IZEA, Inc. (NASDAQ: IZEA), operator of IZEAx, the premier online
marketplace connecting brands and publishers with influential
content creators, reported its financial and operational results
for the fourth quarter and full year ended December 31, 2017.
The financial information presented here and in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2017
reflects restated financial information relating to our prior
period information. All comparisons are on an as-adjusted basis. We
determined that there were errors in our previously issued
financial statements related to our presentation of revenue related
to the self-service Content Workflow portion of our revenue and our
classification of cost of revenue related to our Managed Services.
The restatement had no impact on our previously reported loss from
operations, net loss, loss per share, or on any of the consolidated
balance sheets, statements of cash flows, and statements of
stockholders' equity.
For discussions of the restatement adjustments, see Item 1A.
“Risk Factors” and Item 8, “Financial Statements,” including Notes
2 and 14 of the Notes to the Consolidated Financial Statements in
our 10-K.
Q4 2017 Financial Summary Compared to Q4 2016
- Total revenue up 16% to $6.8 million,
compared to $5.9 million.
- Managed Services revenue increased 16%
to $6.6 million, compared to $5.7 million.
- Content Workflow revenue decreased 33%
to $77,000, compared to $116,000.
- Gross billings up 6% to $7.8 million,
compared to $7.4 million.
- Total costs and expenses were $7.5
million, compared to $7.7 million.
- Net loss was $(743,000), compared to a
net loss of $(1.83 million), an improvement of $1.1 million or
59%.
- Adjusted EBITDA was $103,000, compared
to $(1.1) million, an improvement of $1.2 million.
FY2017 Financial Summary Compared to FY2016
- Total revenue up 15% to $24.4 million,
compared to $21.2 million.
- Managed Services revenue increased 17%
to $23.8 million, compared to $20.4 million.
- Content Workflow revenue decreased 25%
to $351,000, compared to $465,000.
- Gross billings up 7% to $29.2 million,
compared to $27.3 million.
- Total costs and expenses were $29.9
million, compared to $28.7 million.
- Net loss was $(5.5) million, compared
to $(7.6) million, an improvement of $2.1 million.
- Adjusted EBITDA was $(2.5) million,
compared to $(5.1) million, an improvement of $2.6 million.
FY2017 Operational Highlights
- Launched IZEAx 2.0, including Promoted
Posts and IZEA Pay.
- Released ContentMine™ and
CurationEngine™ with integrated artificial intelligence.
- Partnered with CORT to launch first
Augmented Sponsorship™ campaign.
- Recognized as a 2017 Top 100 Company in
Central Florida by Orlando Sentinel.
Management Commentary
“IZEA has demonstrated meaningful improvement across the board
in 2017. We released an impressive array of new technologies,
delivered record revenue, record gross billings, and achieved our
goal of getting to our first Adjusted EBITDA positive quarter a
full year ahead of schedule,” said Ted Murphy, IZEA’s Chairman and
CEO. “The improvements we made throughout the year had a
significant impact on our efficiency and overall strength as an
organization.”
“Custom Content in particular played a meaningful role in our
growth last year. Revenue from Custom Content grew 47%, or $1.7
million over 2016, and the success is a reflection of our
investment in building out the infrastructure to support that line
of business. We continue to see great opportunity for Custom
Content, particularly when paired together with our Influencer
Marketing services.”
“As we look to 2018, a primary goal is the expansion of our
sales organization to provide the foundation for topline
re-acceleration in 2019 and beyond. We are expanding our recruiting
efforts with an emphasis on sales, and will continue to enhance our
technology platform. The company will add sales resources to our
core Managed Services team, as well as our newer SMB and
Partnership teams. Management continues to balance investment in
growth with expense management and an eye on profitability.”
Q4 2017 Financial Results
Revenue in the fourth quarter of 2017 increased 16% to $6.8
million compared to $5.9 million in the same year-ago quarter. The
increase was due to organic growth in both our Sponsored Social and
Custom Content Managed Service offerings. Cost of revenue
(exclusive of amortization) as a percentage of revenue decreased
from 49.1% to 47.5%, an improvement of 1.6%.
Total costs and expenses in the fourth quarter of 2017 were $7.5
million compared to $7.7 million in the same year-ago quarter. This
decrease was primarily due to decreased personnel-related costs as
well as lower public relations and marketing expenses.
