IZEA Worldwide, Inc.

Good afternoon, everyone, and thank you for joining us for IZEA's earnings call covering the third quarter of 2022. I'm Ryan Schramm, President and Chief Operating Officer at IZEA, and joining me on the call are IZEA Chief Financial Officer Peter Beery and IZEA Founder, Chairman, and Chief Executive Officer Ted Murphy. We're glad to have you with us today. Earlier this afternoon, the company issued a press release detailing our performance for the third quarter of 2022. If you'd like to review those details, all of our investor information can be found online 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 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 measure of adjusted EBITDA. Reconciliations between GAAP and non-GAAP metrics for our reported results can also be found in our earnings release issued earlier today, as well as in our publicly available filings. And with that, I'm pleased to introduce IZEA's Chief Financial Officer, Peter Beery. Peter.

Thank you, Ryan, and good afternoon, everyone. I'll review our operating results and provide additional context for the quarter. Revenue for the third quarter of 2022 totaled $10.8 million, 40% higher than in Q3 of 2021. Managed services revenue totaled $10.5 million during the quarter, growing 44% over the prior year quarter. We recorded $350,000 in net revenue from our SAS offerings during the current quarter, down 23% from the prior year quarter. Managed services revenue grew by $3.2 million quarter over quarter, primarily due to revenues on one large customer contract, which grew by $2.6 million. Revenues from all other customers grew approximately 10% compared to Q3 of 2021. As previously announced, managed services bookings fell by 27% to $8.2 million in the third quarter of 2022, as we saw the contracting process slow down over the summer months. Bookings on our large customer contract represented 57% of the total quarter-over-quarter decline, so bookings for all other customers declined a more moderate 17% in Q3 over the prior year quarter. September bookings were strong this year, delivering our second best monthly bookings total, and we ended the quarter with a solid pipeline of opportunities. There is a lag between bookings and revenue recognition. Some of the slowness over the summer is reflected in the current quarter revenue total, but a higher percentage will manifest in Q4 2022 and early 2023 revenues. Our managed services backlog, which represents the total of unrecognized revenue for contracts that are underway, as well as recent bookings that have yet to begin invoicing, totaled $19.2 million on September 30, 2022. We expect to record most of this backlog as revenue in the following three quarters. SAS services revenue consisting of license fees, self-service marketplace spend fees, and other fees declined by 102,000 in the current quarter, or about 23% compared to the prior year quarter. Total licensee counts on all platforms declined by 22% in the current period. Revenue from license fees declined by 10% in the comparative quarter, while gross marketplace spend fees fell 82%. Gross billings for SaaS services fell by 23% quarter over quarter, mostly due to a sharp decline in marketplace spend, including fewer marketers and lower average spending levels. Our cost of revenue was $6.6 million in the third quarter of 2022 or 61% of revenue compared to $4 million or 52% of revenue in the prior year quarter. Accordingly, our gross margin in the third quarter averaged 39% compared to 48% in the prior year quarter. The increase in the cost of revenue is primarily due to a higher delivery cost on one large customer contract, which made up 31% of total revenues during the current quarter. This significant contract aside, the cost of revenue for our other customer contracts was within range of recent historical averages. Expenses other than the cost of revenue totaled $5.6 million for the third quarter compared to $5.1 million for the prior year quarter. Sales and marketing costs totaled $2.5 million during the third quarter, $261,000 or 11.7% higher quarter over quarter. Additional headcount and related payroll costs associated with driving customer growth were partly offset by lower sales commissions and that vary with bookings. General and administrative costs totaled $2.9 million during the third quarter, $256,000 or 9.7% higher quarter over quarter due primarily to higher professional fees associated with changing our auditor. Our net loss was $906,000 for the third quarter of 2022 or one cent per share compared to a net loss of $1.4 million in the prior year quarter or two cents per share. Adjusted EBITDA was negative $591,000 for the third quarter this year compared to a negative $926,000 for the prior year quarter. As of September 30, 2022, we had $67 million in cash and investments, down from $75.4 million at the beginning of the year, lower partly due to negative $2.5 million of adjusted EBITDA for the year-to-date period. with the rest of the change tied up in working capital, mostly due to timing difference of payments and receipts related to our large customer contract. We made $447,000 in interest income on our investments during the quarter. As previously announced, we terminated our at-the-market equity offering during the quarter. We had not raised any capital through the ATM and believe that we are well capitalized for our current growth strategy. Lastly, we do not have any debt on our balance sheet. With cash on hand and liquidity from our investment portfolio as required, we are in a solid position to execute on business growth and opportunities that may lie ahead. With that, I'll turn the call back over to Ryan.

