Q2 2020 IZEA Worldwide Inc Earnings Call
Next question answer session will follow the formal presentation.
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Please note today's conference is being recorded.
At this time I'll turn the conference over to Ryan Schram.
Brian you may now begin.
Nude and welcome to ideas Q2, 2020 earnings call I'm right SREP, Chief operating officer at idea and joining me today is ideal <unk> interim Chief Financial Officer, Leann, Hitchcock and idea Chairman and Chief Executive Officer, Ted Murphy, Thanks for being with US This afternoon.
Earlier today, the company issued a press release with details pertaining to our second quarter performance for 2020.
If you look to review those details all of ideas investor information can be found on our Investor Relations website at <unk> Dot com forward slash investors.
Before we get please take note of the Safe Harbor paragraph that appears at the end of the press release covered the Companys financial results and be advised that during the course of todays earnings call. Our management team will discuss ideas business outlook and make forward looking statements.
These statements are predictions based our teams expectations as of today that are subject to inherent risks and uncertainties and should not be unduly rely upon.
Actual events results for trends could differ materially from our forecast due to a number of doctors.
Putting those mentioned are most recently filed periodic reports with the FCC The company and our management team assumes no obligations to update any forward looking statements made in today's call.
In addition, our update today, we'll refer to certain key metrics and non-GAAP financial measures such as bookings gross billings.
The EBITDA a.
A detailed explanation <unk> reconciliation of these measures is disclosed in our earnings release.
In our most recent form 10-Q available under FCC filings in the Investor section of ideas Dot com.
With the appropriate disclosures are the way I'm now pleased to introduce my colleague and ideas interim Chief Financial Officer, Leann Hitchcock Yep.
Thank you Ryan and good afternoon, everyone.
On March 11, 2020, the World Health organization declared the outbreak of the novel Corona virus also known as Cobot 19, as a global pandemic I'd recommend a containment mitigation measures worldwide.
We directed all of our stuff to work from home after March 13th and they will continue to do so at least through the end of 2020.
All of our business operations and ability to support our customers are fully functional well our employees are working from remote location.
Although our internal operations are fully functional with minimal impact we did experience impact from our customers in the quarter, we observed changes in advertising decisions timing as spending priorities from our customers, which had a negative impact on a revenue in the current quarter.
Well the disruption is currently expected to be temporary there was a high level of uncertainty around the duration and total economic impact.
The Boeing is a summary of our results for our second quarter ended June Thirtyth 2020.
Total revenue in the second quarter was down 20% to 3.1 million compared to 3.9 million in the second quarter of 2019.
With 2.5 million coming from our managed service business at 600, a 45000 coming from ourselves business.
We saw a $501000 or 17% decrease in our Q2 2020 managed service revenue.
The decrease in revenue were driven by two things.
Marketers, where canceling or delaying the launch of previously sold campaign.
Largely from bookings in the fourth quarter of 2019 and in the first quarter 2020.
Ideas revenue recognition is tied to the start of the fulfillment of our customers advertising campaigns and content needs and many customers hit pause during the period due to the cobot changes and uncertainty.
Secondly, as previously discussed on our last call and in subsequent press releases are managed service bookings took a meaningful hit in March and April.
I would like to take a moment to explain how we recognize managed service revenue at idea and the differences between bookings and revenue.
Bookings represent the amount of sales order contracts signed any given quarter minus any cancellations or refund in the same quarter.
So if we sold new contracts valued at a million in the quarter and had customer cancellations of 200000 on previously placed orders in the same period the amount of booking we would report would be $800000.
Once we took a contract we typically recognized revenue over an average of three to six months for managed services.
That means that revenue recognition any given quarter is largely driven by bookings in the previous two quarters.
Well, we saw a revenue declined 17% and the second quarter 2020, as a result of lower bookings in Q1 2020, our bookings were up 50% in the second quarter 2020 compared to the second quarter 2019.
Q2, 2020 bookings were 3.96 million compared to 2.64 million in Q2 2019.
The Q2 2020 bookings include over $670000 and cancellations in response, we provided to customers impacted by Cobot 19.
This is more than two times out of Q2, 2019, and 10 times out of Q1 2020.
Despite the large increasing cancellations that impacted both bookings and revenues, we saw a material increase year over year.
