Thank you for standing by. This is the conference operator. Welcome to the IZEA Worldwide, Inc., Third Quarter 2020 Earnings Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. I would now like to turn the conference over to Ryan Schram, Chief Operating Officer. Please go ahead.

Good afternoon and welcome to IZEA’s Q3 2020 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. Earlier today, the company issued a press release with details pertaining to our third quarter performance for 2020. If you like 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 refer to certain key metrics regarding gross billings and non-GAAP financial measures regarding adjusted EBITDA. A detailed explanation and reconciliation of these measures is disclosed in our earnings release and in our most recent Form 10-Q available under SEC filings in the Investors section of izea.com. Now, with the appropriate disclosures out of the way, I am pleased to introduce my colleague and IZEA’s Interim Chief Financial Officer, LeAnn Hitchcock. LeAnn?

Thank you, Ryan. Good afternoon, everyone. Let’s begin with a summary of our results for the third quarter ended September 30. For the 3 months ended September 30, 2020, IZEA reported total revenues of $4 million compared with $3.5 million coming from our managed service business and $522,000 coming from our SaaS offerings. We saw a $44,000 or 1% decrease in our managed service revenue and a $331,000 decline in our SaaS service revenue in Q3 2020 as compared to Q3 2019. Although there was a slight $44,000 decline in the Q3 2020 managed service revenue compared to Q3 2019, we were pleased to see revenue from managed services increase by $1 million or nearly 41% compared to our second quarter of 2020, which was greatly affected by the initial uncertainty surrounding COVID-19. Larger concentrated marketers are beginning to spend again, but there is still hesitancy to spend amounts for typical annual events that may change as a result of COVID-19 uncertainties such as back-to-school campaigns. Despite the delay in the execution of existing orders from our customers, we have seen a slight increase in net sales orders in the third quarter of 2020 compared to the second quarter of 2020 as marketers who are still advertising shifted more of their spend to influence their marketing campaigns. For Q3 2020, our gross billings decreased to $5.5 million compared to $6.7 million in Q3 2019. This 17% decline in gross billings was primarily due to a $1.1 million decline in marketplace spend and license fees from our SaaS customers due primarily to a trend in the renewal of some of those customers and curtailed spending as marketers pause and change their spending habits due to COVID-19 uncertainties and other factors. The reduction in SaaS gross billings resulted in the $331,000 decrease in SaaS service revenues in Q3 2020 as compared to Q3 2019. Our cost of revenue, exclusive of amortization was $1.7 million in Q3 2020 as compared to $1.9 million in Q3 2019. As a percentage of revenue, our cost of revenue, exclusive of amortization, has improved from 43% in Q3 2019 to 42% in Q3 2020 primarily due to the reduction in personnel and travel-related costs on the fulfillment of our customer marketing campaign. Our total costs and expenses were $5.3 million for Q3 2020 compared with $5.6 million for Q3 2019. If we exclude the non-cash $794,000 gain on the final settlement of our acquisition cost liabilities recorded in Q3 2019, the improvement between periods is more than $1 million as a result of the $200,000 decrease in cost of revenue, a $61,000 reduction in amortization cost as assets were fully amortized in the quarter, and over $700,000 in cost reduction efforts, affecting personnel, software subscriptions, rent, travel and marketing expenditures that were cut due to COVID-19 operating changes. We also saw reduced hosting costs by optimizing usage over data hosting service after shutting down the TapInfluence technology platform in February 2020. Our net loss for Q3 2020 was $1.3 million or $0.03 per share compared to our net loss of $1.2 million or $0.04 per share for Q3 2019. Despite the decline in overall revenues, we were able to improve adjusted EBITDA by $531,000 or 42% to a negative $725,000 in Q3 2020 compared to a negative $1.3 million in Q3 2019. This was achieved through steps taken to curb spending during this period. To summarize, although our team is working remotely and our internal business operations are fully functional, we are still experiencing impacts from the outbreak of COVID-19 on our results of operations. We have observed changes in advertising decisions, timing and spending priorities from our customers, which have had a negative impact on our revenue. But we have also found ways to reduce expenses and gain efficiencies in our internal operations to minimize the effect. While the disruption is currently expected to be temporary, there is a high level of uncertainty around the duration and the total economic impact, especially as marketers prepare their budgets for the future. Between June and August 2020, we raised gross proceeds of $25.7 million through the sale of 13.3 million shares of our common stock under an at-the-market offering program registered on our shelf registration statement filed with the Securities and Exchange Commission. As of September 30, 2020, we had cash on hand of $30.6 million with no amounts used on our $5 million line of credit. We expect that our cash on hand will be sufficient to cover our operating needs for the next 12 months.