Thanks, Peter. And hello again, everyone. There's no question we're operating in an uncertain environment and that businesses across all sectors continue to get tested in new and different ways. When it comes to how IZEA is helping brands and agencies navigate the sweeping changes in the advertising industry, while also further embracing the creator economy, our mission remains unchanged. As I mentioned in our Q2 call, we are continuing to sharpen our focus on a clear set of product and business priorities. The product and expansion announcements we've made in just the last quarter alone have demonstrated that very clearly. including significant improvements to our creator marketplace on IZEA.com by launching our next generation enterprise software solution, Flex, and the continued growth of geographic markets around the world where we can serve managed service clients in a differentiated and compelling manner. These will all drive value for marketers, creators, and our business simultaneously. We have also worked throughout the year to drive efficiency by realigning internal resources to invest in our biggest growth opportunities for 2023 and beyond. Shareholders can expect that as we plan for the fiscal year ahead, IZEA is committed to making important trade-offs where needed and will moderate operating losses prudently due to the current macroeconomic climate. For those of you who tuned into our live streaming event on September 21st, you saw the result of many quarters of investment and hard work finally unveiled to the public. The all-new Creator Marketplace on IZEA.com is geared towards bespoke influencer marketing initiatives and transactional engagements. It's quick, easy, and simple to use and is perfect for small campaigns and projects that need fast turnarounds and upfront pricing. Best of all, it builds off of all of the marketplace findings our team learned from the launch of Shake in 2020 and expands upon it with bilateral interactions. including creator casting calls that are designed to encompass all things influencer marketing. But a reimagined marketplace was just the beginning. Our team also announced the introduction of an entirely new way of working within enterprise software, IZEA Flex. Modern influencer marketing spans the gamut of complexity, process, and measurement. Some brands need a quick post and want content on a modest budget, while others are executing complex multi-year ambassadorships across multiple platforms with everything from nano-influencers to celebrities. Our legacy enterprise solution, IZEA X Unity Suite, excels at structured workflows and bringing buyers and sellers through a clearly defined process. But as the industry has expanded, so too have the needs of our customers. There is a gap in the addressable market to provide software designed to accommodate the needs of brands and agencies, both big and small, built from the ground up to be as flexible as it is powerful. There's so much more to share about Flex's benefits for both IZEA's current and future customers, but central to its business strategy is providing the best price to value in the influencer marketing industry. lowering the barrier to entry for enterprise software across the board competitively. From our completely free tier that allows new users to come in and get a feeling for how Flex's power tools would work for their organization, to the extremely affordable price points of our annual starter and power plans at $130,000, and $500 per month, respectively. We want as many marketers to be able to try this new platform as possible and make the switch if they're currently using inferior, more expensive solutions. If you'd like to learn more about the new IZEA.com or IZEA Flex, an archive of our SuperChange streaming event is linked on the company's online press center. Last but not least, on October 18th, we announced the company's official launch into the United Kingdom. Having built a reputation as a trusted strategic partner in the North American and Chinese markets, IZEA has brought our flexible managed services model underpinned by our powerful technology platforms to one of the world's epicenters of advertising itself. As part of our broader emerging market strategy, we conducted extensive competitive and client due diligence, which underscored that the UK, like many corners of the world, has tremendous growth potential, but lacks the experience and innovation required by top brands. As a battle-tested best-in-class partner, IZEA will be filling a significant gap in the market by working both directly with brands or alongside partner agencies while dispensing the mandatory long-term retainers and hourly billing that currently dominate the sector. Thinking about these initiatives holistically, when faced with an uncertain economy or other unexpected volatility, Clients and customers tend to double down spending with the companies that they believe have the best customer experience and focus on delivering lasting value. And that is where our efforts remain focused. Across all of our lines of business, Team IZEA remains heads down, concentrated on driving a fantastic experience across all of our services and products, as we believe putting clients and customers first is the only reliable way to create lasting value for shareholders. For additional thoughts on our third quarter and how we are looking at the road ahead for IZEA, I'd now like to turn the call over to my colleague and our chairman and CEO, Ted Murphy. Ted.