Q4 2020 IZEA Worldwide Inc Earnings Call
Greetings and welcome to ICU and worldwide, Inc. Fourth quarter of 2020 earnings Conference call. At this time all participants are in a listen only mode of 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.
And as a reminder, this conference is being recorded.
Now I'd like to turn the conference over to your host Ryan Schram, President and Chief operating Officer.
Good afternoon, and welcome to ideas and Q4 2020 earnings call I'm, Ryan Schram, President and Chief operating officer at ICR and joining me today is IZEA interim Chief financial Officer of Leann, Hitchcock, and as the chairman and CEO Ted Murphy.
And for being with US this afternoon.
Earlier today of the company issued a press release with details pertaining to our fourth quarter performance for 2020, if you'd like to review those details all of our Investor information can be found on our Investor Relations website and as the the dotcom forward slash investors.
Before we begin please take note of the Safe Harbor paragraph that appears of the end of the press release covering the Companys financial results and be advised that during the course of today's earnings call. Our management team will discuss <unk> business outlook and make forward looking statements.
These statements are predictions based on our team's expectations as of today that are subject to inherent risks and uncertainties and should not be unduly relied upon.
Actual events results or trends could differ materially from our forecast due to a number of factors, including those mentioned in her and most recently filed periodic reports with the SEC The company and our management team assume no obligations to update any forward looking statements made in today's call.
In addition, our update today will also referred to the key metrics of gross billings and the non-GAAP financial measure adjusted EBITDA.
A detailed explanation of these measures as disclosed in our earnings release and and our most recent form 10-K available under SEC filings and the investors section of IZEA Dot com with the appropriate disclosures out of the way I'm pleased to introduce my colleague and Z as interim Chief Financial Officer Leann Hitchcock.
Leann.
Thank you Ryan and good afternoon, everyone for the three months ended December 31, 2020 ideas total revenue was $6 4 million, a 10% increase compared to Q4 2019 with $5 9 million coming from our managed service business and 537000 coming from our SaaS offerings, we saw.
The a 17% increase totaling 842000, and our managed service revenue and of 274000 dollar decline and our SaaS service revenue in Q4, 2020 as compared to Q4 2019.
And as we have previously announced our bookings of managed services increased approximately 48% and Q4, 2020 compared to Q4 2019 as a result, our revenue from managed services not only increased by 17% compared to the comparable quarterly period and 2019. It also increased by 2.3.
Million or nearly 67% compared to our managed service revenue in Q3, 2020.
Larger customers are increasing their marketing spend with us and more brands are shifting more of their marketing dollars to influencer marketing campaigns.
For Q4, 2020, our gross billings increased $8 million compared to $7 8 million and Q4 2019. This 2% increase and gross billings was primarily due to the $842000 increase and managed service revenue offset by the decline and marketplace spend and license fees from SaaS customers.
The reduction and SaaS gross billings due partially to customer churn lower fees and change spending habits due to COVID-19 uncertainties and other factors resulted in the $274000 decrease in SaaS service the revenue in Q4, 2020 as compared to Q4 2019.
Our cost of revenue exclusive of amortization was approximately $2 7 million and both quarterly periods, but as a percentage of revenue our cost of revenue exclusive of amortization has improved from 46% and Q4, 2019% to 43% and Q4, 2020 primarily due to.
The reduction in personnel and travel related costs on the fulfillment of our customer marketing campaigns.
Our total costs and expenses were $7 4 million for Q4, 2020 compared to $8 2 million for Q4 2019, if we exclude the non cash $418000 impairment of intangible assets recorded in Q4 2019 the improvement between periods is approximately 300.
And dollars, primarily as a result of cost reduction efforts affecting personnel rent and travel expenditures that were cut due to COVID-19 operating changes.
As a result of the notable improvements and our operating results. Our net loss was $1 million or two cents per share in Q4, 2020 compared to our net loss of $2 3 million or seven cents per share for Q4 2019 with.
With the increase and overall revenues, we were able to improve adjusted EBITDA by $825000 or 64% to only negative 467000 in Q4, 2020 compared to negative $1 3 million in Q4 2019 day.
