Ladies and gentlemen, greetings and welcome to the IZEA Worldwide Inc. Fourth Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. A brief Q&A session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ryan Schram, Chief Operating Officer. Thank you. You may begin.

Good afternoon and welcome to IZEA's Q4 and fiscal year 2018 earnings call. I am Ryan Schram, Chief Operating Officer at IZEA. And joining me today is IZEA's Chief Financial Officer, Troy Vanke, and IZEA's Chairman and Chief Executive Officer, Ted Murphy. Thanks for being with us this afternoon. Earlier today, the company issued a press release with details pertaining to our fourth quarter and fiscal year 2018 performance. If you like to review those details, all of IZEA’s investor information can be found on our Investor Relations website which is izea.com/investors. Before we begin, please take note of the Safe Harbor paragraph that appears at the end of the press release covering the company’s financial results. And be advised that during the course of today's earnings call, our management team will discuss IZEA's business outlook and make forward-looking statements. These statements are predictions based on our team's expectations as of today that are subject to inherent risks and uncertainties and should not be unduly relied upon. Actual events, results, or trends could differ martially from our forecast due to a number of factors, including those mentioned in our most recently filed periodic reports with the SEC. The company and our management team assume no obligations to update any forward-looking statements made in today’s call. In addition, our update today will refer to certain non-GAAP financial measures, specifically gross billings and adjusted EBITDA. A discussion and reconciliation of these measures to the most directly comparable GAAP measure is presented in our most recent Form 10-Q available under SEC filings in the Investors section of izea.com. With the appropriate disclosures out of the way, I am pleased to introduce my colleague and IZEA's Chief Financial Officer, Troy Vanke. Troy?

Thank you, Ryan and good afternoon, everyone. Before I begin, I would like to thank Ted and Ryan for the opportunity to join such an energetic and dynamic organization. In the six short weeks I've been with the company, I've met many quite amazing team members, and I've been truly impressed by the vision and the organizational drive. I'm looking forward to the ongoing challenge and to building a lasting relationship. As I turn to a review of the financial results, I would like to remind those on the call today that IZEA adopted new revenue recognition guidelines, starting with the first quarter of 2018. Since the company did not recast its prior year amounts for the new revenue recognition rules, any comparison of 2018 revenue figures to corresponding revenue figures of 2017 isn't 100% pure apples-to-apples comparison. Now, let me turn to our fourth quarter 2018 before moving on to the full year. As mentioned in prior public releases, we acquired TapInfluence during 2018. This acquisition combined with strong organic growth of IZEAx has driven a significant increase in revenue from our software as a service or SaaS offerings. Also, we made an effort to balance our business between our managed services and SaaS offerings in 2018, which is what you're starting to see in the mix of our revenues. As we make this transition towards the business with more SasS related services, it is important to note that IZEA’s individual revenue streams have different accounting treatments under the new revenue recognition rules. Managed services and SaaS licensing fees are accounted for as gross revenue, while marketplace fees and legacy workflow result in revenue being recognized net of the amounts paid to our creators. Over time, this difference in gross and net revenue recognition will widen the gap between what we report as gross billings and bookings and, what ultimately, gets recognized as revenue in the IZEA financial statements, as we continue to shift our business to our SaaS offerings. For the fourth quarter 2018, IZEA reported total revenues of 6.3 million, with 4.9 million coming from our managed services business and nearly 1.4 million coming from our SaaS offerings. This compares with Q4 2017 revenues of almost 6.6 million for managed services and less than 100,000 for SaaS offerings. Although not discretely evident from our public disclosures, the mix shift between managed services and SaaS revenues is also evident in our gross billings, for which, during Q4 2018, we saw the highest quarterly amount of gross billings in IZEA’s history at 11.1 million compared with 7.8 million in gross billings in Q4 2017. For Q4 2018, bookings increased 115% to 11.2 million compared with 5.2 million in Q4 2017. Our cost of revenue, exclusive of amortization, was 2.6 million in Q4 2018, as compared to 3.2 million in Q4 2017. As a percentage of revenue, our cost of revenues, exclusive of amortization, has improved from 47.5% in Q4 2017 to 40.5% in Q4 2018, or an improvement of 700 basis points. This improvement is consistent with what we would expect to see as our balance of revenue derived from our SaaS offerings increases. Our total costs and expenses were 6.8 million for Q4 2018 compared with 7.5 million for Q4 2017, driven largely by our shift in business mix, as discussed in relation to our revenues. Doing the math on the revenue and cost amounts and adding in an increase in our interest expense resulting from higher average balances outstanding on our line of credit, our net loss for Q4 2018 was 693,000 or $0.06 per share compared to the net loss of 743,000 or $0.13 per share for Q4 2017. When taking a look at the full-year 2018, the same themes as I iterated for Q4 are impacting the full-year amounts, although are less pronounced since the acquisition of TapInfluence only impacted the third and fourth quarters of 2018. Full-year 2018 revenues were 20.1 million, down from 24.4 million for 2017. However, our gross billings for 2018 were just under 30 million, up from 29.2 million for 2017. Bookings increased 12% to 30.9 million for 2018 compared to 27.7 for 2017. Our cost of revenue exclusive of amortization was just over 9 million or about 45% of revenues for 2018, down from 11.6 million or about 47.4% of revenue for 2017. Again, this improvement is what we would expect to see as our balance of revenue derived from our SaaS offerings increases. Our total costs and expenses were 25.5 million for 2018, down from 29.9 million for 2017. As a reminder, we booked a charge of $500,000 in Q3 2018 for our insurance deductible associated outstanding litigation which is actually reducing our year over year improvement in total costs and expenses. Our net loss for 2018 was 5.7 million or $0.67 per share compared to the net loss of 5.5 million or $0.96 per share for 2017 Switching the discussion to our liquidity briefly before turning the call back over to Ted. As of December 31, 2018, we had cash on hand of just under 2 million with an outstanding balance on our line of credit of approximately 1.5 million. Our line of credit limit remains 5 million, so deducting the amount drawn as of December 31, we had approximately 3.5 million of credit available to us. In addition, we had sufficient accounts receivable on our books to support a full draw on that line had it been desired. And as we disclosed in our annual report filed earlier today, we expect that our cash on hand and line of credit available to us will be sufficient to cover our operating needs for the next 12 months. But we are likely to issue equity for the payment due in July 2019 for the TapInfluence acquisition. With that, I'll turn the call back over to Ted.

