IZEA Worldwide, Inc.

Good afternoon and welcome to IZEA's earnings call covering the third quarter of 2023. I'm Ryan Tram, 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 third 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 made today regarding our business, operations, and financial performance may be considered forward-looking, and such statements may involve a number of risks and uncertainties that could cause actual results to differ materially. We encourage you to consider these 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. 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 operating results for the quarter ended September 30, 2023 compared to the prior year's quarter and discuss our balance sheet highlights. Total revenue for the third quarter of 2023 was $7.9 million, 27.1% or $2.9 million lower than the prior year quarter. Our net cash loss or EBITDA was negative $1.5 million for the quarter, compared to negative 0.6 million for the prior year quarter. Our net loss in the current quarter totaled 2 million or 13 cents per share on 15.5 million shares compared to a loss of 0.9 million or 6 cents 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 third quarter totaled $7.1 million compared to $8.2 million for the prior year's third quarter, a 14.1% decline. Early this year, we announced that we were parting ways with one large customer, which I'll refer to as our non-recurring customer. Net bookings from this non-recurring customer were a negative $281,000 for the current quarter. as we completed remaining contract obligations and totaled 2 million in the prior year's third quarter. Stripping out bookings from this non-recurring customer, ongoing customer bookings including existing and new customers totaled 7.3 million in the current quarter, 18.2% above the prior year's third quarter total of 6.2 million. Our order count from ongoing customers in the current quarter was 7% below the prior year quarter. However, the average order size increased 28% resulting in our quarterly bookings growth. Managed services revenue totaled 7.8 million during the third quarter of 2023, which was 2.6 million or 25.2% below the third quarter of 2022. Revenue from our non-recurring customer totaled 0.9 million in the current quarter, and $3.3 million in the prior year's third quarter, declining 71.8% and explaining most of the comparative revenue decline in the current quarter. Managed services revenue from our ongoing customers totaled $6.9 million during the current quarter, 3.9% lower than the previous year's third quarter, which totaled $7.2 million. The delivery time between bookings and revenues has improved to about seven and a half months, from approximately nine months to the second quarter of this year. 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 million on September 30, 2023. Backlog associated with our non-recurring customer is now less than 500,000 and will be recognized in the fourth quarter. SaaS service revenues totaled 0.1 million for the third quarter of 2023, down 83.7% from 0.4 million in the prior year of third 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 we call Flex, which together with the Creator Marketplace launched in October of 2022, we expect to provide IZEA with license and transaction fee revenue growth opportunity. The cost of license access is considerably cheaper than our previous enterprise license fees for IZEAX, which means that as our subscriber base grows, related revenues will grow at a slower pace. Our total cost of revenue was $4.7 million in the third quarter of 2023, or 59.3% of revenue. compared to $6.6 million or 60.9% of revenue in the prior year quarter. Our blended gross margin, excluding labor costs, showed improvement in the current quarter as revenues from our non-recurring customer wind down. The mix of revenues from this non-recurring customer has depressed our overall gross margin by about 20% on average for approximately six quarters through mid-2023. Expenses other than the cost of revenue totaled $5.9 million for the third quarter of 2023, up 5.3% from $5.6 million in the prior year quarter. Sales and marketing costs totaled $2.7 million during the third quarter, up 7.9% to the prior year quarter, primarily due to higher spending on brand awareness and demand generation activities to drive bookings growth. General administrative costs totaled 3 million during the third quarter, up 3.6% from the prior year quarter, due primarily to higher web hosting fees, offset by lower accounting and professional fees. Our net loss was 2 million for the third quarter of 2023, or negative 13 cents per share, compared to a net loss of 0.9 million in the prior year quarter, or negative 6 cents per share. Adjusted EBITDA was negative 1.5 million for the third quarter of 2023 compared to negative 0.6 million for the prior quarter. The change in EBITDA was primarily due to lower gross margin dollars. As of September 30th, 2023, we had 62.7 million in cash and investments. That's 2.4 million lower than the beginning of the quarter, primarily due to negative EBITDA our share buyback, and additions to working capital. We earned 0.7 million in interest on our investments during the third quarter. And lastly, we did not have any debt on our balance sheet. 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 lay ahead. With that, I'll turn the call back over to Ryan.

Thanks, Peter. And hello again, everyone. I want to provide a series of updates covering innovation, marketing, sales, and industry honors pertaining to the third quarter. First, let's start with highlighting the industry innovation brought forward by our continued investments in technology. This is best represented outward through IZEA's differentiated portfolio of enterprise software and marketplace products, IZEA Flex, the Creator Marketplace, and Form AI for Creators. For brands and agencies who have an in-house team of influencer marketing experts, IZEA Flex provides those power users with best-in-class price-to-value and a flexible toolset that makes their workdays more efficient by reducing manual tasks. During the third quarter, we added multiple new features requested by customers, including verified Google Mail integration, comprehensive influencer marketing expense management, and end-to-end creator offer negotiation to make the manual back and forth less stressful for everyone involved. Within our industry-first Form AI offering, IZEA launched free access to OpenAI's ChatGPT-4 for all creators. This enables influencers and creators alike a broad set of added benefits to expedite the way they imagine their outputs. From photos and videos to developing better copy, bringing together the best of form AI with open AI just made sense. Giving it an affordable price point and universal access only bolsters its long-term potential as an added growth vehicle for our software unit by continuing to diversify IZEA's customer base and increase overall stickiness to IZEA products and services. Our private engineering team delivered all of these initiatives while simultaneously reducing its overall expenditure through a combination of organizational design efficiency, decreasing infrastructure costs, and gaining new forms of operational leverage. As we look ahead, there is conviction that there are further ways this business unit can continue to deliver increased savings while maintaining the level of quality and innovation our customers are used to. Let's turn our attention to our IZEA Everywhere marketing strategy, which we've referred to in previous earnings updates. We've been very pleased with the work our team has done across the course of 2023. IZEA has no doubt elevated its top-of-mind awareness with new and existing customers alike thanks to these important investments paired with strong execution. Across the board, the metrics that matter have all materially improved this year. Inbound opportunity leads, record site traffic to IZEA.com and record new user signups for our various software offerings. Best of all, the industry is also taking note. In August, IZEA was named Best Influencer Marketing Company in the 2023 MarTech Breakthrough Awards, on top of multiple honors for individual campaign work across the course of the year, some as recent as last month. Not surprisingly, given that performance at the top of the funnel, we are seeing meaningful evidence of positive impact across the organization. Within our managed services business unit, September was our highest new opportunity pipeline generation month in company history, followed by our second biggest month just last month in October. Bookings are up outside of one outsized customer, and we even expect to see our gross margins increase over the course of the coming quarters. In addition, we believe there's additional approaches via economic models to serve clients while unlocking other sources of added revenue for managed services on a go-forward basis. These new ways of working are rooted in forming longer-term relationships with brands and agencies, while also making the process of buying from IZEA easier than ever before. There's more to come in future calls, but our team is actively trialing these efforts with clients to set ourselves up for a strong 2024 with a return to growth. For his commentary on the third quarter, I'd now like to turn the call over to Isaiah's founder, chairman, and CEO, Ted Murphy.