Ted Murphy - CEO LeAnn Hitchcock - CFO Ryan Schram - COO

Jon Hickman - Ladenburg Thalmann Matt Tiampo - Craig-Hallum Bill Musser - New Frontier Capital Neal Goldman - Goldman Capital Management Jim Goss - Barrington Research

Greetings and welcome to the IZEA Inc Full Year 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation [Operator Instructions]. As a reminder this conference is being recorded. I’d now like to turn the conference over to your host Mr. Ryan Schram, Chief Operating Officer. Thank you. You may now begin.

Good afternoon and welcome to IZEA’s fiscal 2015 earnings call. I’m Ryan Schram, Chief Operating Officer at IZEA and joining me on the call this afternoon are my colleague IZEA’s Chief Financial Officer, LeAnn Hitchcock and IZEA Founder, Chairman and CEO, Ted Murphy. On behalf of the entire team here at IZEA we’re pleased to have you with us today as we share updates and perspective on our business. During the course of today’s call our management team will discuss IZEA’s business outlook and in the process of doing so will make some forward statements regarding the company. These statements are predictions based on our team’s expectations as of today. Actual events or results could differ due to the number of risks and uncertainties including those mentioned in our most recent filings with the SEC, the company assumes no obligations to update any forward-looking statements made during this call. Now with the appropriate disclosures out of the way, I’d like to introduce IZEA’s Chief Financial Officer, LeAnn Hitchcock to walk us through results from the fourth quarter of 2015 and the summary of the year in whole. LeAnn?

Thank you Ryan, and good afternoon everyone. I am pleased to share that IZEA had another record breaking quarter. IZEA reported record quarterly revenue of 154% to 6.3 million compared to 2.5 million in Q4 2014. This also represents a 15% increase over Q3 2015 revenue of 5.4 million, this increase is primarily attributable to the creation of our content only revenue stream through to the acquisition of Ebyline and continued increases in our existing sponsored social revenue. Content revenue was 2.3 million accounting for 37% of total revenues in the quarter. Sponsored social revenue was 4 million accounting for 63% of total revenues for the quarter. Net bookings increased 167% to 7.3 million compared to 2.7 million in Q4, 2014. A significant amount of business booked in Q4 including one order in excess of $1 million was weighted towards the back half of the quarter. We’re also continuing to see larger deal sizes that are beginning to extend over longer periods of time up to one year. As a result, much of the bookings were not recognized as revenue within the quarter. At the end of the quarter the company had unearned revenue of 3.6 million with an additional 3.8 million of booked business not yet build for a total of 7.4 million that is expected to result in future revenue. Gross profit for the quarter was 2.7 million, up from 1.6 million in Q4 2014, an increase of 65%. This also represents 24% increase over Q3 2015 gross profit of $2.2 million. The gross profit increase is attributable to the increase in revenue during the quarter along with improved margins on that revenue from 40% in Q3 2015 to 43% in Q4 2015. Gross profit margin for the quarter of 43% is down from 66% as compared to the prior year quarter. This is largely due to substantially lower profit margins on content revenue specifically with newspaper customers. Gross profit margin for the quarter for sponsored social was 60% while gross profit for content was 14%. We expect margins on content revenue will continue to improve overtime due to growth in our managed services over the content business. Operating expenses for the fourth quarter of 2015 were 5.1 million compared to 2.8 million during the same period in 2014. Operating expenses increase as a result of $1 million increase in personal cost. We increased the average number of personal by over 18%, commission and bonus expenses also increased as a result of the increase in revenue. Marketing expenses increased primarily as a result of our IZEA press conference held in Q4 2015. Depreciation and amortization expense also increased by approximately $400,000 as a result of the amortization of our software development cost and intangibles acquired in the Ebyline acquisition. Our cash based OpEx to revenue ratio continues to improve as we gain efficiencies through better performance in technology. Cash based operating expense as a percentage of revenues are trending 33% better than in prior year. However, we still expect that growth in expenses were outpace to growth in our gross profit near term, as we expand our personal to support our managed content business and as we increase our engineering expenses to improve and support our web base platforms and IZEA partners. These investments are being made in order to provide the infrastructure to create continued revenue growth at higher margins in coming years. Adjusted EBITDA for the quarter was a loss of 1.8 million compared to a loss of 1 million during the same period last year. The decrease in EBITDA is primarily due to continued investments in new hires and increased marketing spend in Q4 2015. Net loss for the fourth quarter of 2015 was 2.4 million compared to net income of approximately 1 million in the fourth quarter of 2014. Diluted loss for common share for the fourth quarter of 2015 was negative $0.47 compared to diluted income for common share of $0.34 in the prior year quarter. This is primarily due to a $2.2 million difference in the change in fair value of the Company's derivative and the increase in personal cost between the periods. In July and August, 2015 we offered a 25% to 26% discount on warrants that we had issued to investors in 2013 and 2014. On August 14, 2015 investors exercised warrants for a total of 2.2 million shares of common stock at a post reverse average exercise price of $5.87 per share. As a result of the warrant exercise, we received cash of nearly $12.9 million, recorded a loss on exchange of 1.8 million due to the reduced exercise prices and eliminated the $6.5 million warrant liability in Q3 2015. This transaction combined with our current operations during Q4 2015 resulted in cash and cash equivalents balance of $11.6 million, a positive working capital balance and stockholder's equity of 14.2 million at December 31, 2015. In addition to our cash on hand, we still have a $5 million credit facility with Bridge Bank which is currently untapped. On January 11, 2015 we effected a one for 20 reverse stock split in order to allow our stock price to be trading at a level sufficient for us to trade on a national exchange. All share and share price amounts disclosed on this call and in our annual report for 2015 are adjusted to accounts that effects this reverse split. The tremendous improvements in our financial position throughout 2015 and the reverse stock split allowed us to accomplish our goal to trade on a national exchange. On February 26, 2016 we completed the successful uplifting to the NASDAQ stock market where we rang the opening bell on March 4th. I will now pass it over to Ryan to speak about the brands and agencies we’ve partnered with during our fourth quarter.