Net loss in the fourth quarter of 2017 was $(743,000) or $(0.13)
per share, as compared to a net loss of $(1.8) million or $(0.34)
per share in the same year-ago quarter. The improvement was
primarily due to increased revenue as well as decreased
expenses.
Adjusted EBITDA (a non-GAAP metric management used as a proxy
for operating cash flow, as defined below) in the fourth quarter of
2017 was $103,000 compared to $(1.1) million in the same year-ago
quarter. The improvement in adjusted EBITDA was primarily due to
the increase in revenue as well as reduced expenses. Adjusted
EBITDA as a percentage of revenue in the fourth quarter of 2017 was
2% compared to (18%) in the year-ago quarter.
Revenue backlog, which includes unbilled bookings and unearned
revenue, was $8.2 million at the end of the quarter.
Cash and cash equivalents at December 31, 2017 totaled $3.9
million. At the end of the quarter the Company had accessed
approximately $500,000 of its $5.0 million credit line.
Full Year 2017 Financial Results
Revenue for the year increased 15% to $24.4 million compared to
$21.2 million in 2016. The increase was due to organic growth in
Managed Services. Cost of revenue (exclusive of amortization) as a
percentage of revenue decreased from 49.3% to 47.4%, an improvement
of 1.9%.
Total costs and expenses were $29.9 million in 2017 and 28.7
million in 2016. The decrease was primarily attributable to
decreased personnel costs and related overhead, as well as reduced
marketing spend.
Net loss in 2017 was $(5.5) million or $(0.96) per share,
compared to a net loss of $(7.6) million or $(1.41) per share in
2016. The improvement in net loss was primarily due to increased
revenue and profit margins, along with reduced operating
expenses.
Adjusted EBITDA was $(2.5) million compared to $(5.1) million in
2016. Adjusted EBITDA as a percentage of revenue was (10%) compared
to (24%) in 2016.
Conference Call
IZEA will hold a conference call to discuss its fourth quarter
and full year 2017 results on Thursday, April 19 at 5:00 p.m.
Eastern time. Management will host the call, followed by a question
and answer period.
Date: Thursday, April 19, 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 April 26, 2018.
Toll-free replay number: 1-844-512-2921International replay
number: 1-412-317-6671Replay ID: 13679060
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 consumer content and engaging,
shareable stories that drive awareness. For more information about
IZEA, visit https://izea.com.
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.
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 revenue 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; failure to popularize
one or more of the marketplace platforms of IZEA; inability 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; 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. Consolidated Balance Sheets
December 31, December 31, 2017 2016 Assets
Current: Cash and cash equivalents $ 3,906,797 $ 5,949,004 Accounts
receivable, net 3,647,025 3,745,695 Prepaid expenses 389,104
322,377 Other current assets 9,140 11,940
Total current assets 7,952,066
10,029,016 Property and equipment, net 286,043
460,650 Goodwill 3,604,720 3,604,720 Intangible assets, net 667,909
1,662,536 Software development costs, net 967,927 1,103,959
Security deposits 148,638 161,736 Total
assets $ 13,627,303 $ 17,022,617
Liabilities and Stockholders’ Equity Current liabilities: Accounts
payable $ 1,756,841 $ 1,438,389 Accrued expenses 1,592,356
1,242,889 Unearned revenue 3,070,502 3,315,563 Line of credit
500,550 — Current portion of deferred rent 45,127 34,290 Current
portion of acquisition costs payable 741,155
1,252,885 Total current liabilities 7,706,531
7,284,016 Deferred rent, less current portion
17,419 62,547 Acquisition costs payable, less current portion
609,768 688,191 Warrant liability — —
Total liabilities 8,333,718 8,034,754
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; 5,733,981 and
5,456,118, respectively, issued and outstanding 573 545 Additional
paid-in capital 52,570,432 50,797,039 Accumulated deficit
(47,277,420 ) (41,809,721 ) Total stockholders’ equity
5,293,585 8,987,863 Total
liabilities and stockholders’ equity $ 13,627,303
$ 17,022,617 IZEA, Inc.
