IZEA Worldwide, Inc.

Good afternoon, and thank you for joining us for IZEA's earnings call covering the fourth 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 fourth 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've made 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, provide additional context for the fourth quarter of 2022, and highlight our full-year performance. Revenues hit an all-time record level of $41.1 million in 2022. growing 37% over 2021 and representing the third straight year of top-line improvement for IZEA. We narrowed our EBITDA loss in 2022 by 12%, also a consecutive three-year improvement, moving steadily toward profitability. Total revenue for the fourth quarter of 2022 was $8.8 million, 15% lower compared to the prior year quarter. Managed services revenue was $8.4 million in the fourth quarter, also 15% below the prior year quarter. We recorded $371,000 in net revenue from our SAS offerings during the fourth quarter, down 17% from the prior year quarter. Managed services revenue for the fourth quarter of 2022 fell by $1.5 million from the prior year's quarter, primarily due to weaker second half of the year bookings. As previously announced, managed services bookings fell by 26% to 7.8 million in the fourth quarter of 2022 compared to the prior year quarter, following a similar percentage decline in the third quarter this year as we saw the contracting process slow down over the summer months. Overall, approximately 80% of the bookings decline we experienced in the last two quarters was due to slowing demand from our largest customer. However, due to timing, revenues from this customer increased compared to the prior year fourth quarter, somewhat offsetting a 26% decline in year-over-year quarterly revenues from our other customers. On January 12th of this year, we announced that during the fourth quarter of 2022, we began the process of parting ways with the large managed services customer I just mentioned. This customer represented 23% of our 2022 managed service bookings, which totaled $37.5 million for the year, representing a 33% decrease in that customer's bookings compared to the prior year. The delivery time between bookings and revenues for this customer is longer than our average over recent years, which is a large reason for the growing gap between our bookings and revenues over the past seven quarters. Additionally, the gross margin for this customer is averaged between 30% and 35% of our historical margin. Although the absence of this customer will cause a temporary decline in our managed services bookings, we expect to see our average margins gradually return to historical levels. At the end of 2022, the backlog attributed to this customer, which represents the lag between bookings and revenues, totaled $7.8 million. which we expect to recognize before the end of 2023. This carryover revenue will somewhat mute the top line impact of this customer loss while we continue to add new higher margin customers. 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 18.3 million on December 31st, 2022. And as previously mentioned, 7.8 million, or about 43%, is non-recurring from our largest customer. 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 $79,000 in the current quarter, or about 18% compared to the prior year quarter. Revenue from license fees declined 27% from the comparative quarter, while gross marketplace spend fees grew 32%. Gross billings for SaaS services fell by 15% compared to the prior year quarter, mostly due to a sharp decline in marketplace spending, including fewer marketers and lower average spending levels. It should be noted that our transition away from our legacy IZEAx platform to Flex brings with it a lower revenue model for self-service customers, which we believe will increase adoption over time. Our total cost of revenue was $5.7 million in the fourth quarter of 2022, or 65% of revenue, compared to $4.7 million, or 46% of revenue, in the prior year quarter. accordingly our gross margin including internal labor costs in the fourth quarter averaged thirty five per cent compared to fifty four per cent in the prior year quarter the increase in the cost of revenue is primarily due to higher delivery costs on one large customer contract which made up nineteen per cent of total revenues during the current quarter This major customer aside, the cost of revenue for other customers' contracts during the fourth quarter was within the range that we've experienced historically. Expenses other than the cost of revenue totaled $4.5 million for the fourth quarter compared to $5.5 million for the prior year quarter. Sales and marketing costs totaled $2.2 million during the fourth quarter, up 2% compared to the prior year quarter. Additional headcount and related payroll costs associated with driving customer growth were mostly offset by lower sales commissions that vary with bookings. General administrative costs totaled $1.8 million during the fourth quarter, $1.3 million or 42% less than the prior year quarter, due primarily to capitalized payroll and contractor costs associated with current period platform development. Our net loss was $917,000 for the fourth quarter of 2022, or negative one cent per share, compared to a net income of $311,500 in the prior year quarter, or positive one cent per share. Adjusted EBITDA was negative $301,000 for the fourth quarter of 2022, compared to positive $549,000 for the prior year quarter. The change in EBITDA was primarily due to lower gross margin dollars, partially offset by lower cash operating costs and higher interest income from our portfolio. As of December 31st, 2022, we had $70 million in cash and investments. That's up from $67 million at the end of Q3, primarily due to the collection of customer receivables. Given recent concerns coming out