SOURCE: IZEA, Inc.

IZEA, Inc.

August 11, 2016 16:01 ET

IZEA Reports Record Second Quarter 2016 Results

Record Revenue Up 49% to $6.9M; Record Gross Profit Up 104% to $3.5M

ORLANDO, FL--(Marketwired - August 11, 2016) - IZEA, Inc. (NASDAQ: IZEA), operator of IZEAx, the premier online marketplace connecting brands and publishers with influential content creators, reported record results for the second quarter ended June 30, 2016.

Q2 2016 Financial Highlights vs. Same Year-ago Quarter

  • Revenue up 49% to a record $6.9 million.
  • Sponsored Social revenue increased 86% to $4.5 million, Content revenue increased 9% to $2.3 million.
  • Revenue backlog at the end of the quarter was $8.9 million, including unbilled bookings of $5.1 million and unearned revenue of $3.8 million.
  • Net bookings increased 10% to $6.8 million. The increase in bookings included Sponsored Social bookings up 16% to $4.5 million and Content bookings up 1% to $2.3 million.
  • Gross profit increased 104% to a record $3.5 million.
  • Gross margin was 51%, up from 37% in Q2 2015. Sponsored Social gross margin was 63%, up from 58% in Q2 2015. Gross margin for Content was 24%, up from 11% in Q2 2015.
  • New opportunity pipeline, a representation of new client proposals generated within the quarter, increased 13% to a record $37.6 million.
  • At the end of the quarter, cash and cash equivalents totaled $8.0 million, accounts receivable, net of allowance for doubtful accounts, was $4.7 million and the company had an unused credit line of $5.0 million.

H1 2016 Financial Highlights vs. Same Year-ago Period

  • Revenue up 41% to $12.4 million.
  • Bookings up 36% to $14.3 million.
  • Gross profit up 72% to $5.9 million, gross margin up from 39% to 47%.

Q2 2016 Operational Highlights

  • Integrated a top 10 U.S. retailer into the SocialLinks™ program.
  • Added 10 sales team members, bringing total sales rep to 50 at the end of the quarter.
  • Released 51 updates to IZEAx, including expanded support for video opportunities, enhanced Creator search features and new list curation tools.
  • Named one of the 2016 Best Places to Work by the Orlando Business Journal.
  • Selected by Hashtag Social Media Agency to power influencer marketing in the Middle East and North Africa.
  • Invited to become a member of the Russell Microcap® Index.

Management Commentary

"In Q2, our record topline and strong margin improvement was primarily driven by organic growth of higher margin Sponsored Social revenue and increased use of managed services," said Ted Murphy, IZEA's Chairman and CEO. "During the quarter, we also increased the sales of Content to brand customers and expect to see continued improvement in the Content revenue margins."

"Our recently announced ZenContent acquisition further broadens our content client base with higher margin e-commerce companies and online publishers. This accretive acquisition is part of our ongoing plan to aggregate best-in-class providers in the content and influencer marketing spaces. Looking ahead, we continue to actively pursue accretive acquisition opportunities that can both grow revenue and increase our penetration in niche markets. In addition, we will continue to invest in growing our sales and engineering organizations to support continued growth."

Q2 2016 Financial Results

Revenue in the second quarter of 2016 increased 49% to a record $6.9 million, compared to $4.6 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 second quarter of 2016 increased 104% to a record $3.5 million or 51% of revenue. This compares to $1.7 million, or 37% of revenue, in the second quarter of 2015. The increase in gross profit was primarily attributable to increased use of the company's managed services versus self-service content and sponsored social offerings.

Operating expenses in the second quarter of 2016 were $5.1 million, compared to $3.9 million in the same year-ago quarter. The increase in operating expenses were primarily due to increased personnel costs and additional overhead. These costs increased as a result of a 44% increase in the average number of the company's administrative and engineering personnel and a 20% increase in the number of its sales and marketing personnel compared to the second quarter of 2015.

Net loss in the second quarter of 2016 was $1.6 million or $(0.30) per share, as compared to a net loss of $2.0 million or $(0.69) 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 operating expenses and reduced gain from change in the fair value of derivative financial instruments in the second 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 second quarter of 2016 was negative $1.1 million, compared to negative $1.7 million in the same year-ago quarter. The change in adjusted EBITDA was primarily due to the reduction in net loss and change in the fair value of derivatives. Adjusted EBITDA as a percentage of revenue in the second quarter of 2016 was negative 16% as compared to negative 37% in the same year-ago quarter.

Cash and cash equivalents at June 30, 2016 totaled $8.0 million, compared to $10.1 million at March 31, 2016.

