IZEA, Inc. (the “Company”) (NASDAQ: IZEA), operator of
IZEAx, the premier online marketplace connecting brands and
publishers with influential content creators, reported its
financial results for the second quarter ended June 30, 2018.
Q2 2018 Financial Highlights Compared to Q2 2017
- Revenue was $4.1 million in Q2 2018,
down 28%, compared to $5.7 million in Q2 2017.
- Total costs and expenses were $5.8
million, compared to $7.1 million.
- Net loss was $(1.6) million, compared
to a net loss of $(1.4) million.
- Adjusted EBITDA was $(1.5) million,
compared to $(840,000).
Trailing Twelve Months Ended June 30, 2018 Compared to Same
Year-Ago TTM
- Revenue decreased 3% to $21.9 million,
compared to $22.5 million.
- Revenue from Managed Services decreased
2% to $21.4 million, compared to $21.8 million.
- Net loss improved 27% to $(7.1)
million, compared to a net loss of $(9.8) million.
- Adjusted EBITDA improved 27% to $(5.2)
million, compared to $(7.1) million.
Management Commentary
“In the last three quarters we have seen the impact of weak
pipeline development in the prior year affecting our bookings. An
unhealthy overemphasis on larger customer contracts, combined with
lower overall pipeline development activity in 2017 has had a
rippling effect through the past 3 quarters,” commented Ted Murphy,
Chairman and CEO of IZEA. “We began a course correction in the
fourth quarter of 2017, and have seen new opportunity pipeline grow
significantly in the second quarter of 2018, which we believe will
lead to sequential growth in bookings and revenues starting in the
third quarter of this year.”
“In addition to the rebalancing of our sales efforts, we have
taken steps to reduce core operational expenses as we navigate our
way through this time,” continued Murphy. “Although some expenses
will be higher during the period due to the recent acquisition of
TapInfluence, Inc., we expect to see a meaningful impact of
operational efficiencies beginning in the fourth-quarter of 2018.
We expect to emerge from 2018 more operationally efficient, with
higher revenue per employee, increasing monthly recurring revenue,
and a significantly more diversified customer base.”
Q2 2018 Financial Results
Revenue in the second quarter of 2018 decreased 28% to $4.1
million compared to $5.7 million in the same year-ago quarter. The
portion of revenue attributable to our Managed Services decreased
28% to $4.0 million, compared to $5.6 million in Q2 2018. The
decrease in our second quarter 2018 revenue is primarily due to
lower annual commitments from some of our larger customers for
their 2018 advertising spends and a decrease in the number of
smaller customers running short-term Managed Service campaigns
beginning in the fourth quarter of 2017. Net bookings from Managed
Services were $2.7 million in Q2 2018, compared to $5.4 million in
Q2 2017. Revenue backlog, which includes unbilled bookings and
unearned revenue, was $9.0 million at the end of Q2 2018.
Our total Gross Billings (a non-GAAP metric management uses to
measure total transaction volume, as defined below) were down 30%
to $4.9 million in Q2 2018 compared to $7.0 million in Q2 2017, due
to the decline in Managed Services commitments and Content Workflow
transactions.
Cost of revenue as a percentage of revenue improved from 48% in
2017 to 47% in 2018. Total costs and expenses in the second quarter
of 2018 were $5.8 million compared to $7.1 million in the same
year-ago quarter. This decrease was primarily due to the decrease
in costs of revenue on lower revenue produced, decreases in sales
and public relations expense, and decreases in labor and non-cash
expenses in general and administrative expense.
Net loss in the second quarter of 2018 was $(1.6) million, or
$(0.28) per share, as compared to a net loss of $(1.4) million, or
$(0.25) per share, in the same year-ago quarter. Adjusted EBITDA (a
non-GAAP metric management used as a proxy for operating cash flow,
as defined below) in the second quarter of 2018 was negative $1.5
million compared to a negative $840,000 in the same year-ago
quarter. This decrease was a result of lower revenues during the
second quarter of 2018.
