Greetings and welcome to IZEA, Inc. fourth quarter 2019 earnings 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 would now like to turn the conference over to your host Ryan Schram, Chief Operating Officer. Thank you. Please begin.

Good afternoon and welcome to IZEA's Q4 2019 earnings call. I am Ryan Schram, Chief Operating Officer at IZEA and joining me today is IZEA Interim Chief Financial Officer, LeAnn Hitchcock and IZEA 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 fiscal year performance for 2019. If you wanted to review those details, all of IZEA's investor information can be found on our Investor Relations website at 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 materially 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 also refer to certain non-GAAP financial measures, specifically gross billings and adjusted EBITDA. A reconciliation of these measures to the most directly comparable GAAP measure is presented in our earnings release with additional discussion of both of these measures available in our most recent Form 10-K and 10-Q, available under SEC filings in the Investor section of izea.com. With the appropriate disclosures out of the way, I am pleased to introduce my colleague and IZEA's Interim Chief Financial Officer, LeAnn Hitchcock.

Thank you Ryan and good afternoon everyone. As we continue to transition towards a more balanced business process-related services, it is important to note that IZEA's individual revenue streams have different accounting treatments for revenue recognition. Managed services and SaaS licensing fees are accounted for as gross revenue, while marketplace spend and legacy workflow fees result in revenue being recorded net of the amounts paid to the creators providing the services. Over time, this difference in gross and net revenue recognition may widen the gap between what we report as gross billings and bookings and what ultimately gets reported as revenue in IZEA's financial statements. Additionally, the mix between revenue from our managed services and SaaS services will cause swings in our reported cost of revenues as a percentage of revenue as the reported cost of revenue line item primarily relates to managed services. I would like to begin with a summary of the fourth quarter 2019 before moving on to the results for the full year. For the fourth quarter 2019, IZEA reported total revenues of $5.8 million with $5 million coming from our managed service business and $800,000 coming from our SaaS offerings. We saw an $83,000 or 2% increase in our Q4 2019 managed service revenue, but this was offset by a $600,000 decline in our SaaS service revenue in Q4 2019 as compared to Q4 2018. For Q4 2019, our gross billings on these revenues decreased to $7.8 million compared to $11.1 million in Q4 2018. This 30% decline in gross billings was primarily due to lower marketplace spend from the TapInfluence platform customers and churn in the renewal of some of those customers, resulting in a $600,000 decrease in SaaS services revenue. Our cost of revenues, exclusive of amortization, was $2.7 million in Q4 2019 as compared to $2.6 million in Q4 2018. As a percentage of revenue, our cost of revenues exclusive of amortization has increased from 40% in Q4 2018 to 46% in Q4 2019. This increase is consistent with what we would expect to see as our balance of revenue derived from our SaaS offerings declined in this quarter. Our total cost and expenses were $8.1 million in Q4 2019 compared with $6.8 million for Q4 2018, driven largely by increases in our general and administrative expense attributable to a $418,000 impairment charge on our intangible assets for software technology and our investment of over $536,000 in sales personnel and marketing spend to generate future revenue. Doing the math on the revenue and cost amounts and adding a decrease in our interest expense resulting from lower average balances outstanding on our line of credit, our net loss for Q4 2019 was $2.3 million or $0.07 per share compared to our net loss of $693,000 or $0.06 per share for Q4 2018. When looking at the full year 2019, the same themes I iterated for Q4 are impacting the full year amounts as well. Full year 2019 revenues were $18.9 million, down 6% from $20.1 million for 2018. Gross billings for 2019 were $29 million, down 3% from $30 million for 2018. The amount of SaaS gross billings increased by $1.1 million, accounting for 47% of our billings in 2019 compared to 41% of our billings in 2018. Managed services decreased 12% from the same period in 2018 due to a 30% decrease in our frontline sales personnel which resulted in lower bookings and revenue in the first three quarters of 2019. License fee revenue increased 73% to $2 million compared to $1.2 million in the prior year through a combination of strong organic growth of IZEAx offset by the declining customer base from TapInfluence. Our cost of revenues exclusive of amortization, was approximately $8.5 million or about 45% of revenues for 2019, consistent with the prior year levels at 45% representing total cost of revenue of approximately $9 million. Our total cost and expenses were $26.1 million for 2019 compared to $25.5 million for 2018. The increase was primarily attributable to the $418,000 impairment charge on our intangible assets for software technology and increases in consulting cost and marketing spend. Our net loss for 2019 was $7.3 million or $0.29 per share compared with a net loss of $5.7 million for $0.67 per share for 2018. Switching the discussion to our liquidity briefly before turning the call back over to Ted. As of December 31, 2019, we had cash on hand of nearly $5.9 million with no mounts used on our line of credit. Our available line of credit remains at $5 million with accounts receivable on our books at December 31 to support a full draw on that line had it been desired. As we disclosed in our Annual Report filed earlier today, based on what we know today and our current plans, 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. With that, I will turn the call back over to Ted.