Revenue from these bookings in Q2 are expected to be realized in the next three to 12 month.
Our revenue from South services decreased by 288000 in Q2 2020 as compared to Q2 2019, primarily as a result of lower spend levels from our south marketer and as a result of competitive pricing efforts, which reduced our margins on those spend and on our licensing fees.
For Q2 2020, our gross billings on these revenue decreased to 4.5 million compared to 6.6 million in Q2 2019. This 32% decline in gross billings was primarily due to lower marketplace. Then the former tap influence it he byline platform customers as they transitioned over to idea eggs.
And due to the churn during the renewal of some of those customers throughout 2019.
Our south marketers curtailed spending in March 2020, and throughout Q2, 2020, and new customers were hesitant to enter into long term licensing contracts due to covert 19, uncertainties and other factors.
Our cost of revenue exclusive of amortization was 1.4 million in Q2 2020 compared to 1.8 million in Q2 2019.
As a percentage of revenue our cost of revenue decreased from 46% in Q2, 2018% to 45% in Q2 2020.
This improvement was due to the reduction in personnel and travel related costs due to cost reduction efforts put into place to help mitigate the negative effect of cobot 19 on the company's revenue.
Our total costs and expenses were 4.9 million for Q2, 2020, compared with 5.9 million for Q2 2018.
This decrease was due to a 403000 dollar reduction in the cost of revenue as a result of lower sales.
A 71000 dollar reduction in amortization costs as assets were fully amortized in the quarter.
On a 526000 dollar decrease from cost reduction efforts affecting wages, Brent travel and marketing expenditures to help mitigate the negative effects of cobot 19 of the company's revenue.
Our net loss for Q2, 2020 was 1.8 million or five cents per share compared to a net loss of 2 million or nine cents per share for Q2 2019.
Adjusted EBITDA in the second quarter of both 2020, and 2019 was negative 1.3 million.
Given our low stock price small market cap and uncertainty in the financial markets, coupled with expected reductions and future receivable upon which funding from our line of credit just dependent we applied for and on April 20, Threerd received along from Western Alliance Bank in the principal amount of 1.9 million under the paycheck protection.
Program in order to retain our full time employees during this time of uncertainty.
We subsequently filed a registration statement with the U.S. Securities and Exchange Commission and raised gross proceeds of 15.4 million from the sale of our common stock in June 2020 through an aftermarket offering under which National Securities Corporation serves as the sales agent.
On June Thirtyth 2020, we had a cash balance of 20.8 million.
After June Thirtyth, we have raised an additional 10.3 million under the at the market offering in total we have raised 25.7 million at an average price of $1.94 per share.
After we were able to secure this additional capital we paid down our line of credit I removed the employee salary reductions in hiring restrictions that we had previously implemented.
These reinstatements went into effect July 1st 2020.
We currently have more cash on hand than we've ever had and the history of the company and here as Ryan to provide some insight on how we plan to put it to good use for marketers creators and investors.
Thanks for yen without a doubt the second quarter of 2020 was one of the most historic.
Yeah, Arctic, but also clarifying periods in our company's history.
So many organizations around the world when told that began to make its impact in mid March idea and it's cheap need to rapidly adopt and evolve and unprecedented better.
Initially we were extremely concerned what appeared to be dire circumstances and consequences.
He promotional periods for our clients such as spring break vacation.
Patrick's Day March Madness, Easter even major League baseball opening day were all canceled within days of each other.
The added uncertainty of consumer discretionary and non discretionary spending give some clients cost to freeze their existing campaigns there were already in progress or in other cases cancel them altogether.
And that's to say nothing about the net new sales progression that was temporarily stalling out simultaneous to all of that as brands were shellshocked hesitant to commit to anything well just try to gauge operational risk.
Massive swings in consumer behavior.
It was awful and steri, but our team did not that down from the challenge we knew that ideas class sector concentrations if approach in a pragmatic matter could serve us well.
Well some of our Influencer marketing competitors a base their business on Super serving quote unquote flashier segments, such as high as fashion or beauty categories.
Our approach has always been to align ourselves to traditional mass marketing expenditure sectors, such as high frequency consumer packaged goods direct to consumer E Commerce Entertainment and media personal finance and insurance and consumer technology.