Thank you, Troy. On our Q3 earnings call, I shared that we believe that we would return to adjusted EBITDA positive in Q2 of 2019. I am pleased that we were able to deliver another adjusted EBITDA positive quarter, two quarters early. In the last six quarters, three of them have been adjusted EBITDA positive. This is important to us as we continue our march towards profitability and manage our growth responsibly. Keeping a sight line to adjusted EBITDA positive remains important to us as, a leadership team. I want to commend team IZEA for its grit and commitment to get to adjusted EBITDA positive in Q4. Every team member across the company contributed to helping us achieve this goal. While I am pleased with our progression towards adjusted EBITDA positive, we do not yet believe that we are at a point where every quarter will be adjusted EBITDA positive. We have significant seasonality in our business, with the back half of the year accounting for the majority of both bookings and revenue. At the same time, we have significant annual expenses that we will incur in Q1 of each year, including our annual audit. 2018 marked the beginning of a fundamental transformation for our organization. I would like to talk a bit about where we have been and where we are going. IZEA’s business model has historically been driven by offering managed services to agencies and brands. These brands and agencies hire IZEA to execute marketing campaigns on their behalf. IZEA employees run these campaigns using IZEA’s technology platforms to discover, manage and pay influencers and other content creators. While this model has sustained our business to this point and grown meaningfully along the way, we believe we can unlock significantly more value and higher quality revenue streams through our software. It has always been our goal to develop software that empowers our marketing customers to engage our network of creators on their own. And it is this model that creates a scalable business for IZEA, better outcomes for marketers, and more monetization opportunities for our creators. In 2015, we started an initiative to do just that, and had some early success securing contracts with large media companies. However, as we started to roll out IZEAx to these partners, we recognized two things relatively quickly. The buyers of our software were not yet ready to sell influencer marketing. The end users did not have the experience they needed to successfully execute campaigns. There were no dedicated resources to operate the platform and the budgets being allocated were not large enough to warrant the licensing fees. The platform itself was not yet ready for the organizations we wanted to sell to. Many of the special features that IZEA team members had access to weren't made available to end customers yet. We also didn't take into account the organizational complexities of much larger companies, including financial and security requirements. We decided to pull back from this initiative in order to give ourselves more time to perfect the platform and allow the market to mature. Instead of selling our SaaS product prematurely, we continued to focus on managed services, which would provide us with time and resources to continue to invest in the platform with real world usage. By the end of 2017, we had made significant progress refining our platform. We were also seeing signs that led us to believe that the market for an enterprise solution was nearing an inflection point. Once we started seeing titles of Vice President of Influencer Marketing at brands and agencies, it became clear that software budgets were now available. We started selling SaaS to a handful of customers again, and our instincts about the market and the platform were quickly validated. Early last year, we began building out our SaaS sales team to support this effort. Then, in the back half of the year, we acquired TapInfluence, which added SaaS customers and bolstered our team with additional domain experience. We made some strategic resourcing decisions during 2018 in order to pursue this transformation. Our managed services sales and campaign management headcount was gradually reduced by approximately 25% from December 2017 to December 2018. This reduction in managed services investment was directly reflected in the 26% decrease in revenue associated with that part of our business, but helped free the financial resources necessary to properly staff the organization to sell and service our software. As Troy mentioned, revenue from SaaS services and managed services have different accounting treatments. Managed Services is reported on a gross customer spent while marketplace spend is reported on only the net number. While revenue in Q4 was down year-over-year, gross billings were up 42% and bookings were up 115% in Q4. This is largely due to software licensing and marketplace spent. SaaS services is where we want to derive the majority of our revenue long term. We believe our investments in SaaS will ultimately provide the underlying financial model required for profitable, sustainable growth through higher margin, recurring revenue streams with less customer concentration. In Q4, we saw our highest gross margins in our history, largely due to SaaS services. While we will be focusing more effort on SaaS, we believe that there's a large addressable market for both segments of our business. Many customers still want and need a managed services solution. And sometimes even in parallel with a SaaS commitment. We expect SaaS services revenue to grow substantially year-over-year in each quarter, given our emphasis and investment on that business segment. We expect managed services bookings to be down year-over-year through Q1 of this year. This is directly correlated to less headcount in managed services sales. We expect managed services to return to year-over-year bookings growth again in the second half of this year. It may take a quarter or two after Q2 for revenue to reflect growth in bookings. We expect year-over-year bookings to increase in every quarter of 2019 and we expect roughly half of those bookings to come from SaaS services moving forward. I would like Ryan to speak briefly about some of the adjustments we have made to operations and sales as we head into 2019.