This was achieved through the steps taken to increase revenue and maintain a virtual work environment during this quarter.
Although our team is working remotely our internal business operations are fully functional we have observed changes and advertising decisions timing and spending priorities from our customers, which initially had a negative impact on our revenue. However, we found ways to reduce expenses and gain efficiencies in our internal operations.
To minimize the initial effects and focused our team to meet the needs of our customers throughout this year.
Bookings is one of our key metrics that is our measure of all sales orders minus any known or expected cancellations of refunds within a period.
However, bookings is not always an indicator of revenue for the quarter and could be subject to future adjustments revenue from managed service bookings is typically recognized over a six month period on average.
Based on the increase in bookings and Q4, 2020. We are entering 2021 with the revenue backlog of approximately $10.6 million and we are expecting to see continued increases in revenues in 2020, one compared to 2020, which will be used of further invest and our own marketing and engineering spend.
While we anticipate increased revenues there is still a high level of uncertainty around the duration and total economic impact of the Covid pandemic on our industry and the future.
As of December 31, 2020, we had cash on hand of 33 million and we subsequently raised $34 3 million under our ATM offering and the first quarter of 2021.
From June 2020 to date, we have raised total gross proceeds through the ATM offering of $62.8 million. These funds put us in a position of strength with capital for our future growth.
With that I will turn the call back over to Ryan.
Thank you Lee and it's hard to reconcile the last year of our lives both personally and professionally at times.
In late March 2020, there was unprecedented uncertainty not just within our business and the greater trader economy, but of course the world at large.
When we sent our team members across North America to work from home on Friday March 13th we thought it would be 15 days to flatten the curve of minor distraction to and our fiscal quarter, perhaps it's almost laughable now what's the them back to see how naive we all whereas the society as we face what may likely be the law.
<unk> Global challenge of our generation.
What transpired after the week of March 13th was horrifying the art clients Chancellor of froze campaigns, all new business activity was stopped and its tracks and suddenly the realization that I see it could be highly vulnerable amidst all of the broader chaos became a very real fear for us.
But where other companies parent and suffered as a result.
We put our heads down dot to work we are focused on controlling the things that we could control within the the dynamics of a once in the lifetime pandemic, creating content sharing thought leadership developing new products and inspiring brand investment through a stable hand.
And I personally I can say I've never worked so hard while at the same time pain. So terrified about the unknown and much of our stuff of course felt the same and along the way it hasn't been easy in fact and nothing about the last 54 weeks has been easier on any of us.
Our team members all took temporary pay cuts switching of avoid laying of full time team members, who needed health insurance and income during the height of the pandemic some of us got sick, but thankfully recovered some of US lost beloved family members, who passed away well loan and a hospital many of us.
And were and still are lonely due to extended social distancing, but through it all the conviction of our team was unwilling to waiver. We team is the Ah found a way forward not just survive, but thrive by adapting quickly.
For example, thanks to our cloud first infrastructure approach originally designed years ago to help us navigate the headquartered and our Hurricane zone. Our team members were able to move from offices to home without missing a beat.
And while we all of prefer to see a few Monsieur medians and 2021 is immunization rates increase and it becomes safer to be together again here.
Having the ability to collaborate and real time seamlessly during the workday provided many of a solid sort of otherwise physically disconnected world.
As society and sell into the Covid economy last summer, we quickly realized that amidst the tectonic shifts and advertising and marketing and that occurred due to the pandemic. The influencer March of the matter more than ever we committed to aggressively invest and our future building of complete.
The ecosystem of solutions anchored by a proprietary technology.
We weren't satisfied with the idea of shifting from quote unquote brace for impact to just recovery mode. No. We shifted from recovery mode to a high growth posture with confidence.
And our managed service unit, we keyed in on the fact that more than ever and the Covid economy brands wanted and needed a partner like <unk>, who can provide agile campaign focus flat fee relationships with world class execution, instead of burden and some expensive multiyear.
Year retainers.
Paired with the strong relationship basis, our client base and team members have built over the years allowed IZEA to deliver its highest Q4 managed service bookings ever in 2000 and 'twenty.