Thank you LeAnn. Before I get started, I would like to thank my fellow IZEAns as well as the teams at K&L Gates and BDO. These are simply extraordinary times. People are working diligently in very difficult and uncertain situations. I appreciate the effort and commitment to get us filed on time, despite the challenges we all face. Today's update will be briefer than usual as our entire team is focusing their time and efforts on the core business. 2019 was a transitional year for our company as we integrated TapInfluence and shuttered the eByline platform. Following our capital raise in Q2 of 2019, we began making investments in sales, marketing and engineering to support our growth initiatives. Those investments translated to the start of a topline rebound in Q4 of last year with managed services bookings up 22% year-over-year and revenue up 17% in the second half of 2019 as compared to the first half of 2019. In addition to the strong Q4 managed services bookings growth, we also saw meaningful increases in efficiency. Our revenue per managed services sales person increased approximately 25% for fiscal 2019 compared to 2018. While churn in certain TapInfluence customers combined with our SaaS pricing model revisions will continue to impact year-over-year comparisons for SaaS licensing and marketplace revenue, the total number of SaaS customers licensing our IZEAx technology hit another high in December. With TapInfluence completely integrated into IZEAx and shuttered in Q1 of 2020 and all of our customer transitions complete, we can focus our efforts on IZEAx and BrandGraph. We are cautiously bullish on IZEAx licensing in 2020 despite the current challenges surrounding COVID-19. Total fees under contract by licensees of IZEAx in 2020 are already 40% greater than all IZEAx license fees collected in 2018, partially due to the transition of TapInfluence customers into IZEAx as their contracts renewed. Our software customer foundation built upon IZEAx appears to be strong and we believe that increased usage and licenses of the software by additional customers will help to offset the lower fees charged for our services. Customers have been renewing their licenses the past two weeks even after the Coronavirus outbreak started to more broadly impact the world. Monthly recurring revenue or MRR for IZEAx hit an all-time high in March 2020. We view these renewals as the strongest possible evidence of the underlying value of IZEAx. In a time of global panic, akin to war time when spending is greatly reduced and marketing budgets are receding, a number of our customers are renewing 12 month commitments for our software. The count of new IZEAx Unity customers added in Q1 2020 are up 85% from Q4 of 2019. Each IZEAx renewal is a testament to what our team has created and we want to say thank you to our customers. We appreciate your business and we will continue to work tirelessly on your behalf. But IZEAx is just part of the equation. Last year, we announced BrandGraph. BrandGraph is designed to provide brands with in-depth analysis and performance benchmarking of social media content. It allows marketers to understand who is talking about their brand, what they are saying and how brands measure up against their competitive set through a myriad of unique performance standards. After a successful beta period, IZEA began offering paid BrandGraph licenses to large brands and agencies in mid-February. In a few short weeks, we signed a brand new Fortune 500 customer who was net new to IZEA and another multibillion-dollar enterprise that was also net new to IZEA. Early indicators are that the product is of high value to brands and the sales cycle could be the fastest of all our offerings. Since COVID-19, we have seen a slowdown in new BrandGraph commitments but not in interest in customer awe when we do product demos. I am confident that as the world begins to normalize, we will see an uptick in new licenses. I would now like to speak briefly about the impact of COVID-19. IZEA's leadership is currently assessing the landscape for our company following the global Coronavirus pandemic and the issuance of stay at home orders by state and local governments. The health and safety of our employees is our number one concern. On March 13, we took proactive measures to protect our workforce by instituting an immediate work from home policy for all employees in advance of government directives. Team IZEA was already geographically dispersed and accustomed to virtual interaction with customers and coworkers. Our infrastructure has been designed to allow IZEAns to work from anywhere with an Internet connection and our business continuity plan has been tested through multiple natural disasters over the past few years. IZEA's overall internal business operations continue today with minimal impact. However that is not to say that this is business as usual. It is far from it If you have not yet had a chance to view my March 18, 2020 briefing on the impact of Coronavirus, I invite you to visit izea.com/covid19. On that page, you will find a video and