Business Outlook

Trailing twelve-month revenue is up 83% to $24.1M, compared to the second quarter of 2015. IZEA expects 2016 organic bookings to range between $33 million to $35 million, which would represent growth of 35% to 43% versus 2015. The company expects 2016 revenue to range between $27 million to $30 million, which would represent growth of 61% to 71% versus prior year.

Conference Call

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

Date: Thursday, August 11, 2016
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Dial-in number: 1-877-407-4018
Webcast: http://public.viavid.com/index.php?id=120692

The conference call will be webcast live and available for replay via the Investors section of the company's website at http://corp.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 August 18, 2016.

Replay number: 1-877-870-5176
Replay ID: 13642828

About IZEA

IZEA operates IZEAx, the premier online marketplace that connects brands with influential content creators. IZEA creators range from leading bloggers and social media personalities to A-list celebrities and professional journalists. Creators are compensated for developing and distributing unique content on behalf of brands including long form text, videos, photos and status updates. Brands receive influential consumer content and engaging, shareable stories that drive awareness. For more information about IZEA, visit http://corp.izea.com.

Financial Methodology & Related Disclosures

"EBITDA" is a non-GAAP financial measure within the meaning of Regulation G promulgated by the Securities and Exchange Commission. EBITDA is commonly defined as "earnings before interest, taxes, depreciation and amortization." We believe that EBITDA provides useful information to investors as it excludes 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 EBITDA in the same manner, and EBITDA as presented by IZEA may not be comparable to EBITDA presented by other companies. IZEA defines "Adjusted EBITDA" as earnings or loss before interest, taxes, depreciation and amortization, non-cash stock related compensation, gain or loss on asset disposals or impairment and all other income and expense items such as loss on exchanges and changes in fair value of derivatives, if applicable.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based largely on IZEA's expectations and are subject to a number of risks and uncertainties, certain of which are described in greater detail in our public filings with the Securities and Exchange Commission. Actual results could differ materially from these forward-looking statements as a result of, among other factors, competitive conditions in the content and social sponsorship segments in which IZEA operates, failure to popularize one or more of the marketplace platforms of IZEA, challenges integrating acquired business and changing economic conditions that are less favorable than expected. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this press release will in fact occur. Please read the full statement and disclosures here: http://corp.izea.com/safe-harbor-statement.

 
IZEA, Inc.
Consolidated Balance Sheets
       
   June 30,
 2016
 December 31,
 2015
   (Unaudited)   
Assets      
Current:      
 Cash and cash equivalents  $8,015,684   $11,608,452  
 Accounts receivable, net of allowance for doubtful accounts of $244,000 and $139,000   4,668,264    3,917,925  
 Prepaid expenses   430,978    193,455  
 Other current assets   1,068    16,853  
  Total current assets   13,115,994    15,736,685  
            
Property and equipment, net of accumulated depreciation of $571,203 and $445,971   570,836    596,008  
Goodwill   2,468,289    2,468,289  
Intangible assets, net of accumulated amortization of $1,116,092 and $730,278   1,420,377    1,806,191  
Software development costs, net of accumulated amortization of $291,942 and $207,514   882,588    813,932  
Security deposits   149,846    117,946  
  Total assets  $18,607,930   $21,539,051  
         
Liabilities and Stockholders' Equity           
Current liabilities:           
 Accounts payable  $1,239,128   $995,275  
 Accrued expenses   1,224,343    908,519  
 Unearned revenue   3,755,687    3,584,527  
 Current portion of deferred rent   32,340    14,662  
 Current portion of capital lease obligations   -    7,291  
 Current portion of acquisition costs payable   911,904    844,931  
  Total current liabilities   7,163,402    6,355,205  
            
            
Deferred rent, less current portion   78,304    102,665  
Acquisition costs payable, less current portion   -    889,080  
Warrant liability   1,331    5,060  
  Total liabilities   7,243,037    7,352,010  
            
Stockholders' equity:           
 Common stock, $.0001 par value; 200,000,000 shares authorized; 5,363,798 and 5,222,951, respectively, issued and outstanding   536    522  
 Additional paid-in capital   49,832,843    48,436,040  
 Accumulated deficit   (38,468,486 )  (34,249,521 )
  Total stockholders' equity   11,364,893    14,187,041  
             
  Total liabilities and stockholders' equity  $18,607,930   $21,539,051  
           
 
IZEA, Inc.
Unaudited Consolidated Statements of Operations
       
   Three Months Ended
June 30,
 Six Months Ended
June 30,
   2016  2015  2016  2015
             
Revenue  $6,913,689   $4,627,742   $12,379,639   $8,763,236  
Cost of sales   3,418,387    2,917,360    6,519,756    5,358,851  
  Gross profit   3,495,302    1,710,382    5,859,883    3,404,385  
                      