And our enterprise SaaS work group, the macroeconomic impacts and the greater Mar Tech sector opened up a window of opportunity for us to overhaul our entire go to market approach via best in class cost of value pricing improved term flexibility and a relentless focus and reduce it.
The time to impact for new customers Onboarding.
All of which drove a record number of SaaS customers signing up to IZEA acts.
And we did it all with the smaller work force than we've historically had and place fueled by increases and individual contribution productivity that was enabled by the technology investments, we've made and our platforms, we have fewer people delivering more revenue per person.
However to be truly successful on a global basis, we cannot just go it alone you have the link arms with Likeminded companies, who share ideas of Worldview and complement what we cannot do solely by ourselves.
And through our partnerships work group idea of formed a multitude of industry first working relationships during 2000 and 'twenty and into early 2021 first with the formation of influence United Last September which has brought a cohesive multi continent concept.
The integrated strategy and investment strategy to the industry.
And our fellow charter Alliance members give reciprocal capability presence across North America, Latam, the EU Southeast Asia, India, Australia, the continent of Africa and across the Middle East never before and the Influencer marketing industry has the partnership structure.
Enabled global brands the opportunity to streamline their end to end the investments achieving scale through localized execution, while saving time and money.
More recently is the announced the creation of the entire partner program ecosystem.
The newly established roster of invitation only companies brings together best in class solution providers and top representation agencies that strategically integrate with ideas and consultative managed service offering and across our various software platforms, including shape is the acts of unity.
Suite and as the of X discovery.
By leveraging members of the partner program is the of clients and customers can take their influencer mercury and initiatives to new heights, igniting exclusive execution of possibilities across a wide array of prominent talent and innovative technologies.
And looking to the future our goal is to not just partner with these companies, but provide a basis for even deeper relationship with our clients and customers as a result, leading to increased spend while providing the highest quality of service paired with revolutionary technology now to.
And some more details and the road ahead and to share some exciting announcements on the other aspects of our progress I'd like to turn the call over to my colleague and as the as founder Chairman and CEO Ted Murphy Ted.
Thank you Ryan before I begin I would like to share of heartfelt. Thanks to Leann for her years of service to idea as previously announced tomorrow easily and the last day, serving as interim CFO. She.
She has been and incredible CFO for this company and is one of the most amazing human beings I've ever had the pleasure to work alongside you.
He will be greatly missed and we appreciate all of that you have done for this organization and our shareholders.
Speaking of our shareholders I want to thank you as well.
Without your support and belief and this team and our company, we would not be and the position we are today.
2020 was no doubt the most challenging year and the history of our company but.
But he was also among the most rewarding and transformational periods we've ever experienced.
Last year and the middle of the pandemic, we launched two new products brand Graff and shake at a time when many companies were laying off staff shutting down new initiatives and retreating the safety.
Instead of pulling back on research and development.
The increase the size of our engineering team dramatically reduced our licensing fees and got much more aggressive with our marketing initiatives to build back our sales momentum.
<unk> vision has always been taken net the buyers and sellers, who drive the creator economy forward.
Our goal is for both parties to financially benefit by transacting and collaborating with each other.
Our intent is to make ICL technology platforms available and affordable and the broadest base of customers possible.
The introduction of idea ex discovery, lower pricing tiers, and IZEA ex unity suite and.
And of course, the introduction of shake are all part of that vision.
But we are still in the early days of what we believe is of very large opportunity.
Within the total addressable market that is growing each year.
At the end of Q3, we share that we had an all time record number of customers licensing our software largely due to self service sign ups for IZEA ex discovery.
This trend continued into Q4.
Last I spoke on our Q3 earnings call I commented on and the resilience demonstrated by the ex discoveries since the onset of Covid.
That resilience has now translated to growth.
As the result, we ended Q4 with the highest number of active software customers, we've ever had and as we peaking of Q1, we expect that number will be bested yet again in March.
Record customer accounts are always exciting, but what is even more exciting is that our discovery product is on the verge of of major technology upgrade and Q2 of this year.
We've completely rewritten core components of our Influencer search experience and the.
That will benefit both IV and <unk> unity suite as well as E X discover users.
For the first time, you will see deep IZEA ex integration with brand Graff and shake.