Thanks, Ted. 2018 was a remarkable year of change and evolution for our organization, one that we expect will lend to our success long term as well as deliver value for our clients, team members and shareholders alike. Let me begin by recapping the TapInfluence acquisition and share how the integration process has gone so far. Overall, we continue to be very pleased with the catalyst that Tap’s acquisition provided following the deal closing in late July. We set out to accomplish five key outcomes enabled by this transaction. First, to increase and diversify revenue mix through a boost to SaaS revenue from licensing as well as marketplace spend. Number two, to strengthen IZEA’s operating margins. Third, to bolster our technological footprint by consolidating engineering investment in order to create the industry's premier platform of record for influencer and content marketing. Fourth, we wanted to increase our market share by combining two of the largest players in the space with the first major market consolidation of that influencer marketing in an otherwise highly fragmented market. And last, we want to transform operations on day one, delivering the promise of being a technology first, value driven organization with leading services and software offerings. Beyond these five objectives, there were many other, less obvious, but equally valuable aspects of bringing together Tap and IZEA. For example, it will create more deal flow and marketplace liquidity for our creators by providing them with more opportunities to partner with brands than ever before. This strengthens our already solid working relationships and super charges the greater value of the creator economy overall. Every department at IZEA worked collaboratively and swiftly to integrate the two organizations post acquisition, thanks to terrific due diligence conversations and efficiency planning ahead of the official close. As a result, we have realized the benefit of cost reductions and duplication of expense elimination quickly through a careful streamlining of combined operations. The net-net, a positive impact in our overall EBITDA, ahead of even our own expectations. Some of the key initiatives over the first 120 days post acquisition included choreography and executing extensive multi-month customer roadshow with legacy TapInfluence customers to explain the vision of the combined companies as well as the technological roadmap for IZEAx. We also hosted executive briefing and visioning sessions during the fall right here at IZEA HQ for customers to meet with various resources across our enterprise, from product and engineering to research and customer success. These efforts resulted in a terrific fourth quarter for the newly combined SaaS and IZEA, including over a dozen legacy TapInfluence renewals from large agencies and brands. We were even able to fulfill the desire of several legacy Tap customers who are eager to take advantage of functionalities only available on IZEAx and migrate them ahead of schedule. Also, during the fall, we were honored to be named to the Deloitte Fast 500 for the second year in a row. The award recognizes innovative companies who have converted disruptive ideas into products, services and experiences that captivate customers and drive remarkable growth. I also want to speak briefly about the potential of SaaS customers and what they can mean for IZEA moving forward. We believe that there's potential for IZEA Access customers to spend mid five figures to low six figures in marketplace spend monthly, including some of the large organization announced here in the first quarter of 2019. Those customers are just starting to get up to speed and we expect will benefit from their marketplace spend hen moving forward. These spends, we did a compound over time. And the benefit of our unique SaaS model is that those monies are incremental to the software licensing revenue committed annually by those same customers. But SaaS isn't the only thing that we're excited about. Another great explanation point from last year was the continued expansion of our direct relationship with a Fortune 10 managed service client with their aggregate commitment having reached a seven figure mark for the first time. We remain committed to managed services here at IZEA and still see so much potential for this segment of our business. As Ted mentioned previously, we've heard from clients that they're often seeking an integrated solution provider that can offer flexibility through services and the technology, not services or technology. Speaking of clients, new opportunity pipeline generation during the fourth quarter, which is the total dollar value of proposals presented by clients during a specific period during that particular quarter, was just over $28 million. However, it's important to understand that SaaS marketplace spend is not an area of bookings that counts towards our new opportunity pipeline generation unless that spend is committed upfront as part of a contractual process, which is unusual. As part of our transformation, we’ve also examined and reevaluated the way we want to build our sales organization moving forward. The dynamics of the job market have changed over time as have the needs of IZEA. As a result, we've introduced a new recruiting and internal education initiatives, the IZEA Professional Selling Program. This unique unit is tasked with identifying high caliber, high potential individuals who wants a career in sales, but may lack the practical experience in our sector. By indoctrinating candidates in the IZEA way via this full time immersive training program across six months, we believe we can address the changing hiring climate proactively and generationally. As according to a recent study, 62% of GenZ prospective employees do not consider sales an appealing career path. So we want to change that. Over the course of next year or so, we intend to graduate individuals from the PSP program in to manage service and sales positions, in addition to our regular external recruiting and inbound applicant pools of prospective talent. Finally, before handing the call back to Ted, I’d like to recognize and thank our client development, client service and customer success teams across all of our operational units for the record breaking Q4 bookings that Troy and Ted have both highlighted. To have not only exceeded $10 million of quarterly bookings for the first time, but to have pushed through the $11 million mark as well is an accomplishment that underscores many of the themes and goals we've shared here today.