Thanks, LeAnn. Don’t let the urgent drive out the important. These are wise words our industry contemporary, Marissa Mayer once said, and it particularly resonated with me and our team given the extraordinary events we are living through and navigating as a business. With the constant macroeconomic and public health challenges, at times, each business day of 2020 has felt like a week, each week a month. And yet by focusing on the things we can control, Team IZEA has demonstrably been able to hone in on those important factors, driving meaningful results, particularly during this third quarter. A benchmark of successful businesses is not just the new customers that you secure, but how well you retain and roll them over time. At the center of the COVID crisis, cognizant of the broader market landscape could be unpredictable and inconsistent for new business efforts. Our experienced professionals focused on extending our existing client relationships, especially those in key sectors, such as home entertainment, high-frequency consumer packaged goods, and direct-to-consumer e-commerce that were bolstered by the pandemic and related to those home dynamics. Those factors, combined with brands' needs to redirect their market expenditures, allowed IZEA to enjoy the benefits of having high-impact campaigns within a medium such as influencer marketing that reached consumers outside of conventional approaches. We believe that post-pandemic, these changes in strategy could be one felt, especially given how value is created and a well-rounded strategic investment placed into the greater economy compared to the old extensive quarters of media such as television or out of home. Influencer marketing not only is more cost-effective, it delivers a longer lifetime value through highly measurable results. So, what happens when you pair a world-class client service from IZEA’s team of professionals with brands who want to take full advantage of the changing climate and the hottest social platforms? Well, for starters, unprecedented scale and consumer engagement. Recently, NPR’s Morning Edition studied that the popular children’s YouTube video, Baby Shark had become the platform’s most viewed clip of all time, with 7.05 billion views. Not too shabby. But here is the other part of the story. Highly snackable and shareable content on platforms such as TikTok are rewriting the rules of what is considered normal and shattering previous measurement records as a result. Our clients realize this may work with our team for the direct-to-home release of Scoob; its addictive TikTok dance, choreographed by famed Renegade influencer, Jalaiah Harmon, has racked up 7.2 billion global views and counting since its campaign’s launch earlier this year. As we look at 2021 and beyond, the implications of short-form photo and video-based platforms, such as TikTok, Twitch, Instagram stories, and others cannot be understated in terms of the potential results that can bring to bear for today’s modern brand marketers. These are not just “kid apps.” The impact is being seen in key advertising demographics, such as the desirable adults, aged 18 to 49 brackets. Another large trend, the global impact of influencer marketing. On September 21, IZEA announced the formation of Influence+United, the first global alliance of its kind. Historically, Chief Marketing Officers have been hindered in their ability to receive cohesive multi-continent concepting, integrated strategy, and investment approaches, often having to waste time vetting and onboarding multiple vendors who lack experience and scalability required in today’s creator economy. Localized cultural nuances, language barriers, and contractual differences are also crucial considerations for each of these geographies. So, the Influence+United alliance seeks to take the stress out of globalization and streamline the entire executional journey from proposal to results, for the world’s foremost companies. The alliance serves as the easiest way to execute a unified influencer marketing campaign with trusted leaders who are localized in presence but global in scope. Serving as Founding Member, IZEA subsequently welcomed other charter members to Influence+United alliance, including Buzzoole of the EU, LatAm’s FLUVIP, and India’s Chtrbox. The alliance plans to introduce additional members in the coming months to round out a complete global footprint. Already multiple brands have availed themselves of this exciting opportunity and we believe that will continue to increase over the coming years. Stay tuned. On the operational front, I want to quickly address something LeAnn mentioned in her remarks earlier related to the substantial year-over-year decrease in our expenses related to areas such as rent and travel. Our entire North American team has been in a virtual-only stance since mid-March. Based on the combination of guidance from public health professionals as well as internal surveying of our team members, our management team has made the determination that all of our personnel will remain working from home until the conclusion of the second quarter of 2021 at the earliest. We consider ourselves to be extremely fortunate to serve our category whereby our ability to grow and function as a business is not impeded on a day-to-day basis by not being in our normal physical office locations. Through a combination of solid planning and focusing on our infrastructure being 100% cloud-based, the transition for our team members was largely a non-event technologically. That said, we must see one another at separate videoconferences, and we can’t wait to be able to travel to be with our clients in person once it’s safe for everyone to do so without increased risk. However, we value everyone’s health and safety above all else and remain hopeful that by this time next year, life will feel a lot more like normal again. Until then, our team remains subject to the various risks and uncertainties of the day related to the COVID pandemic, political and social justice issues, to say the least. And while we have been largely able to circumnavigate those, I want to stress something simple; the social platform boycotts have a material impact on IZEA’s revenue recognition, whether it happens to be our expected delay in a campaign or even as far as a cancellation for our brand clients who choose to align themselves accordingly. In those situations, we rely on our team’s ability to leverage the company’s extensive thought leadership, research, and data-driven insights to help prescribe the best possible outcome for our clients. But something for shareholders to be mindful of, as we continue down the path never forged before in the history of advertising. For more details on that road ahead and to share some exciting announcements on other aspects of IZEA’s progress, I’d now like to turn the call over to my colleague and IZEA’s Chairman and CEO, Ted Murphy. Ted?