Thanks LeAnn. 2015 was a remarkable springboard year for IZEA here by three key tenants of our client development strategy. Number one up selling and cross selling of both influencer and content marketing campaign to our client base both new and existing. Number two expanding our [indiscernible] sales team both domestically and aboard with solution minded personnel. And number three to capitalize and our ability to grow existing client relationships through delivering highly measurable results with a world class customer experience. I'm pleased to report that our success in Q4 and the year as a whole in 2015 was thanks to impart to our team executed against this plan, setting IZEA up for further to growth again in 2016. This is the key as we work forward and aim to grow our annual booking to in $100 million at the end of 2018. With bookings up a 167% year-over-year to a record $7.3 million in the fourth quarter. We believe the performance in Q4 is indicative of a broader industry trend. The acknowledgement, the quality content drives a level of engagement and value unlike anything seen from other traditional media or margin investment. That dynamic enables our client development teams to not only benefit from the wind fall of dollars beginning to shift in our direction. But for IZEA's unique position as a technology company to provide compelling efficiencies that aren’t available from traditional media company or advertising agencies. Our teams continue to benefit from another interesting nuance related to influencer and content marketing, our ability to access budgets from the very wide range of end customers. From brand managers seeking to drive awareness and engagement to shopper margining practitioners carving a path to purchase, to public relations and corporate communications specialist charged with telling stories in compelling ways through influential content. All of these aspects make IZEA's unmatched offerings a natural part of a brand playbook which directly correlates to larger deal sizes, extended pipeline and industry recognition the Company enjoyed in 2015. To that point the company budgets first individual customer contract in excess of $1 million during the fourth quarter and has several others already in the pipeline for fiscal 2016. We were also very fortunate that even though the company grew its total bookings substantially year-over-year over 60% of those dollars came from our loyal existing client. Many of these companies are brands you know and love including Clorox, Disney, Hershey, Nationwide, Proctor & Gamble, UPS, and Wendy’s. Our client development organization was equally proud to welcome many new brands to IZEA's family during the quarter including Cost [ph] Media, Hyatt, Mercedes and Viacom. On the topic of our tradition on January 14th IZEA was named the recipient of Frost & Sullivan’s 2015 North American Social Media and Marketing Customer Value Leadership Award. Underscoring the company's investment in technological innovation and acknowledging our industry leading focus on improving customer ROI. Ted and I were honored to accept the award on behalf of the company as a black tie function at San Diego alongside many other global leaders. Now for some additional insights about the company's performance in 2015 and a look at what's ahead for IZEA's here in 2016. I'll turn the call over to my colleague our Chairman and Chief Executive Officer, Ted Murphy. Ted?

