IZEA Worldwide, Inc.

Greetings and welcome to the ISEA Worldwide Second Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ryan Schramm, President and Chief Operating Officer. Please go ahead.

Good afternoon, everyone, and welcome to IZEA's earnings call covering the second quarter of 2023. 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. Thanks for being with us today. Earlier this afternoon, the company issued a press release detailing our performance for the second quarter of 2023. 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 IZEA'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 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 and 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 for the quarter ended June 30, 2023, compared to the prior year's quarter and discuss balance sheet highlights. Total revenue for the second quarter of 2023 was $10.7 million, 15% or $1.9 million lower than the prior year quarter. Our net cash loss or EBITDA was negative $637,000 for the quarter compared to a gain of $254,000 for the prior year quarter. Our net loss in the current quarter totaled $1 million or $0.07 per share on 15.5 million shares compared to a loss of $170,000 or $0.01 per share on 15.6 million shares. These share counts are adjusted for our June 2023 four-for-one reverse split. Managed services bookings for the second quarter of 2023 totaled $7.3 million, compared to $9.3 million for the prior year's second quarter, a 21 percent decline. Early this year, we announced that we are parting ways with one large customer, which I'll refer to as our non-recurring customer. Bookings from this nonrecurring customer were approximately $70,000 for the current quarter and totaled $3.5 million in the prior year's second quarter. Stripping out bookings from this nonrecurring customer, ongoing customer bookings, which include both new and existing customers, totaled $7.3 million in the current quarter, 24% above the prior year's second quarter total of $5.8 million. and which represented 99% of total bookings in the current quarter. Our order count from these ongoing customers was 25% above the prior year quarter, and the average order size was unchanged. Importantly, bookings from ongoing customers also grew 25% sequentially from Q1 2023, showing strength in our core demand and that we're well on our way to replacing the sizable historic demand from our non-recurring customer. Managed services revenue totaled $10.6 million during the second quarter of 2023, which was $1.6 million or 13% below the second quarter of 2022. Revenue from our non-recurring customer totaled $3.3 million in the current quarter and $5.3 million in the prior year's second quarter, declining 37% and explaining more than the comparative revenue decline for the current quarter. Managed services revenue from our ongoing customers totaled $7.3 million during the quarter, 6% higher than the previous year's second quarter, which totaled $6.9 million. Gross margins are still impacted by the mix of revenues from our non-recurring customer, which has depressed our overall margin by about 20% on average for the last six quarters. We expect our average gross margin to improve over the next two quarters as we complete the backlog related to this non-recurring customer. The delivery time between bookings and revenues, which has averaged nine months during the past seven quarters, has improved to about seven and a half months currently. Our managed services backlog, which represents the total of unrecognized revenue for contracts that are underway, as well as recent bookings that we haven't started to invoice, totaled $12.7 million on June 30th, 2023. Approximately $1 million of this backlog is related to our non-recurring customer, and we expect to recognize the majority of this amount as revenue in the third quarter. SAS services revenue totaled $71,000 in the current quarter of 2023, down 82% from $400,000 in the prior year quarter. We previously announced that our IZEA-X platform would be sunset during the second quarter of 2023 in favor of a new feature-rich platform platform we call Flex, which together with the Creator Marketplace, launched in October of 2022, will provide IZEA with license and transaction fee revenue growth opportunities. The cost of license access is considerably cheaper, which means that as our subscriber base grows, revenues will grow at a slower pace. Our total cost of revenue was $6.3 million in the second quarter of 2023, or 59 percent of revenue. compared to 7.2 million or 57 percent of revenue in the prior year quarter. Gross margins were flat as a percentage of revenue, but the contribution margin fell with a higher revenue mix from our non-recurring customer in the current quarter. Expenses other than the cost of revenue totaled 6.1 million for the second quarter of 2023, up 5 percent from 5.8 million in the prior year quarter. Sales and marketing costs totaled $2.8 million during the second quarter, up 24% compared to the prior year quarter, due primarily to higher spending on brand awareness and demand generation activities to drive bookings growth. General administrative costs totaled $3.2 million during the second quarter, down 6% from the prior year quarter, due primarily to lower overall compensation costs, partly offset by an increase in professional fees. Our net loss was $1 million for the second quarter of 2023, or negative 7 cents per share, compared to a net loss of $170,000 in the prior year quarter, or negative 1 cent per share. Adjusted EBITDA was negative $637,000 for the second quarter of 2023, compared to a positive $254,000 for the prior year quarter. The change in EBITDA was primarily due to lower gross margin dollars. As of June 30, 2023, we had 65.1 million in cash and investments. That's 2.7 million lower than at the beginning of the quarter, primarily due to additions to working capital, our share buyback, and a negative EBITDA. We earned 638,000 in interest on our investments during the second quarter. Lastly, we do not have any debt on our balance sheet. With cash on hand and liquidity from our investment portfolio as required, we believe we're in a solid position to execute on business growth and opportunities that may lie ahead. And with that, I'll turn the call back over to Ryan.