As of June 30, 2018, cash and cash equivalents totaled $1.9
million, receivables were $2.8 million, and the Company had
accessed approximately $845,000 of its $5.0 million credit line. On
July 2, 2018, the Company completed an underwritten public offering
whereby it received approximately $3.1 million in cash after
deducting underwriting discounts and commissions and estimated
offering expenses.
Conference Call
IZEA will hold a conference call to discuss its second quarter
results today at 5:00 p.m. Eastern time. Management will host the
call, followed by a question and answer period.
Date: Tuesday, August 14, 2018Time: 5:00 p.m. Eastern
timeToll-free dial-in number: 1-877-407-4018International dial-in
number: 1-201-689-8471
The conference call will be webcast live and available for
replay via the investors section of the Company’s website at
https://izea.com/.
Please call the conference telephone number five minutes prior
to the start time. An operator will register your name and
organization.
A replay of the call will be available after 8:00 p.m. Eastern
time on the same day through August 21, 2018.
Toll-free replay number: 1-844-512-2921International replay
number: 1-412-317-6671Replay ID: 13682061
Use of Non-GAAP Financial Measures
We define Gross Billings, a non-GAAP financial measure, as the
total dollar value of the amounts earned from our customers for the
services we performed, or the amounts charged to our customers for
their self-service purchase of goods and services on our platforms.
Gross Billings for Content Workflow differs from revenue reported
in our consolidated statements of operations, which is presented
net of the amounts we pay to our third-party creators providing the
content or sponsorship services. Gross Billings for all other
revenue equals the revenue reported in our consolidated statements
of operations.
We consider this metric to be an important indicator of our
performance as it measures the total dollar volume of transactions
generated through our marketplaces. Tracking Gross Billings allows
us to monitor the percentage of Gross Billings that we are able to
retain after payments to our creators. Because we invoice our
customers on a gross basis, tracking Gross Billings is critical as
it pertains to our credit risk and cash flow.
"EBITDA" is a non-GAAP financial measure under the rules of the
Securities and Exchange Commission. EBITDA is commonly defined as
"earnings before interest, taxes, depreciation and amortization."
IZEA defines “Adjusted EBITDA,” also a non-GAAP financial measure,
as earnings or loss before interest, taxes, depreciation and
amortization, non-cash stock related compensation, gain or loss on
asset disposals or impairment, changes in acquisition cost
estimates, and all other non-cash income and expense items such as
gains or losses on settlement of liabilities and exchanges, and
changes in fair value of derivatives, if applicable.
We believe that Adjusted EBITDA provides useful information to
investors as they exclude transactions not related to the core cash
operating business activities including non-cash transactions. We
believe that excluding these transactions allows investors to
meaningfully trend and analyze the performance of our core cash
operations.
All companies do not calculate Gross Billings and Adjusted
EBITDA in the same manner. These metrics as presented by IZEA may
not be comparable to those presented by other companies. Moreover,
these metrics have limitations as analytical tools, and you should
not consider them in isolation or as a substitute for an analysis
of our results of operations as reported under GAAP. A
reconciliation of GAAP to non-GAAP results is included in the
financial tables included in this press release.
About IZEA
IZEA operates IZEAx, the premier online marketplace that
connects marketers with content creators. IZEAx automates
influencer marketing and custom content development, allowing
brands and agencies to scale their marketing programs. IZEA
creators include celebrities and accredited journalists. Creators
are compensated for producing unique content such as long and short
form text, videos, photos, status updates, and illustrations for
marketers or distributing such content on behalf of marketers
through their personal websites, blogs, and social media channels.
Marketers receive influential content and engaging, shareable
stories that drive awareness. For more information about IZEA,
visit https://izea.com/.
Safe Harbor Statement
All statements in this release that are not based on historical
fact are “forward-looking statements” within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. Forward-looking
statements, which are based on certain assumptions and describe our
future plans, strategies and expectations, can generally be
identified by the use of forward-looking terms such as "believe,"
"expect," "may," "will," "should," "could," "seek," "intend,"
"plan," "goal," "estimate," "anticipate" or other comparable terms.