Thank you, Ryan. In the beginning of 2015 the IZEA's management team set out to achieve three core objectives. Our first objective was to go IZEA's annual bookings to 25 million. A lofty target from just 9 million and bookings in 2014 we finish the year in line with that objective and more importantly have set the stage for continued growth this year. Our second objective was to strengthen our overall financial position to do that we needed to booster our balance sheet, reduced the warrant over hang and address litigation. In August of 2015 we both settled our patient distribute with Blue Calypso and closed on a $12.9 million warrant conversion. Not only did we receive 81.5% participation, it was accomplish by management without banking fees. Our third objective was to get uplifted to NASDAQ. This goal was based on our desire to attract the broader and more diverse shareholder base and to still our contractual obligations to holders of our 2014 private placement. We started that process in July of 2015. In January of 2016, we affected a reverse split of our stock during one of the most tumultuous [ph] times in the market in recent history. But we were able to maintain the stock price and we began trading on NASDAQ in February of 2016. In addition to our execution against our core objectives, we also made significant progress in other areas of the company. In January, we acquired Ebyline and began offering content marketing solutions. In August, we began initial sales operations in Canada. In October, we launch the IZEA Score Suite Beta, Content Profiles, IZEA for iOS, and SocialLinks Beta with eBay partnership and technology integration. In December, we licensed IZEAx to a global top 10 media company as well as a large multi-national advertising agency. In December, we also signed our first individual customer contract in excess of $1 million. We grew the IZEA staff 94 to 121 full time team members adding senior key members in sales and leadership including Chris Staymates, VP of Engineering and Sandra Carbone, General Counsel. We also grew the IZEAx network to 629,000 user connections, reaching 3.5 billion aggregate fans and followers. Together these milestones have dramatically altered our corporate profile with both our clients and our investors. I am proud of what we accomplished in 2015 and I’ll comment our team for their hard work, dedication and grit. As I have communicated over the past year, our primary focus as an organization is on top-line growth. That said, I want to reiterate that we remain respectful of the bottom-line and are in the process of continued improvement and expense optimization. We are achieving efficiency by refining our technology to automate processes and investing in the betterment of our existing team members. Nowhere is that more directly measurable than in the performance of our sales team. Our sales team is selling bigger deals driving more repeat business and capitalizing on the growing interest in both sponsored social and content marketing. Our average bookings per sales person in 2015 increased 117% over 2014. And our average bookings for all employees increased 84% as well. Our average deal size grew 92% last year reflecting our teams’ ability to command larger budget and navigate increasingly complex sales opportunity. While revenue increased a 146% year-over-year, our cash based OpEx only increased 67% and cash based OpEx as a percentage of revenue decrease from 111% in 2014 to 75% in 2015. This includes $714,000 related to our legal fees and settlement agreement with Blue Calypso. Moving forward, our legal fees will decrease significantly allowing us to invest in areas of the business that are additive to our growth. We believe the market opportunity for IZEA solutions is real and growing as evidence by both start-up funding and acquisitions in the space. In order to maintain our leadership, we will need to put more distance between IZEA and growing field of competitors seeking to secure a peak of the market we created. As we look to 2016, we intend to continue our strategic investment in sales and technology ahead of revenue growth. This will result in losses throughout the year as we continue to scale our team. From a spend perspective, we are comfortable with these investments resulting in a negative EBITDA of approximately $6.5 million in 2016. The majority of this cost is related to our significant investment in engineering and sales team members. Our goal is to grow our sales organization to approximately 65 people by the end of Q4 2016, up from an annualized average of 37 sales people in 2015. A cost of these new hires is absorbed for approximately seven months ahead of their contribution to revenue growth. We believe, we have developed a comprehensive sales program that continues to improve in instability to deliver returns for the company. For every dollar, we spend on sales salary, commission and related payroll taxes in 2015. We generated $6.38 in revenue and $7.39 in bookings. The return on sales spent for booking has increased 76% from $4.21 in 2014. The majority of sales and technology investments we make this year will not have a significant impact on bookings of revenue in 2016. We are making investments this year with our eye on our goal of $100 million in booking by 2018, over the next three years we expect organic bookings growth of 35% to 50% each year, resulting in organic booking of $75 million to $85 million in 2018. We expect to make two to five strategic acquisitions over the next three years, resulting in additional revenue of $15 million to $25 million. In 2016, we expect our organic booking to be in the range of $33 million to $35 million. As we continue to see larger deal sizes we expect that the timeline from bookings to revenue recognition will expand in 2016, we believe the weighted average will be approximately 120 days, as a result we expect that revenue in 2016 will be in the range of $27 million to $30 million. This outlook is largely dependent on the timing of sale and length of the campaigns which may range from one day to one year. As IZEA continues to grow organically, we believe there is opportunity for us to consolidate synergistic companies, optimize them for efficiency, plug them into our sales force and grow our footprint. We are in very stages of active due diligence with a handful of companies at the moment and then move through the process with other transaction on many more. We are seeking companies that are aligned with our core business and complement our people and culture. Acquisitions must be accretive for our shareholders and make sense for IZEA within the construct of our own balance sheet and market cap. As I shared in Q3, we believe that there will be limited growth of the newspaper related editorial content business that represented a vast majority of Ebyline historical revenue. However, we are seeing strong growth of content sales from our brand customer and expect the trend to continue for the foreseeable future. We believe that the Ebyline acquisition was a very positive for our company in terms of revenue, creator network and key members we added. Our total expected payments for the Ebyline acquisition will be $3.3 million, for a business that has already generated $8 million in revenue and $10.2 million in booking in only 11 months during 2015 alone. IZEA has transformed this business by increasing margin, targeting new customers and driving sales through our team. In the first quarter of 2015 the gross profit margin on content sales was 10% and we ended Q4 2015 with a gross profit margin on content sales of 14% and we believe there is still significant room for growth as we build the business within the IZEA model. As a result of our changing revenue mix we believe we will continue to see total gross profit margins that are between 38% and 41% in 2016, not only we're making progress with clients, we're also making progress with partners. In Q4 2015, we signed two significant new IZEAx partnerships, both obtained the monthly license fee to use our platform. We have already received significant commitments from these partners and expect that partner revenue will exceed $1 million for the first time in 2016, while still a very small part of our business, revenue from partner licensing and user subscription grew 711% year-over-year and we expect triple digit growth in 2016 as well. We made significant progress in 2015 and expect that 2016 will be no different. I have high expectations for our team members to continue delivering growth while optimizing our operations. We have never been in such a positive position in terms of our team, our capital structure, our customer base and technology. Speaking of technology, we have some big things we're working on in the IZEA lab, the mantra for this year is better, faster, stronger and the innovations we're developing are designed to broaden our client base, make our team more efficient and open up new recurring revenue stream, mark your calendar now for IZEA Fest 2017 scheduled for February 10th and 11th, in sunny Orlando, Florida. We will be unveiling our latest technology and have opportunities for investors and analyst to meet with the IZEA management team in person. Given our recent uplifting to the NASDAQ capital market, we intend to be more aggressive in our investor awareness efforts. In March of 2016, we engaged Liolios Group as our new Investor Relations firm, we've been working with their team to develop a comprehensive approach to a capital market, near-term we're primarily focused on increasing the liquidity of our stock by sharing IZEA story with the broader audience. While we are still early in our plan, we have already seen signs of interest from new institutions and analysts. Trading on NASDAQ combined with the higher share price has helped open the door to new relationships and opportunities which were previously out of reach. Earlier this week, we announced that we have been invited to present at the Oppenheimer Conference in May. During that same month, we will also be presenting at the Needham Conference, B. Riley Conference and Marcum MicroCap Conference. In addition to these financial conferences, I will be travelling to meet with investors in major markets around the country over the coming months. If you’d like to arrange a meeting with me while I am in your city, please reach out to Ron Both at Liolios. Thank you for spending your time with us this afternoon. I would now like to open up the call for Q&A.