Thank you, Ryan. I appreciate the hard work that you, LeAnn, and the rest of team IZEA have put forward to continually evolve our company in these unprecedented times. I am excited about the progress and changes we have made and the positive impacts that they have had on the bottom line. On our last call, I spoke about the headwinds that we are seeing for enterprise SaaS and cautioned that this line of our business would likely continue to face challenges over the coming quarters. While we have started to collect some enterprise wins again, the macro climate for enterprise MarTech software is dramatically different than it was at the beginning of this year. Marketing budgets have shrunk, teams have been consolidated, and many are taking a wait-and-see approach before making new long-term commitments. Fortunately, IZEA has been focused on a much broader strategic vision for some time now, and we are starting to capitalize on some of the investments we have made to diversify and scale our customer base with a variety of revenue streams. IZEA’s vision has always been to connect the buyers and sellers who drive the creator economy forward. Our goal is for both parties to financially benefit by transacting and collaborating with each other. During our Shake streaming event last month, I outlined the pillars of that vision and our intent to make IZEA technology platforms available and affordable for the broadest base of customers possible. I am excited to share that we are making progress. We continue to see growth with IZEAx Discovery, our self-service offering. At the end of Q2, we shared that we had hit an all-time record number of customers licensing our software. Due to this credit card-driven platform, this trend has continued in Q3. IZEAx Discovery has seen remarkable resilience since COVID. As a result, we ended Q3 with the highest number of active software customers we have ever had. As we take into Q4, that number was bested in October and it looks to be on track to be bested here again in November. And IZEAx Discovery license cost significantly less than our enterprise Unity Suite. It is also a much different sales process. Unity Suite requires a demo from a salesperson, involves contracting with legal, and typically involves a customer procurement team as well. The time to close can extend multiple months for an enterprise customer. Discovery just requires a valid credit card. And after visiting the website, many customers buy the same day. Discovery is inherently more scalable, but it also requires more customers to generate the same amount of revenue. Long-term, we would much rather have more customers, even if they are paying less per customer each month for our software. As our mix of software customers continues to evolve, we may see near-term decreases in software revenue, even though we have more active customers overall. As we have evaluated the near-term challenges with enterprise software sales as well as the opportunities with self-service offerings, we have made some adjustments to our sales and marketing initiatives. We have been investing much more aggressively in our marketing efforts to broaden our customer base and drive self-service revenue growth. That includes everything from influencer marketing to search engine optimization, search engine marketing, and paid social. There was a material uptick in media investment that started in earnest in September, and the results were near immediate. New signups for IZEAx Discovery hit an all-time high in October. It was up 2.6x from October of last year. Monthly recurring revenue for IZEAx Discovery also hit an all-time high in October and was up more than 25% from September of this year, which was the previous record. The growth in IZEAx Discovery is one of the reasons we are so excited about Shake. Lower price points and shorter commitments dramatically widen our buyer universe. And unlike the past, we have significantly more capital to invest in customer acquisition. While the primary focus of recent increased marketing efforts has been on self-service, we believe there has also been a halo effect on our other offerings. The number of enterprise SaaS demos per day has been increasing and the dollar value of the new opportunity pipeline for managed services also hit a yearly high in October. Early indications are that our marketing efforts are working. And we believe there are ongoing performance optimizations to make each dollar we spend more effective as we gather more data. To that end, we have ongoing multi-variant testing and benchmarking in place in an effort to continually improve our marketing outcomes. We have also engaged two advertising partners to help us measure, test, and experiment with creative new approaches. Marketing spend will increase in Q4 and moving forward. It will include not only investment in paid marketing efforts, but also properly staffing the marketing organization for success. We will be adding full-time personnel dedicated to managing our social media as well as marketing automation in the coming months. Not only have we made adjustments in sales and marketing, we have also made some changes in engineering priorities to capitalize on the opportunity we see with IZEAx Discovery, Shake, and a general shift towards a much broader customer profile than ever before. Our team had originally planned to release IZEAx 4.0 and BrandGraph 2.0, both of which are targeted at enterprise SaaS customers next month. However, as we have gained more insights over the past quarter, we have made the decision to hold both releases until 2021. Our leadership team came to this conclusion for four primary reasons. Number one, we are working our way through some growing pains. We have never added this many engineering team members this fast to our development efforts, let alone completely remote and rotate around the world. While our employees reside in the United States, we now have full-time engineering contractors that act as an extension to our team in Brazil, Egypt, Nigeria, and Kenya. These global contractors not only lower our engineering costs per team member, but they enable us to expand our daily window of engineering operations. The additional development acumen will provide us with an advantage long-term, but short-term, it is taking more time away from our most senior engineering team members than we anticipated. Number two, we want to deliver an even better experience for the new version of IZEAx. There have been significant technology advances made by our data science team very recently. These are next-generation leaps forward, utilizing neural networks to gain unprecedented new insights about content and creators. Our engineers need more time to get that data surfaced inside the platform. Number three, we want to push our enterprise-focused software announcements past any post-election noise. We are hopeful that on the other side of the inauguration and continued progress with COVID vaccine tests, we will be better positioned to garner attention from marketers and they will be more comfortable in making larger software investments. Number four, and most importantly, we want to be able to cycle quickly on self-service software improvements in order to improve conversion and retention of customers, which brings us to Shake, our new self-service platform. I have some exciting news to share. Today is the day we have all been waiting for. Just a bit ago, we quietly turned on the buy button for everyone on the Shake website. Anyone with a Shake account and a valid credit card can now go into the marketplace, search for a creator, and make a purchase. In addition, today, IZEA launched a broad-scale influencer marketing and paid media campaign to drive traffic to some of the best individual Shake listings. We are incredibly excited about the people who have joined the platform to date and we can’t wait to see how it grows over time. Our engineering team has been releasing new updates on a near daily basis. And the feedback that we have received from users has been incredible and is helping us guide development of the platform. This is day one for Shake. As we look to the future, we will be enabling more powerful search capabilities, turning on more categories, and bringing more IZEA data and insights to the Shake experience. This year has surely put IZEA to the test: a global pandemic, recession, social media boycotts. We have had a lot thrown at us all at once. But this team came together. Instead of retreating when faced with adversity, we doubled down on efficiency and dramatically improved our operating margins. We doubled down on innovation and launched two brand new products, and we doubled down on service to drive amazing campaign results for customers, all despite the most difficult of circumstances. As we look to close out 2020, I am immensely proud of my fellow IZEAns. And I hope our shareholders recognize just how dedicated and special this group of people is. I am also incredibly optimistic about the future, the technology we have just released, and the other next-generation capabilities that are just around the corner. Thank you all for your support. I would now like to open up the call for Q&A.

