Q1 2020 Financial Summary Compared to Q1 2019
- Total revenue was the same at $4.8 million in each quarter.
- Managed Services revenue increased 7% to $4.1 million, compared to $3.9 million.
- SaaS Services revenue decreased 36% to $583,000, compared to $913,000.
- Total Gross Billings* decreased 22% to $6.1 million, compared to $7.8 million.
- Total costs and expenses were $10.9 million, compared to $6.5 million. Increase driven by a $4.3 million impairment of goodwill in Q1 2020.
- Net loss was $6.2 million, compared to a net loss of $1.8 million.
- Adjusted EBITDA* was $(1.2) million, compared to ($874,000).
Q1 2020 Operational Highlights
- Completed TapInfluence platform integration
- Launched BrandGraph® social intelligence platform
- Executed managerial and departmental restructuring along with other cost cutting initiatives
* Total Gross Billings and Adjusted EBITDA are non-GAAP financial measures. Refer to the definitions and reconciliations of these measures under “Use of Non-GAAP Financial Measures”.
Management Commentary
“In the weeks leading up to the issuance of stay-at-home orders being issued across the country due to COVID-19, our team had really hit its stride on both sides of the business,” said Ted Murphy, IZEA’s Chairman and CEO. “We saw strong bookings in Managed Services and had record new SaaS customer starts on IZEAx Unity Suite in Q1. For the six weeks following March 13th, we noted declines in new business sales, with the 14-day average run rate trendline for Managed Services bookings bottoming out at the end of March.”
“In mid-April, we began to see a remarkable resurgence of bookings due to the hard work and perseverance of our team. I have never been prouder of this organization and what we have been able to accomplish in one of the most challenging business environments imaginable. As of today, the 14-day average bookings trendline is now above our 14-day Pre COVID-19 average and we are gaining momentum.”
“We are still digging out from the overall decline in SaaS licensing and marketplace revenue related to TapInfluence customer churn and lower marketplace spend levels from remaining customers, but our software customer foundation built upon IZEAx appears to be strong,” continued Murphy. “Monthly recurring revenue from IZEAx hit a new all-time high in March 2020, with renewals from many key customer accounts. However, SaaS sales attributable to new customers post March 13th have been much slower to rebound than Managed Services, primarily due to a high concentration of opportunities related to negatively-impacted sectors that were in the pipeline prior to stay-at-home orders going into effect. Many of those customers will remain on hold until such time that those sectors begin to recover. We have been diligently rebuilding the pipeline with customers less impacted by COVID-19 and our 14-day average trendline for daily software demos hit an all-time record last week.”
“This is a rapidly evolving macro environment and we cannot assure that this momentum will continue. Our team must remain focused and continue to make adjustments in order to dig out from the setback related to the COVID-19 crisis. I believe that IZEA’s products and services are well-aligned for the current consumer environment and I am cautiously optimistic for the months ahead.”
COVID-19 Adjustments to Operations
IZEA was already in a process of optimizing our operating expenses prior to the COVID-19 outbreak. We have seen a material decrease in costs as a result of these measures and expect to reflect those costs savings in Q2.
Some of the immediate measures we have already taken include:
- Reduction of employee salaries by 19-21% at all levels of the organization
- Reduction or elimination of certain employee fringe benefits
- New employee hiring freeze and part-time employee furloughs
- Reduction or elimination of contractors and vendors
- Freeze on all travel and entertainment expenses
- Reduction and shift in marketing spend
- Non-renewal of expiring leases for office locations in Florida, California and Canada
In addition to cost control measures, we have proactively bolstered our available cash by tapping a portion of our credit line using qualified receivables. IZEA also received a loan of $1.9 million from Western Alliance Bank under the Paycheck Protection Program to help sustain its payroll during this time.
Q1 2020 Financial Results
Total revenue in the first quarter was flat year over year at $4.8 million, with revenue from Managed Services increasing 7% to $4.1 million in the first quarter of 2020 from $3.9 million in the first quarter of 2019. Revenue from SaaS Services decreased to $583,000 in the first quarter of 2020 compared to $913,000 compared to the same period in 2019. Revenue from Managed Services increased as a result of increased bookings in the second half of 2019 that led to increased revenues in Q1 2020. Revenue from SaaS Services decreased primarily as a result of lower spend levels from our SaaS marketers and as a result of competitive pricing efforts which reduced our margins on those spends. Our SaaS marketers decreased their spend levels as they transitioned from the TapInfluence platform to IZEAx and curtailed spending in March 2020 as a result of COVID-19.
Total costs and expenses in the first quarter of 2020 were $10.9 million compared to $6.5 million in the corresponding quarter of 2019. This increase was primarily due to a $4.3 million impairment of goodwill recorded in the first quarter of 2020, reduced by a loss of $191,000, associated with our first quarter 2019 settlement on a portion of our accrued acquisition costs.
Net loss in the first quarter of 2020 was $6.2 million or $(0.18) per share, as compared to a net loss of $1.8 million or $(0.15) per share in the first quarter of 2019, based on 34.7 million and 12.6 million shares outstanding, respectively.
Adjusted EBITDA (a non-GAAP measure management uses as a proxy for operating cash flow, as defined below) in the first quarter of 2020 was $(1.2) million compared to ($874,000) in the first quarter of 2019. Adjusted EBITDA as a percentage of revenue in the first quarter of 2020 was negative twenty-five percent (25%) compared to negative eighteen percent (18%) in the first quarter of 2019. The increase in Adjusted EBITDA loss was primarily due to $250,000 less in capitalized expenses related to our internal software build of IZEAx 3.0 and a $73,000 increase in advertising and marketing efforts in the first quarter of 2020 compared to the same period in 2019.
Cash and cash equivalents at March 31, 2020 totaled $5.6 million after we received $1.2 million from our credit facility using our qualifying trade receivables as collateral.
Conference Call
IZEA will hold a conference call to discuss its first quarter 2020 results on Thursday, May 14th at 5:00 p.m. Eastern time. Management will host the call, followed by a question and answer period.
Date: Thursday, May 14, 2020
Time: 5:00 p.m. Eastern time
Toll-free dial-in number: 1-877-300-8521
International dial-in number: 1-412-317-6026
The conference call will be webcast live and available for replay via the investors section of the company’s website at https://izea.com/. Please call the conference telephone number five minutes prior to the start time. An operator will register your name and organization. A replay of the call will be available after 8:00 p.m. Eastern time on the same day through May 21, 2020.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10143761