All within one incredibly powerful and easy to use solution.
And is the culmination of years of engineering effort and something I can't wait to share with you next quarter.
In addition of major IZEA ex enhancements, we continue to improve shake which opened up for public transactions for the first time and November 2020.
Sheikh has very much so and nascent platform, but we are making consistent improvement each week with new creators and buyers joining the platform.
One of the challenges of any marketplace is balancing supply and demand and the very early days.
You need to have inventory to sell to buyers and unique buyers to attract sellers.
As we have on boarded new talent, we have seen an increase and the amount of money being spent on the platform.
But these numbers are still small compared to our overall revenue today and it.
It will take some time to build into a meaningful portion of IC of revenue.
Increasing inventory is of primary directive of the shake team and.
And we have aligned and many of our engineering spreads towards the increasing conversion rates and the creation of the quality shake listings.
Our product team has also identified multiple opportunities to improve the shake creation experience.
Starting with the redesign of the homepage that launched a few weeks ago.
This has had an immediate positive impact on time on site conversion rates and bounce rates.
We're also and the process of designing and implementing other shake platform changes that we believe will have a positive impact on both sign ups and the creation of approved shake listings.
In addition, the software refinements are shake inventory building effort also includes larger initiatives such as our recently announced parade of stars as well of the idea of partner program that Ryan mentioned earlier.
We are seeing of steady uptick of new shakes from creators and Influencers of all sizes and Q1.
And the rate of sheet creation is accelerating from the rate we saw in Q4.
These improvements to shake would not be possible without the recent investments we've made to expand and enhance the sheet product team.
And the very beginning shakes started out as a skunk works project with me and a single engineer.
We now have a proper dedicated product management team a team of front end and back and engineers and dedicated QA resources.
And the shape platform and the team behind it is still maturing and gaining momentum.
And as it does we expect shaped and grow and inventory capabilities and revenue.
This is a common theme and our engineering organization.
Is he has been able to accomplish a great deal with a relatively small team to date.
But that has been at the greater expense of speed to market and our product capabilities.
A small engineering team working on very complex systems can only take us so far.
To give you some perspective on this last year IV of spent $4 $1 million and development costs for its various SaaS platforms.
In comparison of competing public company that operates of marketplace similar to shake it.
It's been over $45 million on research and development and 2020.
More than 10 X ideas investment across multiple platforms.
We are very proud of what we've been able to do with such a small talented team.
But we are changing our approach moving forward.
We are making the engineering investments needed to fully realize the potential of the platforms that we've created.
Over the past few quarters, we've been working to build out our engineering and product teams and.
In addition to bolstering our count of Engineers, writing code.
We have created and filled many of the management positions needed the scale from here.
We have added multiple new product managers of new director of engineering and starting this week of new senior manager of data science and data engineering.
We are investing heavily and research and development.
And we intend to continue to bring on engineering and product talent throughout 2021 and beyond.
We are doing so in order to expand the capabilities of our existing platforms refine our offerings based on customer feedback and.
And build out new software products that are focused on the creator economy.
That includes things such as the next generation of IZEA ex and brand graph as well as the expansion of shake including of much requested shake mobile app.
We have built a vast technological foundation and Ics and.
And we intend to aggressively pursue the development of our software to address the market opportunities.
Alongside the investment and product, we intend to market much more aggressively.
And net investment will ramp up as we release new software features.
Expect to see up to triple the investment and marketing over the course of 2021 as.
As we seek to increase brand awareness and significantly grow revenue and this year and beyond.
Again to provide some perspective on this.
Last year IZEA spend of approximately $6 million and total sales and marketing.
And comparison that same marketplace I previously referenced.
And $94 million and sales and marketing.
Almost 16 X that of Ids year.
That is 30% of revenue for idea.
The 50% of the revenue for our competitor.
Make no mistake idea is transitioning to an aggressive growth mode.
And to achieve the type of aggressive growth, we are aiming for we must invest aggressively well.
And well ahead of near term profits.
We are focused on expanding our customer base.
Increasing the inventory of creators available and our platform, providing the best possible customer experience, we can and of course meaningfully growing our revenue.
While increasing operational efficiency.
Our team will do so and our strategic and responsible way.