Other sectors, including travel and tourism consumer hospitality had better consistent part of our client mix over the years, but have never been more than 10% to 15% of our gross billings.
Doug tailoring our sector diversity, both arms of ideas business provide readymade solutions for brands that require flexibility and efficiency building during this very fluid and challenging period of their operations.
Well there it's easy snap on step off managed service programs without the cost we've long term commitments or various software solutions to help brand or agency personnel quickly assemble and steel influencer marketing programs idea was uniquely position to be able to respond.
At assist top corporations in a time of dramatic change within their businesses.
The result was the turnaround we began to see in early may.
We observed a pronounced shift towards influencer marketing as brands were not able to access their consumers and other more traditional means during the stay at home period in particular.
We began to be awarded investments moved from both new and existing customers alike.
Businesses were evolving in response to the cobot crisis.
And we launched campaigns that reach new industry Heights from a multibillion view to talk campaign for one of our home entertainment clients.
Optional multi color that work or domestic government entity promoting mast wearing toward the spread of the corona virus in their home state.
None of this would have been possible without ideas you need go to market strategy. The adjustments that we made to be a flexible thought leader for our brand clients.
Resolute commitment from our team members, who worked tirelessly from home.
Often while balancing the needs of their families who had children remote learning or other challenges never previously faced.
But the work is far from over.
We recognize the resulted public health economic crisis, we'll continue to have profound macroeconomic and societal impact for the foreseeable future.
Idea will need to continue to be both proactive and agile to a wide itself to the benefit of our brand clients and partners.
Our team also sees opportunity imprudently and strategically investing capital to drive future growth. During this dramatic time of change.
Well others in our category might be struggling to survive for various reasons. We believe it's the ideal time to focus on side, but domination and scale.
To that end with the capital. We've recently raised replenish deliberately increase in our cost basis and net loss over the coming quarters to promote investments in key areas around our business that we believe our long term game changers.
From hiring and launching our first ever wholly virtual professional selling program. This fall to develop up and coming in how sales talent to adopting a virtual first human capital stance across all company departments.
We're taking inventory of the positive aspects part about through covert related impacts.
Innovate as an organization.
By being free of physical locations with our office is closed it allows our leadership to access the breadth and depth of talent around the country and in some cases around the world.
Just a bar flexible resource in philosophies global time zone contribution benefit and of course, securing the very best talent possible.
By embracing change that came from things society couldn't foresee.
It's inspired us to work differently in ways. We previously did it think we could.
As we look into the future. It also means that idea itself does it have to have a massive employee base in order to steel in fact, our current plans that peak still have our headcount smaller than our pizza several years ago.
And what do you think about it that shift readings into who we are and what we stand for as a company.
We have always benefited from the world wide aspect of I see a worldwide via our creator ecosystem.
Now we intend to do the same far employee and contractor base, whether it's with specialized engineering talent solution oriented sales personnel or global alliances with various partners around the world to further the possibilities within influencer collaborations.
And speaking of collaborations you may have noticed more idea adequately on various social or display platforms.
This isn't a coincidence we are working to raise awareness to drive more inbound leads for our managed service enterprise Hsas and self service tools software such as idea acts discovery.
Knowing the brands of all shapes and sizes can take advantage of our various offerings. It's never been more important to be top of mind and capture demand where the customer is in their lifecycle.
It is our strong belief that idea is positioned to stand alone in providing world class professional services and software solutions that are booked collaborative.
And interchangeable given that there are built off the same frameworks and philosophies that we have built the business upon or the last many years.
To further this strategy, we've engaged to read boutique consultant seized to assist us in various aspects of marketing and advertising.
All these efforts are very much in early days, we expect to see initial benefit come Q4 of this year with significant impact being felt in fiscal year 21, well. There is seemingly no shortage of things to share that are happening right now I hope, it's plainly apparent to shareholders that every ounce of what we're doing it.
Because we're enthusiastic for and focused on the future of the Influencer marketing category, one, which we help ignite starting as a company in 2006.
Now that we're in the back half of this calendar year there're. So many exciting developments ahead first sneak peek at some of them I'd like to turn the call over its had to share his perspective on what we've accomplished so far and what we have in store for clients partners creators and investors ahead into.
Coming quarters Ted.
Thank you Ryan.
Our client services team has done an outstanding job adapting to the landscape and customer dynamics, all while working from home with no ability to meet customers face to face.
