IZEA Chief Financial Officer Peter Beery and IZEA Chairman and Chief Executive Officer Ted Murphy. Thanks for joining us. Earlier this afternoon, the company issued a press release with details pertaining to our third quarter performance for 2021. If you'd like to review those details, all of our 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 included in today's press release covering the company's financial results, and be advised that during today's earnings call, our management team will discuss IZEA's business outlook and made 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 also refer to a non-GAAP financial measure, adjusted EBITDA, and other business metrics such as gross billings and bookings. A detailed explanation of these measures is disclosed in our earnings release and in our most recent form, 10Q. With the appropriate disclosures taken care of, I'd now like to turn the call over to my colleague and Isaiah's Chief Financial Officer, Peter Beery. Peter.

Thank you, Ryan, and good afternoon, everyone. I'd like to highlight our results for the quarter ended September 30, 2021. Total revenue for the third quarter of 2021 was $7.6 million, or 88% higher when compared to Q3 of 2020, with $7.2 million coming from our managed services business and $454,000 coming from our SaaS offerings. Managed services revenue increased by $3.7 million, or 104%. while SAS revenue declined by 68,000, or 13%, both compared to the prior year quarter. As we've previously announced, managed services bookings, a key metric which measures sales orders received less than any cancellations or refunds given during a period, topped 11 million for the third quarter of 2021. This all-time record represents an increase of 181% compared to Q3 of 2020, and continues the growth trend that we've seen since late last year. The trend towards larger brands increasing their marketing spend with IZEA also continued during the quarter, as we added several new Fortune 500 customers and repeat business from three Fortune 10 partners. These factors, taken together with efforts put forth by our team to fulfill campaigns, resulted in the increase in managed services revenue. As a reminder, we recognize revenue on our managed services contracts over time based on the percentage of completion and delivery timing can vary greatly. Historically, bookings have converted to revenue over a six to seven month period on average. However, since late last year, we've been receiving increasingly larger and more complex sales orders, which in turn has lengthened the average period for revenue recognition to approximately nine months, with the largest contracts taking even longer to complete. Planning for larger contracts takes more time up front, which can also cause further delays. For these reasons, managed services bookings, while an overall indicator of the health of our business, may not be used to predict quarterly revenues and could be subject to future adjustment. SAS revenue, which consists of license fees, self-service marketplace spend fees, and other fees, was comparatively $68,000 lower for the third quarter of 2021. Licensee counts continue to grow on all platforms. However, average license fees are lower primarily due to changes made a year ago to our pricing methodology, namely in driving the improved price-to-value economics and being a first mover in transparent competitive pricing. We also lowered our pricing on select self-service offerings, which impacted our margins on marketplace spending during the current quarter. Gross billings from marketplace spend in the third quarter were 31% lower than the prior year quarter, leading to lower fees revenue. Our cost of revenue exclusive of amortization was $4 million in Q3 of 2021, or 52% of revenue, compared to $1.7 million, or 42%, in the prior year quarter. Cost of revenue was higher primarily due to a heavier mix of larger deals that carry lower overall margins. Accordingly, gross margin in the current quarter averaged 48% compared to 58% in the prior year quarter. Expenses other than the cost of revenue totaled $5.5 million for the current quarter compared to $3 million for the prior year quarter. Sales and marketing costs were $2.2 million during the quarter, $1.4 million or 60% above the comparative quarter due to sales compensation, which varies with higher bookings and increased marketing costs associated with driving customer growth. General administrative costs totaled $2.7 million during the quarter, $844,000 or 46% above the prior year quarter, due primarily to higher compensation, as well as contractor costs to support operations and IT investments. Our net loss for the third quarter of 2021 totaled approximately $1.5 million, or negative two cents per share, compared to a net loss of $1.3 million in the prior year quarter, or negative three cents per share. Adjusted EBITDA was approximately negative $1 million for the third quarter, compared to negative $725,000 for the prior year quarter, a difference of about $275,000. Booking's growth over the last four quarters has outpaced our growing managed services revenue, driving our unearned revenue backlog to over $22 million at the end of Q3, and higher sequentially by 30%. We anticipate that revenues will increase during the fourth quarter of 2021 as we deliver end-of-year and seasonal promotions. As of September 30, 2021, we had $74.5 million of cash on hand, down about $500,000 from the end of Q2, and we have no debt on our balance sheet. As previously announced in June 2021, the company entered into a new two-year at-the-market sales agreement under which it may offer up to $100 million of its common stock from time to time. That agreement provides IZEA with financial flexibility moving forward. The company has not sold any shares in the open market under that agreement to date. With our cash on hand and a potential additional financing vehicle in place, We are in a strong position to execute on business growth, both in front of us and opportunities that may lie ahead. With that, I'll turn the call back over to Ryan.

Thanks, Peter. It's wonderful to be delivering continued strong results for our shareholders and clients alike. While 2021 has been a record-setting year for IZEA on several fronts, one of the shining examples comes from our managed service work group. For those of you not familiar, this unit of integrated marketing professionals works on behalf of brands and their agencies to concept, strategize, and execute world-class influencer marketing programs. By leveraging IZEA's technology platforms, it allows our team members to have a unique advantage in delivering both highly innovative and highly effective work with unparalleled efficiencies. Such an offering is a key element in our strategy to unlock incremental value for our clients, resulting in larger dollar-sized commitments, broader geographic access, and more substantive relationships overall. And it's working. Since 2019, we've more than tripled the number of clients who are trusting IZEA with million-dollar-plus budgets, while at the same time increasing the absolute number of new managed service clients by more than 2x over the last year. Obviously, these are terrific numbers that our team is proud of, and they should be. But for our shareholders, it also underscores the continuing shift within the broader advertising and marketing investment trends that were exacerbated by the COVID-19 pandemic. Compared to old, established bastions of media such as television, radio, and print, influencer marketing not only is more cost-effective, but it delivers a longer lifetime value through highly measurable results. As we look toward 2022 and beyond, there's even more opportunity ahead of us. From new types of client engagements to provide strategic planning pre-campaign, to offering best in class data science personnel to provide insight and analytics on campaign performance in new and exciting ways. We see IZEA's future thriving at the intersection of our talented team members, our passionate creators, and our proprietary technology. When paired with a healthy growth mindset entrenched across the company's personnel, by having the advantage of technology-backed solutions, adding more clients doesn't necessarily mean having to add proportionately more cost. While we remain steadfastly committed to securing and consolidating the very best talent across the influencer marketing industry in both our sales and service organizations, we believe that IZEA will continue to enjoy an increase in revenue per full-time employee over time as we seek to enhance and automate lower value aspects of the campaign fulfillment process. That way, our valued team members can spend more time surprising and delighting our clients, driving increased retention and larger investments in return. Doing so also unlocks greater opportunities for the broader creator economy as well, with increased deal flow and higher diversity of brand collaboration opportunities to engage against. Now for some additional perspective on IZEA's performance year to date, as well as commentary on the road ahead for the company. I'd like to turn the call over to my colleague and IZEA's founder, chairman, and CEO, Ted Murphy. Ted.