But we will bias towards speed.
The bias towards growth and.
And biased towards capturing as much share of the Influencer marketing industry as we can.
Over time, we believe our biases will result, and a larger more valuable and more profitable company with.
With the scale needed to sustain the technology and marketing investments needed to continue gaining market share.
We have weighted 15 years for influencer marketing to become mainstream.
For all the negatives that have come with COVID-19.
It has also served as the catalyst to propel Influencer marketing to center stage and.
And spawned the rebirth of idea.
We had the worst possible social and economic scenario of thrown at us last year.
Not only have we survived but we have thrived.
And we have emerged a better company for it.
We are positioned to attack the market on all fronts.
We have a strong balance sheet to support long term investments.
We have and incredible and growing base of customers ranging from four of the fortune 10 to hundreds of smaller brands and agencies.
We have a proven team that can tackle the most difficult of situations.
And we are building on and amazing technology base that is constantly raising the bar for others.
Thank you all for your support.
I would now like to open up the call for Q&A.
Thank you at this time, we'll be conducting the question and answer session.
If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is and the question queue.
You May press star, two and if you'd like to remove your question from the Q.
The participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
And our first question is from Jon Hickman with the land and the Zelman. Please proceed.
Okay.
Can I just ask a couple of clear.
Hello.
The ahead.
Okay.
Just a couple of clarification questions first so bookings and Q4 were $8 million.
Total.
Okay.
They were $8 $3 million total.
$8 three okay.
And did you break out managed services of matter.
Yeah.
Managed services was $6 six.
Okay.
Okay.
Thank you and then can you.
Maybe the third question for Lance.
The share count now with the 33 $34.3 million range.
And the last couple of months.
We are at the 59 million shares outstanding currently.
15 of them Okay.
Okay and then.
Ted you said youre going to spend three X and marketing from last year is that what you meant to say.
Yes, correct.
And is now and whether or not and all of the sales sales and marketing that is that's just marketing.
And that was on the market.
Correct, Thats kind of ramp up of overtime. So its not the not the entire sales and marketing line.
So do you have like a target for.
Like how much of sales are you going to spend and operating.
And then a quick one.
We haven't set of specific target for that now.
Okay.
Okay.
Okay.
So then elaborate a little more you're going to you're you're introducing the new.
Hmm.
And their version of discovery.
Correct correct.
And what will be exactly want to shake.
We'll be launching a new version of discovery debt.
We'll bring in aspects of shake and of brand graph and.
And to the discovery experience.
Okay.
And worried about.
The overhaul of like is the are.
Are we looking forward to it and I use the X four Plano.
Yes.
That will be kind of part of the.
<unk>.
A larger initiatives around IZEA X 4.0, we're going to be breaking those out into.
The different releases over the course of the year. So we're focusing first on the discovery component, which touches brand graff shake.
The X discovery and and it's also part of IZEA <unk> Unity suite and.
And then we will have.
And subsequent releases that are dealing more on the workflow side.
That will give some some peaks into and this quarter.
Okay and then.
Just from a modeling standpoint.
And as Leon said, the you are looking forward to increased revenues from 2020.
Any help with like percentages or.
Sequential quarterly increases and.
LTE and inventories.
We're not we're not really giving guidance. If you look at the release that we put out yesterday.
We are we are now past, the 100% growth and bookings.
For managed services here in Q1.
Our Q2 pipeline looks very strong as well.
But where we are still.
Very much so aware of that we're in the middle of the pandemic and.
We are taking each of each quarter as it comes right now.
And then.
So do you think you have enough capital to.
The way you want to do.
I think debt, we've got a pretty strong balance sheet right now yes.
Okay, I'll, let someone else ask questions.
Thank you John.
And our next question is from Sean give me with Alliance. Please proceed.
Hi, everyone and thanks for taking my question here and Ted Congratulations on the extreme growth and with you and the team obviously very impressive.
Kind of one and I definitely wanted to touch on a couple of the items of the previous.
Previous individuals' spoke to but I think one of the the kind of questions I've had for awhile and is any of that marketing spend first shake gonna be spent on shake as to say are you going to target those influencers that are on the.