Thank you. At this time, we’ll be conducting question-and-answer session. [Operator Instructions]. Our first question comes from John Heckman, I’m sorry. Our first question comes from [indiscernible]. Please go ahead. I’m sorry next question comes from Dennis Doe [ph], Private Investor. Please go ahead.

Can you first address the bookings for the fourth quarter, it was 36.2 million in Q3, 24.8 million in Q4. What accounted -- what was the significant drop?

Are you speaking of the pipeline?

Pipeline, yes the pipeline, sorry

Pipeline, okay. Sure.

Hi there it’s Ryan, Dennis. There is really a couple of factors that we want people to know about as it relates to the pipeline. One is seasonal, the other is operational. Seasonally for us in Q4, you basically have three weeks of solid holidays between the Thanksgiving and Christmas and Jewish holidays that happened in November and December, we lose a lot of our own team members’ time, but certainly client availability. So that comes as no surprise to us. The other thing we would say is that we’ve really been trying to work with our team to increase the operational rigger of what really is considered qualify pipeline. So most of the proposals that we put in front of our client often have multiple price points, which they’re considering. So we’re try more and more efficient to effective at being able to look at that and be as conservative as possible when we report that number to the public. However, on the positive side I’d say, I think the real story and Q4 is the extremely high closer rate we had with that pipeline, it’s not only giving us a tremendous amount of -- since that story is talked about in Q4, but certainly from the table for us here in 2016.