Thank you, Ryan. Over the past year, our leadership team has spent a considerable amount of time, looking inward at the business and outward at our industry. As we look to the future, we have a few core beliefs. One, our industry is real and growing. Influencer marketing is no longer an afterthought or remnant buy. Current estimates of the industry tag the annual spend in our space at approximately $2 billion. The budgets are growing and virtually every large consumer focused company is utilizing influencer marketing in some way. Two, platforms will dominate. While the majority of transactions are still happening manually, in order for this industry to continue to grow, agencies and brands will need technology and tools to make them more efficient. It is important to note that our space is fast moving with constantly changing social networks and customer requirements. Unlike the display ad space that moves at a snail's pace, the platforms in our space are always evolving. At one point, Twitter didn't have pictures and Instagram didn't have stories. Their constant partner changes and those changes require influencer marketing platforms to change as well. It is those changes that make it so difficult and expensive to build software in our space. It is an arms race. This space is incredibly fragmented with literally hundreds of players and providers. There is intense competition for customers and awareness, and it will require a significant investment in sales, marketing and technology to effectively breakout and increase market share in a meaningful way. As the industry gets bigger, so will be investment required to compete and win. Four, scale matters. Building and maintaining technology in this space is expensive, as is marketing and sales. However, there's also opportunity to gain real efficiency and scale. As the top line grows, the operational leverage grows, as infrastructure costs are spread among a larger customer base. For example, when we acquired TapInfluence, they were investing heavily to build their influencer marketing business. It was ultimately unsustainable as a standalone company. But inside of IZEA, we could eliminate the duplicative spent. This transaction gave us operational leverage and scale that contributed meaningfully to our positive adjusted EBITDA in Q4. Five, consolidation in the industry is coming. Because of the aforementioned reasons, it is common belief among CEOs in this space that consolidation is coming and is also required. The amount of money being spent to compete with each other ultimately doesn't make sense. We are better together. If we pull back and look at these beliefs in totality, it becomes clear that there is a significant opportunity in this space and indeed for IZEA. We believe that we have the best enterprise platform in the industry, the most spend coming to our marketplaces, and by far the most domain experience. We intend to use our resources and unique position as the only public company in the space to grow our share and further our mission. In the month since we made the acquisition of TapInfluence, we have benefited from a significant amount of inbound activity from parties that share our beliefs and vision for the future. These discussions have yielded new opportunities and options for IZEA. 2019 is going to be another important year for this company, as we continue to transform our operations and invest in the responsible growth of our business. We are quickly coming upon the release of IZEAx 3.0. This is the combination of over two years of hard work, and we are incredibly excited to share the new platform with you. Our engineers have outdone themselves and the reception we have received from clients who have been given an early preview has been overwhelming. The number one question we get from clients when we show it to them is, when can we have it? The answer is soon, very soon. Please join us on the 23rd of April to see the future of our platform. Additional details about this event will be announced in advance. IZEAx 3.0 will provide the foundation, not only for SaaS services, but for managed services as well. Better tools mean we can be more efficient and deliver more value for our customers. Both sides of our business rise on a better technology foundation. Thank you for spending time with us this afternoon. I would now like to open the call for Q&A.