downloadable presentation that outlines the impacts we predict on consumer habits as they relate to influencer and content marketing. Management believes there will be near-term implications for IZEA's topline sales and revenue which could worsen if the macro economic climate worsens over time. IZEA is fortunate in that the company serves a very diverse customer base. While many of our customers are currently experiencing massive decreases in consumer demand and pulling back on spend, we have others who are seeing material increases in consumer demand, particularly those in high-frequency CPG, grocery and finance. However, we are seeing delays across most industries in new contractual commitments as legal, finance and marketing teams at large organizations scramble to regain their footing and develop plans for the road ahead. We must assume a slowdown in both bookings and revenue recognition for the foreseeable future and we are taking measures to lessen the impact on IZEA. IZEA was already in an ongoing process of optimizing our operating expenses prior to the COVID-19 outbreak. We had consolidated some departments and managerial positions to streamline operations and saw a material decrease in hosting costs through IZEAx platform re-factoring and a shutdown of the TapInfluence platform. However, the current pandemic will necessitate accelerating more rigid cost control initiatives. Some of the immediate measures we have already taken include hiring freeze and employee reductions, the reduction or elimination of contractors and vendors, a freeze on all travel and entertainment expenses and a reduction in shift in marketing spend. Given the uncertainty related to stay at home orders and our ability to work and collaborate remotely, we are looking at multiple options we have available to us with the lease for our headquarters in Orlando expires at the end of April 2020, including extended work from home initiatives and short term flexible office space. We have also made the decision to vacate and cancel the various coworking facilities our team members use around the country as our short term leases for these facility expire in the next one to six months. We believe the timing of our lease expirations is actually fortuitous for IZEA. We will use this opportunity to reevaluate our structure and negotiate lower cost contractual commitments for our locations as needed moving forward. We are not yet done with cost-saving measures. I am working with the leadership team and the Board of Directors to identify additional areas of savings and optimization. Nobody can predict ultimate length or magnitude of impact that COVID-19 will have. We are weighing those path against both short and long term risks and operational implications. In addition to cost control measures, we have proactively bolstered our available cash by tapping a portion of our credit line. We will likely take advantage of additional draws from the line in the future to maintain a strong cash position. IZEA will also be exploring eligibility for government provided small business disruption loans under the CARES Act and we intend to take advantage of these programs, if approved, to strengthen our cash position to be able to retain the employees needed to sustain our business operations and provide quality service to our customers. Now that we have addressed COVID-19, I do want to share a bit of hope and optimism. Coming into this pandemic, IZEA had really its stride on both sides of the business. My disposition in as little as three weeks ago was incredibly bullish. Managed services and SaaS licensing sales were on plan for material increases in bookings in Q1. We have made a significant reduction in costs. We were well ahead of our internal plan for both revenue and EBITDA loss. COVID-19 will be a setback. There is no way around that. IZEA, like almost every business on the planet, will have to adjust its plans and expectations. We must navigate this point in time, but it does not change my long term optimism for our business or industry. We believe IZEA will be an even more efficient and competitive business on the other side. I founded IZEA one year prior to the financial crisis that began in December 2007. We weathered that economic storm with perseverance, grit and creativity. There were some painful decisions we had to make but we made it through. On the other side of the recession, we saw explosive growth and 14 years later, we are still a leader in the space we created with a large roster of Fortune 500 brands and the world's leading agencies counted among our clients. I have never been prouder of the IZEA team. This event has brought us closer than we are physically further apart. Team IZEA has been stepping up in every capacity to help in anyway they can. We have been moving with speed and conviction and it has been remarkable to see this team deliver under extreme pressure. Thank you, team. You were all credible. To all of our investors and partners, I wish you safety and health. We will get through this together. I would now like to open the call for Q&A.