Managed services sales effort shining Q2, but SAS licensing for enterprise contracts remain challenged throughout the quarter and is likely to still face some headwinds as we look to the future.
While we saw a record addition of enterprise SaaS customers in Q4, new customer acquisition has been slow since Covidien 18 began to impact our customers and customer pipeline.
The longer term commitments, coupled with higher minimum investment requirements make it a challenging proposition for many marketing organizations that pull back and or downsize their staff.
Conversely, our monthly idea ex discovery offering has grown aggressively year over year amble customer count as well as revenue, though office smaller base.
This lower cost credit card driven alternative is building a need for marketers.
In fact, we had an all time record number of customers licensing our software at the end of the quarter largely due to wise yet acts discovery.
We lost this platform at the end of December 2019, and it is growing to become a meaningful part of our SaaS licensing revenue.
The challenge is that we've observed in the marketing landscape since coping 19 served to amplify our excitement about shakes business model.
We believe many marketers are simply wary of long term licensing commitments at this particular point in time.
But they are still very much so interest in influencer marketing.
To that end, we'll be releasing different licensing models for idea ex unity suite to enterprise customers in Q3.
To meet our customers changing needs during the pandemic.
I'm proud of what we've accomplished in Q2, particularly with our managed services team.
But I don't want to give anybody the impression that we are muni corona virus or the impacts on the global economy.
No individual or company is and we are constantly navigating the changing impacts on our organization and the customers that we serve.
Team idea is working incredibly hard to keep this pace and push towards future revenue growth.
Our strong balance sheet now gives us the ability for more investment in the things that will further set us apart from the competition long term.
While many you're pulling back or even closing shop, we will be strategically pushing forward and intend to capture more shared the market through incredible new technology aggressive marketing and the highest quality services.
We believe there is going to be a great thinning of the herd Influencer marketing technology space and indeed, it is already begun.
Since April we've been approached by steady stream of smaller competitors looking for homes.
For this moment in time, we intend to focus our resources inward.
We have many catalyst for our business that will soon get their opportunity to shine.
First up is shake.
Every day in this platform with our engineering team and every day my excitement only gross.
Shake is a radically different kind of marketplace for us.
Then at the same time take advantage of what we do best help creators monetize their content creativity and influence.
This marketplace is designed to put creators and the driver's seat with public listings that provide opportunities for both idea and our creators to earn.
We're going to be supporting many types of transactions and platforms that we never had before with a streamline offering that can be used by businesses of all sizes.
We're already seeing shakes of all types being submitted with a particular concentration on influencers as you would expect.
Listings range from $50 to thousands of dollars for larger Influencers.
In the coming weeks, we will begin to share a few shakes in preview mode.
This will allow you to see a shake but not by you shake.
Next month, we will hold the streaming event to walk you all through the platforms buying and selling experience and after that we'll begin to turn on the buy button for select shakes shake bought the AI chat bought the guy users through every shake changes the purchase and content workflow experience.
Dramatically.
I think you're going to love how easy it is to buy in cell digital services.
Our team recognizes that this is a new way of transacting for our customers.
So we're taking a measured approach to all aspects of rolling out this platform and making sure that we get the user experience right at every step along the way.
Once we feel comfortable that real world purchases outside of our smaller testing environments are truly delightful experiences for our buyers and sellers, we will open up more or less things turn out more buy buttons and allow more transactions.
Make no mistake, we believed that this platform will be transformational for idea and our customers.
Now while shake his dominated the idea headlines is only part of the story, we have a trifecta of software platforms, each would thrown use cases and target customers.
Brand graph 1.0 rolled out earlier this year, but it was just beginning of this product brand graph is already getting material upgrades, which will be rolled out in Q4 with the release of brain graph to point out.
Introducing entirely new concepts in the platform while dramatically expanding the brand graph universe at the same time.
We're currently adding over 1 million pieces of content to brand graft per day and of nearly doubled the volume of brands. We are classifying since last year.
Last but certainly not least is I used the x.
Idea ex provides the core services for everything we do it provides the foundational technology for both shake Brian grass and it's taking a major leap forward with idea acts 4.0.
X 4.0 will include deeper integrations with brand graph and use its new features in brand graft 2.0 to radically transformed the user experience for marketers. We will also be surfacing aspects of shake into idea acts for the first time.
