ORLANDO, FL (November 12, 2020) – IZEA Worldwide, Inc. (NASDAQ: IZEA), the premier provider of influencer marketing technology, data, and services for the world’s leading brands, reported its financial and operational results for the third quarter ended September 30, 2020.
Q3 2020 Financial Summary Compared to Q3 2019
- Total revenue down 9% to $4.0 million, compared to $4.4 million.
- Managed Services unit revenue decreased 1% to $3.5 million, compared to $3.6 million.
- SaaS Services unit revenue decreased 39% to $522,000, compared to $853,000.
- Total costs and expenses decreased to $5.3 million, compared to $5.6 million.
- Net loss was $1.3 million, compared to a net loss of $1.2 million.
- Adjusted EBITDA* improved to $(0.7) million, compared to $(1.3) million.
Q3 2020 Operational Highlights
- Raised gross proceeds of $10.3 million from sale of securities through an at-the-market offering. In total, we have raised $25.7 million at an average price of $1.94 per share.
- Opened pre-registration for the Shake Marketplace.
- Announced launch of BrandGraph Pulse with Slack and Microsoft Teams Integration.
- Formed Influence+United and onboarded multiple global influencer marketing partners.
* Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition and reconciliation of this measure under “Use of Key Metrics and Non-GAAP Financial Measures”.
“While revenue was down year over year in Q3, we saw a material improvement in both revenue and Adjusted EBITDA quarter over quarter. Revenue increased 29% and Adjusted EBITDA improved 43% compared to the second quarter ended in June 2020,” said Ted Murphy, IZEA’s Chairman and CEO. “Managed Services revenue in Q3 was close to flat year over year, despite the large gaps in new business we saw in March and April and the ongoing challenges associated with COVID-19 and the political environment. There was no way for IZEA to completely avoid the impacts that COVID-19 has had on the marketing budgets of some of our existing clients, but I believe our team has done a fantastic job adjusting our sales approach and finding new opportunities to bridge the gap.”
“There was a bigger impact in our SaaS Services unit, as we expected,” continued Murphy. “We were already in the midst of a change in pricing model for enterprise customers from last year which would impact 2020 revenue even without the events that have unfolded since the pandemic was declared. The acquisition of new enterprise customers has been slow since March, and many of our existing customers have reduced their marketplace spend. We expect to see challenges with enterprise SaaS until such time that the macro environment stabilizes, and marketers feel more comfort in making long term commitments.”
“Despite the decreases in overall SaaS revenue, our count of active SaaS customers is growing and hit an all-time high again this quarter,” said Murphy. “We continue to see growth with IZEAx Discovery, our $149/mo self-service offering. New customer signups for IZEAx Discovery hit an all-time high in October and were up 2.6x from October of last year. Monthly revenue for IZEAx Discovery also hit an all-time high in October and was up more than 25% from September of this year, which was the previous record. We are beginning to invest much more aggressively in our marketing efforts to broaden our customer base and drive more of this self-service growth. Early indications are that our marketing efforts are working, and we believe there are ongoing performance optimizations to make each dollar we spend more effective as we gather more data.”
“IZEA ended the quarter with $30.6 million in cash, the strongest our balance sheet has ever been,” said Murphy. “Our team has been working to prudently make strategic investments in technology, marketing, and people to best position ourselves for 2021 and beyond. Our primary focus for the year ahead is returning to revenue growth by broadening our customer base with emphasis on self-service revenue streams.”
Q3 2020 Financial Results
Total revenue in the third quarter of 2020 was down 9% to $4.0 million, compared to $4.4 million in the third quarter of 2019, with revenue from Managed Services decreasing by $44,000 or 1% to $3.5 million in the third quarter of 2020 compared to the third quarter of 2019 and revenue from SaaS Services decreasing by $331,000 or 39% in the third quarter of 2020 compared to the third quarter of 2019.
Revenue from Managed Services decreased slightly due to marketers canceling or pausing planned advertising campaigns or events in March and throughout the third quarter of 2020 as a result of uncertainty or inability to offer their products for sale as a result of business or event shutdowns due to COVID-19. Despite the delay in the execution of existing orders from our customers, we experienced a slight increase in net sales orders in the third quarter of 2020 compared to the second quarter of 2020, as marketers who were still advertising shifted more of their spend to influencer marketing campaigns.
Revenue from SaaS Services decreased primarily as a result of lower marketplace spend levels (“gross billings,” a key metric as further defined below) from our SaaS marketers and, as a result of competitive pricing efforts, our margins on those spends were reduced. Our gross billings for SaaS Services decreased 35% to $2.0 million in Q3 2020, compared to $3.1 million in Q3 2019. Our SaaS marketers decreased their spend levels as they transitioned from the TapInfluence platform to IZEAx and curtailed spending in March 2020 and throughout Q3 2020. The reduction in these gross billings resulted in the $331,000 decrease in SaaS Services Revenue in the third quarter of 2020 compared to the third quarter of 2019.
Total costs and expenses decreased 5% in the third quarter of 2020 to $5.3 million compared to $5.6 million in the corresponding quarter of 2019. This decrease was due to a $203,000 reduction in cost of revenue as a result of the lower sales, a $61,000 reduction in amortization costs as assets were fully amortized in the quarter, and cost reduction efforts affecting personnel, software subscriptions, hosting costs, rent, travel and marketing expenditures. The improvement between periods is more than $1 million after removing the effect of a $794,000 gain on the final settlement of our acquisition cost liabilities recorded in the prior year quarter. The gain resulted due to the actual closing market price of our common stock on the date of settlement being lower than the 30-day volume weighted average price used to calculate the number of shares used to pay for the acquisition liability pursuant to the terms of the purchase agreements.
Net loss in the third quarter of 2020 was $1.3 million or $(0.03) per share, as compared to a net loss of $1.2 million or $(0.04) per share in the third quarter of 2019, based on 45.8 million and 32.4 million shares outstanding, respectively.
Adjusted EBITDA (a non-GAAP measure management uses as a proxy for operating cash flow, as defined below) improved 42% or $531,000 to $(0.7) million compared to $(1.3) million in the third quarter of 2020 and 2019, respectively. Adjusted EBITDA as a percentage of revenue in the third quarter of 2020 was negative eighteen percent (18)% compared to negative twenty-eight percent (28)% in the third quarter of 2019. Despite the decline in revenue, we were able to improve Adjusted EBITDA through the steps taken to curb spending during these months of uncertainty.
We raised $10.3 million from sale of securities through our at-the-market offering (the “ATM”) in Q3 2020. To date, we have raised total gross proceeds through the ATM of $25.7 million between June and August 2020. Our cash balance as of September 30, 2020 was $30.6 million.
IZEA will hold a conference call to discuss its third quarter 2020 results on Thursday, November 12th at 5:00 p.m. Eastern time. Management will host the call, followed by a question and answer period.
Date: Thursday, November 12, 2020
Time: 5:00 p.m. Eastern time
Toll-free dial-in number: 1-855-327-6837
International dial-in number: 1-631-891-4304
The conference call will be webcast live and available for replay via the investors section of our 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 November 19, 2020.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10011744