Okay, thank you. Just two quick ones, are you experiencing for the first -- did you experience for the first quarter roughly the same cash earn rate as you did into the fourth quarter, which would give you about 9 million or so cash left at the end of this quarter approximately?

We’re not really going to discuss Q1 yet, that will be something that will handle on our next earnings call.

Very good. And my last question really talks about valuation. You were talking about looking at acquisitions that were accretive to shareholders. Given the extremely low valuation of the enterprise value right now, which is roughly about one-time sales. Are you suggesting that you can be buying companies out there for less than one-time sales?

I believe that those types of opportunities are available, if we are able to be creative in the structures that we’re putting together. If you look at the Ebyline acquisition that we did last year, you will see that we will able to do that in a way that was below one-time sales. And those opportunities are certainly out there with other company.

Well, I guess what I was really hoping to see the answer was that, you thought the valuation was way too low and you’re expecting that valuation to get up higher than one-time sales, which will give you many more opportunities.

Well, we certainly do agree with that, we do believe that the company is undervalued and that the market cap is nowhere near what it should be. At the same time, we are trying to operate within the constraint that we have of our own capital structure. So we are trying to balance those two things to best that we possibly can, realizing that the market is lagging behind our performance.

Thank you very much.

Our next question comes from Jon Hickman from Ladenburg Thalmann. Please go ahead.

Hi, Ted. I am sorry I have got kicked off for a few minutes, so I hope these aren’t repeat questions. Can you hear me?

Yes.

Okay, so just to go back over your guidance, you were saying that you thought bookings would be 35 million to 36 million in 2016, did I get that right?

Bookings for next year, yes those are correct.

And then you said revenues from 27 million to 30 million?

That is correct.

And gross margins from 38% to 41%?

That’s correct.

Okay and then here was the number that LeAnn gave that I didn’t get the write down, she said something about unearned booking were 3.6 million and un-booked was how much?

We have 3.6 million in unearned revenue on our books and we still have additional 3.8 million of orders that we have yet to begin and start billing for a total of 7.4 million.

7.4, okay. So can you talk a little about -- you said something about it growing book of competition, can you elaborate on that?

Jon, its Ryan. I’ll speak to that. Yes, I mean what we were seeing is really a trifecta situation going on right now. One, we are seeing -- we are tracking over 200 different competitors in the influencer and content marketing space, that’s a global number and those are the ones that we call material side, I mean actually doing revenue, not incubated or very early stage. And I believe also that’s an opportunity for us and what Ted was alluding to in his comment, we are seeing a large portion of those that our company maybe have gotten early stage or even if there is a funding, they just haven't been run very well, but have built a market position that could be accretive to IZEA, so those with heights of companies that we’re looking to build a burn into our operational system and take advantage of bringing something potentially.

Yes, I would add to that that one of the things we are seeing is that while many of these companies have a good looking Web site and a great out ward appearance, that many of them are just simply very small. So we have set a minimal threshold internally for us to look at companies that are above $3 million in annual revenue as kind of our minimum. And what we are finding through this process is that the overwhelming majority of those companies fall far below that threshold.

Okay, so going back to your guidance, you indicated that for the year there would be total of negative EBITDA, but you also said you are aware of the bottom-line, do you have some target in mind like when you might go profitable on the bottom line, positive EBITDA? Like are you targeting mid next year or late this year or can you give us any kind of timeframe on that?

What we are really looking at Jon is a revenue run -- a bookings run rate of somewhere around $50 million. in terms of the exact timing it's really going to be based on the mix between our products and only 11 months into this with Ebyline, we are still trying to determine how that revenue is going to be recognized and how that’s going to ultimately affect that the bottom line.

So 50 million in bookings?

Yes, we --.

To get EBITDA positive?

True. I am sorry revenue.

50 million in revenues?

Yes.

Okay, so --.

I do want to carry out that, that there are a number of things that impacts our gross profit margin and depending on what the mix is it will effect that.

So 50 million in revenue that’s like well over a quarter or something like that?

Approximately, a little more --.

Okay thank you. I’ll let someone else start questions. Thanks.

Our next question comes from Matt Tiampo from Craig-Hallum. Please go ahead.