The platform with the new Influencer discovery incredible CRM features streamlined workflow new promoted post experience completely redesigned analytics and new collaboration tools for agencies and brands.
The team has done an incredible job here it will be our fastest most powerful experience ever design from the ground up to meet the needs of enterprise Influencer marketing organizations.
Look for the idea X 4.0 streaming event in Q4.
These past few months had been transformational for us.
Nothing about this time has been easy or predictable.
But I can honestly say we are in the best position, we've ever been as a company. Despite the global events that impacted us all.
We are in the REIT space at the right time with the balance sheet to capitalize on opportunities and invest in the company and we had to foresight to develop new technologies that are perfect for a co bid 19 world.
The diversity of our customer base in our commitment to providing the best possible customer experience has helped us navigate the pandemic, thus far and we believed that our customer base will only become more diverse as we begin allowing transactions in shake.
Thank you all for your support the back half is going to be an exciting one and I'd now like to open up the call for today.
Thank you at this time will now be conducting a question answer session.
If you had to ask a question today. Please press star one from your telephone keypad and a cut French don't indicate your line is in the question Q.
If you have to withdraw your question you May press star too.
Participants using speaker equipment, and maybe necessary to pick up your handset before pressing the sarkies.
One moment, please all we pull for questions.
Thank you.
Our first question is front line of thanks Haggard with private Investor. Please proceed with your question.
Hi, Ted I was wondering.
If you could provide maybe a little bit of.
Ed or more detail in regards to the specifics of the relationship with Fortune I believe it was 10 retailer. Unfortunately 500.
Financial firms, maybe specifics regarding the size of the.
Oh, the relationship or I'm guessing you can't provide anything on the name but.
If you don't want.
We wish we couldn't provides named for Algos those customers.
But unfortunately were.
We're not allowed to.
We.
Actually secured at a number of new relationships with Fortune 500 customers in Q2 as well as.
Renewed some relationships that had gotten dormant after cobot 19.
Not all of those relationships are.
North of six figures.
Are there at least six figures and some of them or mid mid six figures in terms of the individual contracts what some of those customers spending seven figures with us on autonomy more annualized basis.
Thank you Ted.
My pleasure. Thank you.
Our next question is front line of Mike Jeffrey a private Investor. Please proceed with your question.
Good afternoon.
Okay.
I have two questions. The first one is that in January of 2018.
Wanted to get into.
Currency block chain business.
Because at that time the prices.
Hi.
No.
The prices of the point is high again I'll get after two and half years.
Do you plan to consider.
Getting into.
Choke Korea or block chain again, or not and then I have my second question.
Yes, you know, we started down that path and if you remember correctly we.
Made some inroads there, but really decided not to pursue that at the time do that regulatory and legal obstacles.
It's not core focus of ours right now.
Not something that I think that we're going to be putting engineering resources towards any time near term either.
Okay and then my second question is that.
Going to show US this so the revenue growth and profit both together.
Not just I.
Yes.
I would say that near term our focus is definitely going to be more on the topline.
We think that we've got a unique situation here, where a lot of our competitive set is really.
Struggling and we are going to be focused more on.
Gaining market share.
At the same time.
Cove, It has really forced us to.
Look at all aspects of our organization and see where we can streamline certainly we're saving a good amount of money by not having physical facilities.
And also.
You may significant amount of money on travel.
But for the near term here that the focus is going to be on investing in salespeople investing in marketing and investing in our.
LNG.
Okay and on the last thing is that.
This is that.
For the last few years whenever you wanted to buy a company too.
They are not really.
Okay.
Companies.
And I'm, suggesting that the investors they really like to see that their price.
As a goes up and I've seen many companies and they buy.
Great company that is profitable their price off that couponing. It goes much much higher is it policy bill that the next time that you plan to buy companies. Since you have a lot of money now you have over.
20 million were 25 million.
Do you buy a company that is already property there better idea then losing money.
I would say that.
Our focus right now is really on our core operations.
Not really looking at doing any near term act acquisitions of any type.
Theres, just so many different challenges and unknowns with cope at 19.
I'd say that where we're really just focusing on the things that we can control. We think we've got a lot of catalysts on our own.
But being that quarters three.
Would be much better than quarter too.