[Operator Instructions]. The first questions comes from the line of Mike Malouf with Craig-Hallum. Please proceed with your questions.

Great and thanks for taking my questions.

Hi Mike.

Hi. I want to focus first off on IZEAx. And I am wondering if you could, at this point, now that you have gotten everything switched over to IZEAx, give us a little bit of color on how many customers you have now? Maybe just a range of how much per month or per year that these contracts are in size and maybe an average to give us a sense of what's going on there?

Yes. We are not going to disclose the exact customer counts or price ranges really for competitive reasons. What I can tell you is, the overall customer count hit and all-time record at the end of the quarter. That is partially from IZEAx Discovery customers and partially from IZEAx Unity Suite customers. What we have also seen here in Q1, the count of new IZEAx Unity Suite customers is up about 85% from Q4. So we believe that we are starting to get some material traction there. We are continuing to see those customers renew that have been on the platform even now through COVID-19. But given the amount of competition that there is in this space currently, we are not going to put out information that would provide too much detail on pricing.

Got it. And then with regards to the marketplace spend, has there been any change with regards to marketplace spend in their willingness to make that part of the package?

We have definitely seeing more customers that are doing product-only activations. That has had an impact on the overall marketplace spend and the revenue that we get to recognize from the take rate.

Yes. Okay. Great. And then just a clarification on the spend in G&A. There was a $418,000 in the G&A of the impairment charge.

Yes. I will let LeAnn speak to that.

Yes. That is correct. There was a $418,000 impairment charge and that was as a result of the transfer of the Tap platform to the IZEAx and all those customers. It really was the kind of unusable portion of the software that was remaining.

Okay. Great. So then going forward, we should be back down to sort of that $1.6 million level going forward?

For G&A expense or for --

I am sorry. $2.6 million going forward for G&A.

With the COVID, we are not really putting complete estimates out at this point just because of the unknown. But they should definitely start returning back to normal as we are optimizing our cost.

Okay. And then with regards to the sales personnel, that's in the sales and marketing part that we saw, right? We were right around $1.4 million, then last quarter it was $1.5 million and then it jumped up to $2.0 million. That's the $536,000, is in the sales and marketing side? Is that correct?

Yes. It was pretty much half of personnel and the other half was related to the additional marketing spend that we were investing in.

Got it. Okay. Great. All right. That's all I needed. Thanks a lot. I appreciate it.

Sure.

The next questions comes from the line of Jon Hickman of Ladenburg. Please proceed with your questions.

Hi. Ted, I was wondering, could you comment on, you mentioned two customers for BrandGraph. Are there more than that? Just you mentioned two really large ones. Could you give us a little more?

Yes. Those are our initial customers for that platform. We really started to sell that right as COVID began to explode. So we do have a lot of opportunities in the pipeline right now, but those are the two core customers. I will say that the sales process for those customers was incredibly fast, faster than IZEAx Unity Suite certainly and significantly faster than any managed services sell. And both of those customers are also were net new to IZEA. One actually went up licensing BrandGraph and then shortly thereafter turned into an IZEAx customer on the other side. So we are hopeful that we will see more of that type of activity once the dust settles a little bit and people get back to more normal activities.

So let's talk about that for a minute. So it seems to me that if an advertiser can't reach me while I am out and about, they can reach me while I am streaming Netflix or whatever. But it seems like social media is like, everybody is on their phones. It seems like the perfect opportunity to increase my social media advertising efforts. So are you seeing any of that?

We definitely, we agree with you and that's what our research also points to. I think that what we are seeing now is really people are just a bit gun-shy, right and they are working from home and there is just a lot of disorganization right now. But I do think that from a product perspective, influencer marketing is a great fit for advertisers. It's just a question of them getting a level of comfort and understanding and being able to get some of their operations going again.

Okay. Well, keep up the good work. Nice quarter. And we wait to hear from you relatively soon on Q1.

Thank you.

Thanks Jon.

We have reached the end of the question-and-answer session. I will now turn the call back over to Ryan Schram for any closing remarks.

We would like to thank everyone for joining us this afternoon and remind you that all of IZEA's investor information is available online on our corporate website, which is izea.com/investors. On behalf of everyone here at Team IZEA, please stay safe and stay well.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great evening.