Managed Services Revenue up 27% to $4.7 Million

ORLANDO, FL (May 10, 2017)IZEA, Inc. (NASDAQ: IZEA), operator of IZEAx, the premier online marketplace connecting brands and publishers with influential content creators, reported results for the first quarter ended March 31, 2017.

Q1 2017 Financial Highlights vs. Same Year-ago Quarter

  • Revenue up 14% to a Q1 record of $6.2 million vs. $5.5 million.
  • Managed Services revenue increased 27% to $4.7 million vs. $3.7 million in Q1 2016.
  • Content Workflow revenue decreased 14% to $1.5 million vs. $1.7 million in Q1 2016.
  • Revenue backlog, which includes unbilled bookings and unearned revenue, was $11.8 million at the end of Q1 2017.
  • Net bookings increased 5% to $7.8 million in Q1 2017 compared to $7.4 million in Q1 2016.
  • Gross profit increased 27% to $3.0 million, with gross margin up 500 basis points to 48%.
  • Adjusted EBITDA was $(2.0) million in Q1 2017 and Q1 2016.

Q1 2017 Operational Highlights

  • Hosted IZEAFest in Orlando, Florida with over 1,500 registered attendees.
  • Launched IZEAx® v2.0, IZEAx for Android, Promoted Posts, and ContentAmp®.
  • Signed a seven-figure contract with a Fortune 500 transportation company.
  • Secured $500,000 in contracts from a global retailer and global CPG company.

Management Commentary

“The combination of our technology, creator network and people is proving to be a winning combination for brands,” said Ted Murphy, IZEA’s Chairman and CEO. “Our team continues to close deals with the world’s leading companies, disrupting traditional agency models and delivering more value to our customers. While these larger brand-direct deals take longer to close and recognize as revenue, we believe these relationships represent a huge opportunity for IZEA.”

“We continue to see strong demand for both influencer marketing and custom content through IZEA’s managed services. Influencer marketing and custom content have reached margin parity at approximately 60% gross profit margin each, and the majority of managed customers are using some combination of these offerings. Managed Services accounted for 76% of our revenue and 95% of our contribution margin in Q1.”

Q1 2017 Financial Results

In January 2017, we revised the way we categorize our revenue streams to more closely align the revenue based on margin profiles and how we currently analyze the business. The revised categories are as follows: Managed Services, which is comprised of Sponsored Social and Content revenue; Content Workflow, derived from the self-service use of the legacy Ebyline platform by news agencies to handle their content workflow; and Service Fee Revenue, derived from various service and license fees charged to users of our platforms. A breakdown of our revenue into these revised categories in historical periods for 2015 and 2016 may be seen in the Management’s Discussion and Analysis section of our Form 10-Q for the quarter ended March 31, 2017, which was filed earlier today and may be found on our company website at https://izea.com/investors/sec-filings.

Revenue in the first quarter of 2017 increased 14% to $6.2 million compared to $5.5 million in the same year-ago quarter. The increase in our Q1 2017 revenue is primarily due to organic growth in our Managed Services revenue.

Gross profit in the first quarter of 2017 increased 27% to $3.0 million, or 48% of revenue, compared to $2.4 million, or 43% of revenue, in the first quarter of 2016. The increase in gross profit was primarily attributable to a favorable shift to higher margin Managed Services versus self-service Content Workflow.

Operating expenses in the first quarter of 2017 were $5.7 million compared to $4.9 million in the same year-ago quarter. This increase was primarily due to increased personnel-related costs and higher public relations and marketing expenses. Personnel costs increased as a result of a 7% increase in the average number of personnel in the first quarter of 2017 as compared to the first quarter of 2016. Public relations and marketing costs were higher due to the shift in timing of our annually sponsored IZEAFest event from Q4 2015 to Q1 2017.

Net loss in the first quarter of 2017 was $(2.7) million, or $(0.49) per share, as compared to a net loss of $(2.6) million, or $(0.49) per share, in the same year-ago quarter. Despite the increase in operating expenses, the net loss was nearly the same as the prior year due to increased revenue and profit margins on our Managed Services compared to in the first quarter of 2016.

Adjusted EBITDA was $(2.0) million in both first quarters of 2017 and 2016.

Cash and cash equivalents at March 31, 2017 totaled $4.4 million. The company continues to operate debt free and has an unused $5.0 million credit line.

2017 Outlook

Management believes that spending among IZEA’s newspaper clients will decline moving forward. This will result in significantly reduced revenue from Custom Workflow in 2017. In addition, IZEA has been notified of overall marketing budget cuts at one of its top clients, which will likely result in a $1 million reduction in revenue in 2017.

The company expects annual revenue in 2017 to be approximately $29-$30 million compared to $27.3 million in 2016. Gross margins are expected to range between 48% to 49% compared to 48% in 2016. Adjusted EBITDA is expected to be approximately $(4.0-4.5) million compared to $(5.2) million in 2016.

Conference Call

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

Date: Wednesday, May 10, 2017
Time: 5:00 p.m. Eastern time
Toll-free dial-in number: 1-877-407-4018
International dial-in number: 1-201-689-8471

The conference call will be webcast live and available for replay here and 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 IZEA at 407-215-6218.

A replay of the call will be available after 8:00 p.m. Eastern time on the same day through May 17, 2017.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13661847

VIEW Q1 2017 FINANCIALS

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