of the banking sector, it's important to note that we have limited our exposure where possible. Our investment portfolio is held in trust accounts, which are shielded from normal commercial banking risks and invested in high quality instruments. In our still rising interest rate environment, our investment holdings have accumulated unrealized losses. However, we believe that we have plenty of liquidity to hold all of these investments to maturity with full principal recovery. We also changed our primary commercial bank to better enable international growth, which we understand has the added benefit of reduced venture lending exposure. We earned $489,000 in interest in our investments during the fourth quarter and $1.2 million for the year of 2022. Lastly, we did not have any debt on our balance sheet. So with cash on hand and liquidity from our investment portfolio as required, We believe that we're 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. In taking inventory of the year in full, 2022 was quite the paradox for IZEA. On one hand, it was filled with meaningful accomplishments that brought the company to new heights. Record bookings and revenue over multiple quarters, the company's launch into China and the UK, solid cost containment, multiple industry awards, and the announcement of not one, but two entirely new software initiatives, Flex and Marketplace. At the same time, it's clear that following a period of significant acceleration in digital advertising investment during the height of the pandemic, the macroeconomic climate's headwinds are being felt by everyone, including IZEA. In this moment, one of the greatest responsibilities and challenges our collective team has is finding signal from the increasing noise surrounding us and keeping everyone accountable on the things we can control. It's equally important to recognize that these same distractions are being faced by our clients and customers. They're trying to make the best business decisions possible while budgets are being unexpectedly shifted, timelines are being delayed, and initiatives are being reprioritized. As a result, now more than ever, we believe that IZEA's near-term opportunity remains directly aligned to our long-term purpose as a company. leading the creator economy forward and rising to serve our clients in meeting their needs and respective need states with an unmatched level of flexibility. Thanks to prudent investments we have made over the last several years, IZEA stands ready to provide differentiated and cost-efficient solutions that brands and agencies look to value when value matters most. Our managed services group is built for all marketers, brand side or agency side. We work on a campaign basis that is priced upfront with guaranteed results. No hourly fees, retainers, or other surprises. IZEA Flex has, in our opinion, the best price to value in the influencer marketing industry. paired with the latest innovation, which lowers the barrier to entry for enterprise-grade software competitively, with no long-term contracts required. And the creator marketplace is geared towards one-off, transactional engagements, when buying software just doesn't add up. It's quick, it's easy, and simple to use, and absolutely perfect for small campaigns or projects that need fast turnarounds and transparent pricing. Based on what we know today, our team expects the remainder of the first half of 2023 to contain continued turbulence with improving stability and growth sometime in the second half of the year. Much of our assumption is predicated on a general calming of the macroeconomic environment paired with reduced interest rate heights and consumers remaining resilient as they have in recent quarters. While that interim turmoil isn't enjoyable for anyone, we believe that short-term disruption can still be beneficial for IZEA and its shareholders. Our management team intends to further reduce spending in select areas across the company to make prudent investments in methods to unlock growth opportunities, be it in paid demand generation, event marketing, or expanding the types of services we offer to our clients. After all, when times are tough, clients look for new ideas from market leaders, and IZEA is well positioned to be a partner that they can trust while bringing innovative solutions to the table. That said, we continue to approach these trade-offs with an overarching mindset that flatter is faster, leaner is better, and that technological innovation married with deep subject matter eminence makes us all the more differentiated. In addition, there may also be opportunities for inorganic growth through competitive acquisitions in the space, as nearly the entire creator economy was built off of a tremendous wave of venture capital, and many of those startups are now facing the harsh realities of a forced exit amidst the current climate. Because of that, we remain an interested and opportunistic perspective buyer for the right scenario, as we believe the tide has turned to our space being a buyer's market compared to 12 to 18 months ago. Before I turn the call over to Ted, I also want to express a word of sincere gratitude to our team members, now on four different continents, who are the heart and soul of our business. For all of the industry recognition that comes from IZEA's campaign work or technological innovation, the awards that matter the most to us are those that come from Comparably's Independent Employee Survey data, which honored our company with five different awards last year alone, providing IZEA with quantitative evidence that underscores the value we place in the IZEA way. I would now like to turn the call over to our chairman and CEO, Ted Murphy, to share his perspective on IZEA's 2022 performance, as well as additional commentary on what's next for 2023. Ted.