Targets and other Influencers using your platform.
So that marketing spend is spread across.
Sheikh brand growth as and Ics discovery.
And we're using that on both sides of of the shape marketplace of bulk to attract new creators to sign up to the platform as well as driving marketers to two.
The higher those creators I think one of the things Thats really unique about shake and and what we can do with it is that we can actually use the and pointers themselves in our and our marketing so and a lot of the paid media that you see through social channels.
We are actually feature featuring the individual creators and driving traffic to specific shake listings.
Got it and and I guess, it's really starting to just ramp up now where youre seeing sort of some of lot of revenue come from shape.
Has there been any pushback from any individuals signing up for shake any of the individual influencers on.
Sort of the the spread I think or can you comment on sort of what you guys are taking.
Proposed I think I had read and 15%.
Yes.
Sure.
Our fee of 15% inclusive of the credit card fees.
Which is.
Significantly less than what you see.
On other competing platforms.
Got it.
And another individual jump on here. Thank you very much of it.
Thank you.
And our next question is from the old sorry, with ease of private investor.
Hey, good evening everyone.
Great great.
The information Ted and team.
And then I example of lost.
Four years and then they were in the roster.
So one thing, which I want to ask is putting the one question and then I keep wondering the.
And the competition that's true.
How are you of stands out with Cooper and.
With respect to the stock price difference, how do you plan to take over the <unk>.
The price to that level.
Okay.
Thank you.
If you look at the type of inventory that is and a platform like fiber versus what's and shake I think one of the things that you'll see right away as debt.
And the quality of the inventory the associated pricing with that inventories just dramatically different.
We have people and there that are missing.
Listing shakes for thousands to tens of thousands of dollars that have.
Millions or tens of millions of followers.
And that is just not something that debt you see inside of the hybrid platform.
So do you pick your call and being on shape too.
The big idea to like the mix lower.
But it's really a combination of of all of the platforms and that's one of the things that I'm. Most excited about is debt.
All of these are working together.
And the people that are that are in shake are also largely in E X.
The.
The type of advertisers that might sign up.
To lie.
License our enterprise platform.
And May also want to hire somebody that they could find in and shake.
Or we may have and advertiser, who.
Who can't afford and enterprise license for IZEA ex Unity suite and May just want to do a $100 shake or license ACX discovery. So the real goal here is to be able to.
Have a offering for the entire spectrum of potential buyers, whether that's one of our fortune 10 customers down to the very small agencies and.
And businesses that are going to hopefully be much.
The much larger agencies and businesses and the future.
And that's true. Thank you. Thank you Doug.
Thank you.
And we have a follow up question from Jon Hickman with Ladenburg Thalmann.
Yes.
Hey, Ted I wanted to put you on the spot here, but.
Could you comment on this.
Kind of the emerging markets for and Ftes and if share count's up placed in that world.
Yeah.
So.
I have certainly been following the.
The developments around and Ftes and has sold and NSP and myself.
I think that it is a very interesting space that has.
Oh wow potential opportunity around it but also a lot of.
And of questions right now and I think of lot of inefficiencies.
And I sold my NSP for I think of $120 and it cost me $160 and gas.
So wasn't such a great experience as a creator and it would be hard to to look at that and say that that would be of wind for for creators right now and just given the way that a lot of.
Those things are structured.
Do think that.
Assets digital assets and digital collectibles.
And could could certainly have a future inside of shake and or another platform.
And the assets in general has been part of the greater vision.
Of idea for some time now so.
I don't know that that will be specifically ftes or not.
But I think debt the idea that somebody could sell of digital asset the b that of photo and illustration of font of video.
Will will be something that you.
Potentially see from IC and the future.
Thanks, I appreciate that.
Thank you.
Alright, Thank you ladies and gentlemen, we have reached the end of the question and answer session and now I'd like to turn the call back over the wire and shrimp for closing remarks.
Thanks, Omar and good day, thank all of our passionate and loyal investors for joining US. This afternoon and as a reminder, all of our Investor Relations information can be found online on the icy of web site, which is I see the dotcom forward slash investors.
Safe be well and we'll talk to you all soon.
This concludes this evening's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day everyone.