In terms of as we look out at 2016, maybe you can give us a sense for how you expect the business to trends seasonally throughout the year, trends for a continued sequential quarter-over-quarter growth and then, also as we think about the timing and layering in of additional expenses and how you expect that to progress through the year, any color you can give would be helpful.

Yes. We think that it will largely be quarter-over-quarter sequential growth just based on the way that we are layering in sales people. That said there is some seasonality and marketing spend in general Q1 tends to be the lightest and Q4 tends to be the biggest. But that will I think largely be affected by the way that we've done our sales hiring. So if anything I expect that the variance between those quarters would be pretty minimal.

Okay, great. And then I think Ted you mentioned that you expect to do your first year of over $1 million in partner revenue this year and just wondering if that is captured within the total revenue guidance first and then second what should we expect in terms of contribution margin on that revenue and how that effects the overall gross margin?

Yes so it is captured in the overall revenue number the margins on that are going to be lower, in that the partners are offered discounts. So those -- that can be what actually brings down the sponsored social revenue a bit -- I'm sorry, the contribution on sponsored social, but it is also offset by licensing fees. So I don’t know that we have quite enough information that to know what the ultimate balance between those licensing fees and the discounts are going to be, but we've already received enough commitments early this year to feel comfortable on that million dollar number.

Great. Maybe just one more for me that can you give us an update on how your partnership with eBay is progressing? Thanks.

So I assume that you are talking about social links?

Yes.

So we released a new version of that platform two weeks ago and just rolled out the analytics component of that for the first time. It is now available to all of the users who meet the minimum quality requirements and we are going to be messaging those people as to the availability of that driving them back in within the next two weeks. So we are in a phase right now, I'm just making sure that all the analytics are correct and that we are happy with how that system is working. On the topic of social links, one of the things that we are really excited about is that we currently have a backlog of online retailers who want to participate in that program, so what we are doing right now is making sure that we have stabilize the technology and the core features before we onboard the other major retailers who want to participate. So we see that as a long-term play for us, we’re definitely excited about what the opportunities are, we think that performance marketing is going to be a big part of the influencer space moving forward and we think that the big opportunity with that platform actually gets unlocked when we roll it out on the idea mobile devices.

Our next question comes from [Indiscernible]. Please go ahead.

I wanted to ask a little bit about I guess the budgets that you are getting. So you mentioned that you are spending across number of different budgets, brand budgets, PR budgets, shopper budgets. Do you have a rough kind of presented allocation across the different types of budgets?

It does fluctuate from quarter-to-quarter, what I would say directionally is that we're seeing growth the most in PR brand and shopper budgets directionally and it's interesting because those are traditionally areas that aren’t necessarily always as above the lines if you will, from an advertising perspective as people think. That's not to say that the media sector isn’t also growing, thankfully it is, it's just that in a world that is highly fractionalize in the space or highly fragmented our ability to be able to go in and get comprehensive access to budget actually comes from the more nontraditional areas as well.

Got it and between I guess the PR and sharper do you have a rough split of where are your booking are coming from?

I have an offhand for Q4 of the year, I can go back and look at that for you. What I would say anecdotally is that different key times of the year relate to where those money's may come from for example PR dollars tend to come during launches of products which in say automotive or even retail happened earlier on in Q4 and where a shopper tends to be more holiday specifics they are looking basically at Black Friday and beyond

Great and then I had one more question, in terms of the competition, wanted to get your perspective on who you see as the top competitors? Is that the agencies trying to do, what you do, throughout their own networks, is that -- do you see funded companies like tap influence or collective buyers [ph] or is it the social platforms like Facebook or Twitter recently acquiring a niche or buying influencer network. So, would like to get your perspective on that.

Sure, I think you can actually come from all three of those audiences, the largest through in terms of set and size, are privately backed or venture backed companies themselves. The agencies for us are our client source, in most cases what we do complements what they do, they bring in the strategy and clockwork resources to really ideate and oversee how sponsored social or virtual news room fit in to a broader client strategy. We're not looking to go down the past other agency model whatsoever, that’s why we stayed very focused with the technology front, to be able to provide better solutions to them. That's what we think is our sweet spot. To that extent the platforms themselves, as it relates to a niche with Twitter, I think that's great, it happens to be one or two of what is 10 different platforms that IZEAx support and they're really trying to super serve the very high end celebrity or web celebrity audience which while important is only one portion of the spectrum that we're trying to solve the problem for IZEA.

Got it. Are any of these UC backed competitors, I guess, are they all doing the self-serve tech model that you guys are or are they the ones that are doing more of a managed services and do you see benefits in either methodology?