Examples of forward-looking statements include, among others,
statements we make regarding expectations concerning IZEA’s ability
to increase its revenue and sales pipeline and improve Adjusted
EBITDA, expectations with respect to operational efficiency, and
expectations concerning IZEA’s business strategy. Forward-looking
statements involve inherent risks and uncertainties which could
cause actual results to differ materially from those in the
forward-looking statements, as a result of various factors
including, among others, the following: competitive conditions in
the content and social sponsorship segment in which IZEA operates;
our ability to popularize one or more of the marketplace platforms
of IZEA; our ability to attract and retain customers; our ability
to finance growth initiatives in a timely manner; our ability to
establish effective disclosure controls and procedures and internal
control over financial reporting; our ability to satisfy the
requirements for continued listing of our common stock on the
Nasdaq Capital Market; changing economic conditions that are less
favorable than expected; our ability to finance obligations related
to recent acquisitions; and other risks and uncertainties described
in IZEA’s periodic reports filed with the Securities and Exchange
Commission. The forward-looking statements made in this release
speak only as of the date of this release, and IZEA assumes no
obligation to update any such forward-looking statements to reflect
actual results or changes in expectations, except as otherwise
required by law.
IZEA, Inc.
Unaudited Consolidated Balance Sheets
June 30,2018 December 31,2017 Assets
Current: Cash and cash equivalents $ 1,878,159 $ 3,906,797 Accounts
receivable, net 2,821,401 3,647,025 Prepaid expenses 626,246
389,104 Other current assets 40,456 9,140
Total current assets 5,366,262
7,952,066 Property and equipment, net 315,987 286,043
Goodwill 3,604,720 3,604,720 Intangible assets, net 451,873 667,909
Software development costs, net 1,078,337 967,927 Security deposits
148,103 148,638 Total assets $
10,965,282 $ 13,627,303 Liabilities and
Stockholders’ Equity Current liabilities: Accounts payable $
1,527,539 $ 1,756,841 Accrued expenses 1,112,108 1,592,356 Contract
liabilities 4,434,627 — Unearned revenue — 3,070,502 Line of credit
845,365 500,550 Current portion of deferred rent 40,307 45,127
Current portion of acquisition costs payable 386,872
741,155 Total current liabilities 8,346,818
7,706,531 Deferred rent, less current
portion — 17,419 Acquisition costs payable, less current portion
351,150 609,768 Total liabilities
8,697,968 8,333,718 Commitments
and Contingencies — — Stockholders’ equity: Preferred stock;
$.0001 par value; 10,000,000 shares authorized; no shares issued
and outstanding — — Common stock, $.0001 par value; 200,000,000
shares authorized; 5,860,933 and 5,733,981, respectively, issued
and outstanding 586 573 Additional paid-in capital 53,335,845
52,570,432 Accumulated deficit (51,069,117 )
(47,277,420 ) Total stockholders’ equity 2,267,314
5,293,585 Total liabilities and stockholders’
equity $ 10,965,282 $ 13,627,303
IZEA, Inc.