Consolidated Statements of Operations (Unaudited)
Three Months Ended Twelve Months Ended December 31,
December 31, (As Restated) (As Restated) 2017
2016 2017 2016 Revenue $ 6,800,385 $ 5,883,614
$ 24,437,649 $ 21,234,297 Costs and expenses: Cost of
revenue (exclusive of amortization) 3,230,931 2,888,292 11,585,316
10,474,769 Sales and marketing 1,584,671 2,061,786 7,593,197
7,989,590 General and administrative 2,292,976 2,358,702 9,218,565
8,946,431 Depreciation and amortization 420,976
364,788 1,516,807 1,299,851
Total costs and expenses 7,529,554
7,673,568 29,913,885 28,710,641
Loss from operations (729,169 ) (1,789,954 ) (5,476,236 )
(7,476,344 ) Other income (expense): Interest expense
(19,544 ) (24,683 ) (64,950 ) (82,944 ) Loss on exchange of
warrants — — Change in fair value of derivatives, net 3,147 (5,405
) 39,269 9,163 Other income (expense), net 2,490
(9,590 ) 34,218 (10,075 ) Total other
income (expense), net (13,907 ) (39,678 )
8,537 (83,856 ) Net loss $ (743,076 )
$ (1,829,632 ) $ (5,467,699 ) $ (7,560,200 )
Weighted average common shares outstanding – basic and
diluted 5,720,824 5,450,005
5,674,901 5,380,465 Basic and diluted loss per
common share $ (0.13 ) $ (0.34 ) $ (0.96 )
$ (1.41 )
IZEA, Inc.Non-GAAP
Reconciliations(Unaudited)
Reconciliation of GAAP Revenue to Non-GAAP Gross
Billings:
Three Months Ended Twelve Months Ended
(As Restated) (As Restated) December 31, December 31, December 31,
December 31, 2017 2016 2017 2016
Revenue $ 6,800,385 $ 5,883,614 $ 24,437,649 $ 21,234,297 Plus
payments made to third-party creators (1) 1,044,188
1,550,377 4,744,325 6,076,306 Gross
billings $ 7,844,573 $ 7,433,991 $
29,181,974 $ 27,310,603
(1) Payments made to third-party creators
for the Content Workflow portion of our revenue reported on a net
basis for GAAP.
Gross billings by revenue stream and the percentage of total
gross billings by stream:
Three Months Ended Twelve Months Ended (As
Restated) (As Restated) December 31, 2017 December 31, 2016
December 31, 2017 December 31, 2016 Managed Services $ 6,561,921
84 % $ 5,652,220 76 % $ 23,836,236 82 % $
20,393,757 75 % Content Workflow 1,121,687 14 % 1,666,447 22
% 5,094,973 17 % 6,541,684 24 % Service Fees & Other 160,965
2 % 115,324 2 % 250,765 1 % 375,162 1 %
Total Gross Billings by stream $ 7,844,573 100 % $ 7,433,991
100 % $ 29,181,974 100 % $ 27,310,603 100 %
Reconciliation of GAAP Net Loss to Non-GAAP Adjusted
EBITDA:
Three Months Ended Twelve Months Ended (As
Restated) (As Restated) December 31, December 31, December
31, December 31, 2017 2016 2017 2016
Net loss $ (743,076 ) $ (1,829,632 ) $ (5,467,699 ) $ (7,560,200 )
Non-cash stock-based compensation 125,785 171,948 635,427 748,092
Non-cash stock issued for payment of services 38,459 26,457 181,995
133,897 (Gain) loss on disposal of equipment (3,295 ) 9,919 (8,757
) 9,435 (Gain) loss on settlement of acquisition costs payable — —
(10,491 ) — Increase (decrease) in value of acquisition costs
payable 247,524 155,459 583,010 196,431 Depreciation and
amortization 420,976 364,788 1,516,807 1,299,851 Loss on exchange
of warrants — — Interest expense 19,544 24,683 64,950 82,944 Change
in fair value of derivatives (3,147 )
5,405 (39,269 ) (9,163 )
Adjusted EBITDA $ 102,770 $ (1,070,973
) $ (2,544,027 ) $ (5,098,713 )
Revenue 6,800,385
5,883,614 24,437,649 21,234,297
EBITDA as a % of Revenue 2% (18)%
(10)% (24)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180418005390/en/
IZEA, Inc.Justin Braun, 407-215-6218Manager, Corporate
Communicationsjustin.braun@izea.com
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