So to be clear, we are actually approaching that in three ways, right, we have our managed business, which would be working with our sales team and there support resources to execute campaign. We have our self-service model where you can go in and plug in a credit card and do it yourself if you are a small business. And then our partnership ecosystem which is more or white label ecosystem for large media companies and agencies. So what we're seeing though on the competitive landscape, are larger people trying to play in the managed space with some kind of technology maybe, to Ted’s point earlier what we're seeing as we go through the exploration process of acquisitions, is that with there are multitude of bulk claims been made out there about the sophistication of some of these companies and when you really peel back the layers, sometimes it's just, four guys or girls in a garage with a really great wordpress [ph] instant. So it's been an interesting exercise for us at low level to understand the market better, but really to understand how IZEAx stands up to some of those solutions.

Our next question comes from George Kafkarkou, he is a Private Investor. Please go ahead.

I got a few questions, the more I hear you guys, the more it’s pretty obvious that inference space marketing is a growth share of advertising, that’s very obvious. How do you think some of the traditional advertisers think about this, it seems the only competitors we have, while you mentioned the number 200, they are either incredibly small, they've just started and any serious ones will see feedback [ph]. So it seems as though we have good headroom to grow, clearly you are growing very reliably, you're increasing sales staffs. So I'm just wondering how does the traditional [indiscernible] or Verizon or Google, how do you think they think about this space?

One other thing that we're seeing is that these traditional media companies are seeing the opportunity in the influencer space and in many cases we're working with them. So as Ryan had mentioned Wycom [ph], work with NBC, Universal and Disney. Even though Disney has their own solution in the influencer space, we're still doing work with them. So I think that that speaks to the solution that we’ve build and the specification of that network and the technology and all that said, there is no doubt that people over the years are perking up and they see opportunity here and we think that long-term for us, that puts us in a very good position to be a target that one of these larger companies may want to look at and if that opportunity come that will be one that we will evaluate.

Yes, of course. I mean it’s very hard, it’s very difficult to imagine companies growing in banner advertising, I mean that’s very dated at this point, so hence my question, okay. Can I just ask about the average deal size, it increased significantly most impressively this year? This may sound the crazy question, if you’re goal to continue to increase the average size of the deals, because you can look at number of ways right, I mean if replace or have the emphasize come up with seven or eight, seven figure deals. It takes a year, two years to recognize it. I mean is there a sweet spot. How do you guys think of one is the optimal size of deal? Am I explain --?

George. Yes, so I actually think there is a handful of factors in the way that we looked at it. The first one is, we’re enjoying organic deal size growth on the individual offering themselves. So we’re selling larger sponsored social campaigns, larger individual virtual newsroom campaigns. The area of opportunity and really where we’re having the biggest conversations today with clients is actually commitment that involves both of the two tenants of the company and that by nature increases the overall deal size. Because now you’re talking about perhaps a multi-quarter or annual content management efforts, married with great sponsored social to help with the amplification of that content across those different periods of time. So I don’t think we’ve even begun to see the surface of what that can do for us in the hole. But I also think on the individual offering sizes, it’s all tied back to result. I mean you just said it a second ago, not only are banner ads ineffective, we as a society are banner blind. I mean the real stat is, you have a better chance of surviving on plane crash than intentionally clicking one of those things this year. So it’s no wonder that eight or nine digit business category, is that those dollars are shifting towards things that actually deliver measurable results, which I think is why we’re starting to see the consistency that we’ve been able to demonstrate.

Okay. Alright, great stuff. Last question, just a very small thing. I notice in the press release. We now user term, user connections whereas before, I think it was registered users. Is that just imagination or did I pick-up on it right?

No, that we actually addressed that in the K. We are in the process of making some changes in our backend technology to split apart, the way that we look at user accounts. Because what we are finding is that, we could have the 10 or 20 celebrities registered as creators, but tied back to a single manager. So moving forward what we are going to report are those user connections as well as accounts and those accounts have multiple user connections tied to them.

Okay. But then obviously the historic comparisons have to be addressed as well, right? Because to do the comps -- okay. I get it. That’s useful. Thank you. Okay guys listen great quarter, great year. Thank you very much and more of the same please and hopefully.

Our next question comes from Bill Musser from New Frontier Capital. Please go ahead.

My question is sort of follows on a little bit from the prior one. Could you talk about your million dollar deal, was it social, was it content, who brought it in, how long did it take to negotiated it and sort of how will it flow through the revenues? And then my second question is that in terms of talking about the increased in engineering spending, you said there were some potential important technology break through that could be available to us and I’d like to understand in general what those might be?