Operating expenses:                     
 General and administrative   2,524,746    2,164,380    5,104,747    4,024,894  
 Sales and marketing   2,612,714    1,746,549    4,972,377    3,328,036  
  Total operating expenses   5,137,460    3,910,929    10,077,124    7,352,930  
                      
Loss from operations   (1,642,158 )  (2,200,547 )  (4,217,241 )  (3,948,545 )
                      
Other income (expense):                     
 Interest expense   (11,411 )  (36,393 )  (32,750 )  (55,163 )
 Change in fair value of derivatives, net   26,421    250,507    29,273    (2,255,444 )
 Other income, net   803    1,142    1,753    2,949  
  Total other income (expense)   15,813    215,256    (1,724 )  (2,307,658 )
                      
Net loss  $(1,626,345 ) $(1,985,291 ) $(4,218,965 ) $(6,256,203 )
                      
Weighted average common shares outstanding - basic and diluted   5,350,128    2,885,721    5,320,962    2,885,305  
Basic and diluted loss per common share  $(0.30 ) $(0.69 ) $(0.79 ) $(2.17 )
                 
 
IZEA, Inc.
Unaudited Consolidated Statements of Cash Flows
    
   Six Months Ended
June 30,
   2016  2015
Cash flows from operating activities:      
 Net loss  $(4,218,965 ) $(6,256,203 )
Adjustments to reconcile net loss to net cash used for operating activities:           
 Depreciation   125,232    96,536  
 Amortization of software development costs and other intangible assets   470,242    303,971  
 Provision for losses on accounts receivable   105,000    -  
 Stock-based compensation   405,326    322,744  
 Fair value of stock and warrants issued or to be issued for payment of services   72,470    105,341  
 Change in fair value of derivatives, net   (29,273 )  2,255,444  
Changes in operating assets and liabilities, net of effects of business acquired:           
 Accounts receivable   (855,339 )  (832,326 )
 Prepaid expenses and other current assets   (138,871 )  (258,099 )
 Accounts payable   243,853    209,420  
 Accrued expenses   342,549    159,643  
 Unearned revenue   171,160    879,598  
 Deferred rent   (6,683 )  1,096  
Net cash used for operating activities   (3,313,299 )  (3,012,835 )
            
Cash flows from investing activities:           
 Purchase of equipment   (100,060 )  (73,296 )
 Increase in software development costs   (153,084 )  -  
 Acquisition, net of cash acquired   -    (905,586 )
 Security deposits   (31,900 )  (4,400 )
Net cash used for investing activities   (285,044 )  (983,282 )
            
Cash flows from financing activities:           
 Proceeds from exercise of options   34,587    29,865  
 Stock issuance costs   (21,721 )  -  
 Payments on capital lease obligations   (7,291 )  (29,869 )
Net cash provided by (used for) financing activities   5,575    (4 )
            
Net decrease in cash and cash equivalents   (3,592,768 )  (3,996,121 )
Cash and cash equivalents, beginning of period   11,608,452    6,521,930  
            
Cash and cash equivalents, end of period  $8,015,684   $2,525,809  
            
Supplemental cash flow information:           
 Cash paid during the year for interest  $47,045   $4,578  
            
Non-cash financing and investing activities:           
 Fair value of warrants issued  $-   $51,950  
 Acquisition costs payable for assets acquired  $-   $4,192,639  
 Acquisition costs paid through issuance of common stock  $848,832   $-  
 Fair value of common stock issued for future services  $82,867   $-  
         
 
IZEA, Inc.
Reconciliation of GAAP to Non-GAAP Operating EBITDA
(Unaudited)
       
   Three Months Ended
 June 30,
 Six Months Ended
June 30,
   2016  2015  2016  2015
             
Net loss  $(1,626,345 ) $(1,985,291 ) $(4,218,965 ) $(6,256,203 )
Non-cash stock-based compensation   200,354    180,413    405,326    322,744  
Non-cash stock issued for payment of services   41,220    70,291    72,470    105,341  
Change in the fair value of derivatives   (26,421 )  (250,507 )  (29,273 )  2,255,444  
Interest expense   11,411    36,393    32,750    55,163  
Depreciation & amortization   299,177    226,211    595,474    400,507  
Adjusted EBITDA   (1,100,604 )  (1,722,490 )  (3,142,218 )  (3,117,004 )

Contact Information

  • Media Relations for IZEA:
    Lindsay Broadhurst
    Director, Corporate Events & Communications
    IZEA, Inc.
    (407) 215-6218
    Email contact


    Investor Relations for IZEA:

    Ronald A. Both
    Liolios Investor Relations
    (949) 574-3860
    Email contact