[Operator Instructions] Our first question comes from the line of Mike Malouf from Craig-Hallum.

Great. Thanks guys for taking my questions and congrats on getting to that EBITDA positive, certainly ahead of our outlook. So that was great.

Thank you.

Question for you, as you roll out the SaaS business, can you give us a little color on what, whether it's brands that are first to jump on this or it's agencies and just give us a sense of maybe how many of each are in total that you have on the platform right now?

Yeah, it's been a pretty even mix between brands and agencies, and I would actually throw a big category that we're seeing is actually PR firms. So, I would put them in that category of agencies. There's different use cases for the platform, depending if it is a brand or an agency. And one of the things that we like a lot about the agency business is that they're able to support a lot of marketplace spend through multiple clients. But on the brand side, we obviously like the direct relationship as well. We're not yet releasing any sort of numbers in terms of the number of customers. But we're pretty evenly selling in between those two different types of customers.

Okay, great. And then as you look into managed services, bookings being down, maybe a little bit in the first quarter, and then starting to grow in the second quarter. How fast do you think revenues will trail that growth? Obviously, it'll be down in the first quarter, year-over-year, but, will it be down again, probably be down again in the second quarter, but when will we see that growth in revenues?

Yeah. I mean, typically if you look at the trailing effect of the bookings there, it's been about six months. And it really depends on kind of what the customer mix is and what the programs are. So, I think it's a little bit early for us to speculate on that. We're going to be rebuilding the managed services team here and have started that process, but it's going to take some time for them to build their pipeline, grow their bookings, and then ultimately have that flow through to revenue.

Got it? And then just one final question. Can you remind us again, when we take a look at the revenue of the SaaS business, relative to the managed services business, if you just look at all three, managed service, software license and marketplace, where are the gross margins for those three as you sort of target over the next couple of years?

Yeah, so if you look at historically managed services, it's been about 60% or just a hair over 60%. Marketplace, it averages about 12.5%. A lot of that is, there's legacy Tap customers that are at a lower marketplace fee. And then on the licensing side, it's -- you've got the cost of the infrastructure and the engineering, but that flows through at basically 100%.

[Operator Instructions] Ladies and gentlemen, we have no further questions in queue. I'd like to turn the floor back over to management for closing comments.

I would like to thank everyone for joining us this afternoon. As a friendly reminder, if you’d like any additional information on IZEA as an investor, it's available for you online at izea.com/investors. Have a great evening.

Thank you. Ladies and gentlemen, this does conclude our teleconference for today. You may now disconnect your line at this time. Thank you for your participation and have a wonderful day.