Sure Bill. I’ll handle the client one first and hand it over to Ted to talk about engineering. That million dollar deal is actually characteristic of what we hope to see across the course of 2015 and actually off of what I mentioned to George for a minute ago, which is the combination of virtual newsroom and sponsor social. And that is actually that spread across the majority of 2016 to support a wide variety of different efforts at that brand.

And how is that -- so which was there sales guy got that or how did that -- is that through an agency, how does a deal like that come in?

Good question that was actually brand direct and it was actually an existing customer we were already working with on the sponsored social side for a period of several campaign, And shortly after the Ebyline acquisition we had a series of discussion talking about what we believe the virtual newsroom could do for that brand and it aligns to a bigger opportunity and frankly increased the [indiscernible] of how even sponsored social could be aligned to that in ways that it hadn’t before. So not only are we now creating really great compelling content that’s on the but on brands blog driven portions of their website. But we are using influences than to help drive awareness engagement to that content and in other brand initiatives unrelated to that contents throughout the course of the year.

So to the extent that that’s a novel for brand new way to do things, I mean does this million dollar client be a multiple million dollar client over a period of time?

You can imagine that’s our goal.

What?

You can imagine that is our goal.

And in terms of how long it took to close that, was that a year or more or how long?

No, like I have said the conversing really started shortly after the Ebyline acquisition and in earnest really started to coming into fruition from a planning perspective in the second half for the year, culminating us receiving that contract in the fourth quarter.

Thank you.

You are welcome.

And then on the technology side, one of the thing that we are very aware of is that we are not able to source enough opportunities for our network to keep them happy at the end of the day. They are always looking for more opportunities, more ways to monetize and it is not realistic to think at least in today's current scenario that we can bring a sponsorship opportunity for them for a fixed fee, to then every single day. So what we are looking at on the technology side, are ways that we can offer performance based marketing solutions to our customers that open up opportunities to more individuals on an ongoing basis, whether that be cost per action base, cost per click based or more of the affiliate model. We believe that all of those will open up new revenue streams for us, new advertiser basis for us, and gives the broader base of creators more opportunity to monetize on a daily basis. So those are -- that’s really where we are focusing our afford, we call that internally -- our fly wheel opportunities that are really outside of what we are going to be doing on our managed side of the business and that really what the core focus is this year.

Our next question comes from Neal Goldman from Goldman Capital Management. Please go ahead. Q - Neal Goldman: Just the quick one on the numbers, what is your CapEx schedule for '16 and what's your D&A [ph] running?

We couldn’t really hear the second part of that the CapEx schedule for '16 and?

CapEx '15 and the depreciation and amortization.

Got you. Give us one moment here.

Okay, we are looking at the amortization and depreciation somewhere in the range of $1 million for next year. And then -- and not really looking to add too much in the way of CapEx from general equipment, but we will be capitalizing several hundred thousand dollars in the software development cost and then just normal increases in equipment for the additional sales back that we’re obtaining. Q - Neal Goldman: So maybe $400,000 or something combine?

Yes, that’s correct. Q - Neal Goldman: Okay so it is a swing of $600,000 in terms of positive cash flow from the EBITDA, so it maybe its 5.5 million of net cash burn for the year?

That would be correct. Q - Neal Goldman: Thank you.

Our next question comes from Jim Goss from Barrington Research. Please go ahead.

I was wondering, if you could discuss the cost of content creation? And also what enticements you offer to the influencers to participate, are they compensated in any way or is it an ego driven aspect, or what that element is?

So everything that we do on both the content side and the influencer side of the business, we are directly compensating the creators for the production of the content and distribution of the content. That is primarily done on a cost per post basis or a cost per asset basis, if we are talking about content production. So nothing has been shared for free, nothing has been for free. Our cost of goods is the payment to the creators or influencers for that content.

And is that something that's very leveragable and that's part of the story that you are able to get a certain amount of information in place and then as you are able to get to additional users that's where the margin improvement would be?

The margin improvement is really in -- yes being able to leverage the marketplace to drive price and drive efficiency for our customers.

Okay. Thanks that's all.

Thank you. I'd like to turn the floor back over the management for any closing remarks.

Thank you all for joining us today. We appreciate you spending the time. If you have any further questions I'd be happy to answer those on a one-on-one basis and you can reach out to Ron at Liolios to schedule a follow up call. Thank you very much.

Thank you. This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.