Unaudited Consolidated Statements of
Operations
Three Months EndedJune 30, Six Months EndedJune 30,
2018 2017 2018 2017 Revenue $ 4,120,960
$ 5,712,904 $ 8,017,401 $ 10,547,409 Costs and
expenses: Cost of revenue (exclusive of amortization) 1,930,298
2,714,699 4,093,440 5,051,759 Sales and marketing 1,735,596
1,886,528 3,491,122 4,275,348 General and administrative 1,970,610
2,166,370 3,585,832 4,613,288 Depreciation and amortization
210,691 358,260 476,146
720,866 Total costs and expenses 5,847,195
7,125,857 11,646,540 14,661,261
Loss from operations (1,726,235 ) (1,412,953 )
(3,629,139 ) (4,113,852 ) Other income (expense): Interest
expense (35,403 ) (13,272 ) (56,714 ) (30,348 ) Change in fair
value of derivatives, net 113,801 (8,420 ) (11,794 ) (9,038 ) Other
income (expense), net 82 (11,953 )
4,772 (12,580 ) Total other income (expense), net
78,480 (33,645 ) (63,736 )
(51,966 ) Net loss $ (1,647,755 ) $ (1,446,598
) $ (3,692,875 ) $ (4,165,818 ) Weighted
average common shares outstanding – basic and diluted
5,837,476 5,676,629 5,819,883
5,637,636 Basic and diluted loss per common share
$ (0.28 ) $ (0.25 ) $ (0.63 ) $ (0.74 )
Revenue stream and the percentage of total revenue by
stream:
Three Months Ended Six Months Ended June 30, 2018
June 30, 2017 June 30, 2018 June 30, 2017 Managed
Services $ 4,004,850 97 % $ 5,592,800 98 % $
7,801,515 97 % $ 10,276,923 97 % Content Workflow,
net 62,761 2 % 93,910 2 % 126,309 2 % 196,173 2 % Service Fees
& Other 53,349 1 % 26,194 — % 89,577 1 %
74,313 1 % Total Revenue by stream $ 4,120,960 100 %
$ 5,712,904 100 % $ 8,017,401 100 % $ 10,547,409
100 %
IZEA, Inc.
Non-GAAP Reconciliations
(Unaudited)
Reconciliation of GAAP Revenue to
Non-GAAP Gross Billings:
Three Months Ended Six Months Ended June
30,2018 June 30,2017 June 30,2018 June 30,2017 Revenue $
4,120,960 $ 5,712,904 $ 8,017,401 $ 10,547,409 Plus
transaction costs for third-party creators (1) 780,584
1,267,318 1,594,503
2,635,318 Gross Billings $ 4,901,544 $
6,980,222 $ 9,611,904 $ 13,182,727
(1) Transaction costs related to third-party creators for
services provided for the Content Workflow portion of our revenue
reported on a net basis for GAAP.
Non-GAAP Gross Billings by revenue stream and the percentage
of total Gross Billings by stream:
Three Months Ended Six Months Ended June 30, 2018
June 30, 2017 June 30, 2018 June 30, 2017 Managed
Services $ 4,004,850 82 % $ 5,592,800 80 % $
7,801,515 80 % $ 10,276,923 78 % Content Workflow
843,345 17 % 1,361,228 20 % 1,720,812 18 % 2,831,491 21 % Service
Fees & Other 53,349 1 % 26,194 — % 89,577
1 % 74,313 1 % Total Gross Billings $ 4,901,544 100 %
$ 6,980,222 100 % $ 9,611,904 99 % $ 13,182,727
100 %
Reconciliation of GAAP Net Loss to Non-GAAP Adjusted
EBITDA:
Three Months Ended Six Months Ended
June 30,2018 June 30,2017 June 30,2018 June
30,2017 Net loss $ (1,647,755 ) $ (1,446,598 ) $ (3,692,875
) $ (4,165,818 ) Non-cash stock-based compensation 203,351
167,870 349,632 326,846 Non-cash stock issued for payment of
services 33,819 22,830 62,490 83,462 (Gain) loss on disposal of
equipment (2,253 ) (1,734 ) (1,400 ) (3,687 ) (Gain) loss on
settlement of acquisition costs payable — — — (10,491 ) Increase
(decrease) in value of acquisition costs payable (231,502 ) 37,986
(624,596 ) 141,778 Depreciation and amortization 210,691 358,260
476,146 720,866 Interest expense 35,403 13,272 56,714 30,348 Change
in fair value of derivatives (113,801 ) 8,420
11,794 9,038 Adjusted EBITDA $
(1,512,047 ) $ (839,694 ) $ (3,362,095 ) $
(2,867,658 ) Revenue 4,120,960
5,712,904 8,017,401 10,547,409
Adjusted EBITDA as a % of Revenue (37)% (15)%
(42)% (27)%
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version on businesswire.com: https://www.businesswire.com/news/home/20180814005692/en/
IZEA, Inc.Justin Braun, 407-674-6911Manager, Corporate
CommunicationsJustin.braun@izea.com
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