Record Revenue Up 38% to $7.5 Million; Record Gross Profit Up 66% to $3.6 Million

ORLANDO, FL (November 14, 2016)IZEA, Inc. (NASDAQ: IZEA), operator of IZEAx, the premier online marketplace connecting brands and publishers with influential content creators, reported results for the third quarter ended September 30, 2016.

Q3 2016 Financial Highlights vs. Same Year-ago Quarter

  • Revenue up 38% to a record $7.5 million.
  • Sponsored Social revenue increased 44% to $4.6 million, Content revenue increased 28% to $2.8 million.
  • Revenue backlog at the end of the quarter was $9.2 million, including unbilled bookings of $5.5 million and unearned revenue of $3.7 million.
  • Net bookings increased 14% to $7.7 million. The increase in bookings included Sponsored Social bookings up 14% to $4.4 million and Content bookings up 15% to $3.3 million.
  • Gross profit increased 66% to a record $3.6 million.
  • Gross margin was 48%, up from 40% in Q3 2015. Sponsored Social gross margin was 60%, up from 58% in Q3 2015. Gross margin for Content was 26%, up from 11% in Q3 2015.
  • Net loss improved 42% to negative $1.5 million versus negative $2.6 million in Q3 2015, an improvement of $1.1 million.
  • Adjusted EBITDA improved 41% to negative $0.9 million versus negative $2.2 million in Q3 2015, an improvement of $1.3 million.
  • New opportunity pipeline, a representation of new client proposals generated within the quarter, decreased 23% to $28.2 million. Pipeline conversion rate increased from 18.5% to 27%.
  • At the end of the quarter, cash and cash equivalents totaled $6.6 million, accounts receivable, net of allowance for doubtful accounts, was $4.6 million and the company had an unused credit line of $5.0 million.

Q3 2016 Operational Highlights

  • Expanded custom content offering with acquisition of ZenContent
  • Selected by Federated Media to further expand influencer network
  • Partnered with VISIT FLORIDA to create virtual reality tourism influencer marketing campaign
  • Recognized as a Top 100 Company in Central Florida by Orlando Sentinel
  • Petitioned the Unicode consortium to create #AD Emoji
  • Released 30 updates to IZEAx, including a completely new click and view tracking micro-service, real-time chat between creators and brands, enhanced search features and multiple infrastructure improvements in preparation of the launch of IZEAx 2.0.

Management Commentary

“Our strong third quarter results were driven by continued growth in organic revenue across all revenue streams,” said Ted Murphy, IZEA’s Chairman and CEO, “In addition to topline growth, we continue to see large gains in our custom content margins, which have more than doubled from this time last year. Our cash-based operating expenses have increased only 4% from Q3 2015, while revenue has grown 38% and gross profit has grown 66% during the same period. Revenue is up 57% to $26.1 million for the trailing twelve months ending September 30, 2016, versus the same period a year-ago. I believe we are starting to see some demonstrable operating leverage in the business due to the investments in our proprietary technology.”

“Looking ahead, we plan to continue to invest in growing our sales organization to support growth, but at a more tempered rate given the macroeconomic climate. We had originally planned to employ 65 sales people by the end of 2016. We have reduced that target to 50 sales people this year in order to decrease our near term cash expenditure and optimize operations. Our revenue forecast of $27-30 million for 2016 remains unchanged. Our gross profit margin should increase to 46-47%, up from our original outlook of 30-35%. We reduce our bookings forecast to $29-30 million given the smaller team as well as some client delays we have seen in the months running up to the election.”

“The election cycle has had an impact on client commitments, especially for our larger engagements. While we are still expecting Q4 to be a record quarter, the delays and political uncertainty will have a near term effect as many executives have taken a “wait and see” position. That position has started to warm post election night. However, we have some ground to make up for the quarter. Beyond 2016, we see great opportunity in both segments of our business and the fundamental demand for IZEA’s offerings remains very strong. In addition to continuing the growth of our current offerings, we will announce several new revenue generating software services in Q1 2017 at IZEAFest.”

Q3 2016 Financial Results

Revenue in the third quarter of 2016 increased 38% to a record $7.5 million, compared to $5.4 million in the same year-ago quarter. The increase is primarily due to organic growth in all of the company’s revenue streams, including Sponsored Social revenue, Content revenue, and, to a lesser extent, Service Fee revenue.

Gross profit in the third quarter of 2016 increased 66% to a record $3.6 million or 48% of revenue. This compares to $2.2 million, or 40% of revenue, in the third quarter of 2015. The increase in gross profit was primarily attributable to a favorable shift to higher margin managed services versus self-service content and sponsored social offerings.

Operating expenses in the third quarter of 2016 were $5.0 million, compared to $3.0 million in the same year-ago quarter. In 2015, the operating expenses were reduced by a $1.7 million gain on the change in the fair value of business acquisition costs related to the Ebyline acquisition in January 2015.  Without this non-standard gain in our 2015 operating expenses, the increase in our operating expenses was less than $300,000. This increase in operating expenses was primarily due to increased personnel related costs offset by lower fees for legal expenses. Personnel costs increased as a result of a 39% increase in the average number of the company’s administrative and engineering personnel and a 31% increase in the number of its sales and marketing personnel compared to the third quarter of 2015 and legal fees decreased due to the settlement of a patent litigation in the third quarter of 2015.

Net loss in the third quarter of 2016 was $1.5 million or $(0.28) per share, as compared to a net loss of $2.6 million or $(0.65) per share in the same year-ago quarter. The improvement in net loss is primarily due to increased revenue and profit margins partially offset by the increase in expenses in the third quarter of 2016 compared to the same year-ago quarter.

Adjusted EBITDA (a non-GAAP metric management uses as a proxy for operating cash flow, as defined below) in the third quarter of 2016 was negative $0.9 million, compared to negative $2.2 million in the same year-ago quarter. The change in adjusted EBITDA was primarily due to the increased revenue and profit margins thereon. Adjusted EBITDA as a percentage of revenue in the third quarter of 2016 was negative 12% as compared to negative 40% in the same year-ago quarter.

Cash and cash equivalents at September 30, 2016 totaled $6.6 million. The company continues to operate debt free.

Conference Call

IZEA will hold a conference call to discuss its third quarter results today at 5:00 p.m. Eastern time. Management will host the presentation, followed by a question and answer period.

Date: Monday, November 14, 2016
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Dial-in number: 1-201-689-8471
Webcast: http://public.viavid.com/index.php?id=121633

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. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.

A replay of the call will be available after 8:00 p.m. Eastern time on the same day through November 21, 2016.

Replay number: 1-412-317-6671
Replay ID: 13648336

Safe Harbor

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