We think that we're going to benefit from our bookings that we hadn't quarter to certainly.
But we're not we're not providing any sort of guidance, we don't ever provide any guidance.
Okay. Thank you very much.
Thank you.
Thank you as a reminder to ask a question for me Press Star one.
The next question is for in light of Michael friendships a private investor. Please proceed with your question.
Mr. Richard Your line is open for questions.
All right with committed okay, sorry about that.
Thank you for taking my question I've been basically call in the company for Awhile and I am Investor and the company in the and I appreciate all of the.
The activity in terms of you using Twitter and others to basically inform us what's going on that's been very very helpful and keeping us aware as to kind of where things are going and stuff like that so thank you for that.
My question is that yes, and my question is that we saw the brand graft.
Integration with.
Mark Sopp teams and that will help them. So it's pretty cool to see something like that happened.
I'm wondering from a standpoint of maybe other types of things are you looking at other platforms to look to try to integrate in different areas and stuff like that and.
The other pieces was the second part of this is that what other areas are you looking at in terms of like advertisement I just saw a really great add on Facebook and that kind of got me excited to see that kind of type stuff going on so okay.
Yes, so the first I'll talk about integrations, we really believe that integrations are going to be a key part of our strategy moving forward. So you you saw the integration with slack with Microsoft teams.
There is going to be more of that and that in the coming months and.
In the coming year.
That's going to actually be a real.
Pillar of.
IZEA acts and really the whole idea ecosystem moving forward.
A lot of marketers have their existing marketing's.
Our tech stacks.
And we want to provide integrations into those martech stacks and other tools that they may be using.
The second part of that on on marketing.
You shouldn't be seeing ads on.
Facebook and Instagram and tick Tock and linked and then you know Google display ads and Google search and Weve definitely increased our investment on the marketing front.
We'll be increasing it even more on the other side of the shake launch.
And looking to partners to help us get the word out where we're still relatively small team here from a marketing perspective.
Two.
To the point that Ryan shared earlier, we've engaged three different boutique agencies to help us with some new creative and also help us build out some additional sales channels.
Great. Thank you. Thanks for your answers and by the way those add look very professional it's just it looks really good so thanks.
Thank you I appreciate that.
Our next question is in Atlanta, Josh.
Also a private investor. Please proceed with your question.
Hey, good afternoon, everyone.
In industrial the stock have been calling in for quite some time.
My question is with respect to some of the changes you're seeing on Facebook platform with respect to real and adding that you don't pick talk at feature.
What is the trajectory of the company moving forward with respect to some of these changes to the platform and especially with what's going on with QIC talk in Donald Trump potentially banning the program.
Yes, so when we think about social platforms. We've always tried to be completely agnostic. When I first started this company we were doing influencers sponsorships on my space and message boards and a lot has changed since then.
We believe that it's going to continue to change whether or not there are.
Theres a ban of tick tock, we can't.
We can't predict that obviously.
I personally don't don't think it's going to go anywhere but.
Yes, there's there's obviously some.
Big political issues that are being dealt with there.
From from a platform perspective.
It is incredibly easy for us to add new platforms inside of Shake you saw that we were able to add support for Instagram reals.
And two business days of that being announced.
And.
In the future I believe that we will likely be adding more and and have support for niche platforms that wouldn't necessarily make it into izeax, but are a natural fit for the shake platform.
Awesome. Thank you guys appreciate that could really kind of I'm confident in terms of.
How quickly can predict and.
Addressed ever changing social media platforms, I think thats, a big concern for a lot of investors at the moment.
A lot of changing.
I'm happy to hear that will make a quick its with movement action, which inc.
Thank you.
Thank you.
To sum we've reached into very question answer session I'll hand, the flip back to Ryan Schram for closing remarks.
I'd like to thank everyone for joining us this afternoon, and especially thanks for the nice questions and feedback on our progress we're very proud of what we've been able to accomplish particularly during this unprecedent period of time as a reminder, all of ideas investor information is available online at idea Dot com.
Forward Slash investors you post a lot of great information additions press releases.
Other research other kinds of things can be useful so make sure that if you're not already subscribed to things like our email newsletter you do so today, that's it for joining us stay well.
Thank you everyone. This concludes todays conference you may disconnect. Your lines at this time, we thank you for your participation.