The first question comes from Graham Hickman with Ladenburg Thalmann. Please go ahead.

Yes, hi, guys. Thanks for taking my questions. Just a few here. If you could maybe talk about the dynamic of new SaaS customers like there has been the decline in SaaS revenue, but you have picked up new SaaS customers as you have broadened your scope into the self-service platform. If you could maybe talk about kind of how you see that evolving over the next year or what we see as the vision for that? Should we expect those customers to kind of follow a land-and-expand approach or how are you thinking about that?

Yes. The customers that we are talking about, that we have been adding are primarily customers that are using IZEAx Discovery. That platform retails for $149 a month versus our enterprise suite, which averages in the mid-2000s. So, you need many more customers that are licensing the Discovery offering versus the Unity Suite offering. Right now, the enterprise customers are a much more difficult sale for us. It is a much slower process; you are talking about longer commitments and larger spends that really need to be made in order to warrant the license for that. So, we think that that’s going to likely be challenged here for the next couple of quarters, where we are seeing the growth is at the lower price point, and it’s frankly much easier for us to market that product and add additional customers because people are able to come in, use a credit card without any sort of long-term commitments or spending tens of thousands of dollars on licensing.

Got it. Yes, that makes sense. And then maybe follow-up as you are talking with these customers and you have developed product, can you talk about some of the lessons we have learned along the way in terms of what customers are looking for to the extent you can? So what have you learned as these develop new products kind of for a broader base?

Yes. One of the things that we are seeing right now is that marketers have very different workflows and ways that they are using influencers as part of their overall marketing. Content has certainly become a big part of that strategy, where brands are looking to use influencer content to power their own social handles or produce content for their website, but every marketer is different in the way that they are utilizing influencers. And one of the things that we are really focused on is providing as much flexibility in our platform as possible, so that brands can really transact and manage their workflow in a way that makes sense for them and, in many cases, that requires us to rethink the way that we have built out processes to allow customers to kind of jump in and out wherever they want.

Got it. That’s helpful. Thanks. I would jump back.

Thank you.

The next question comes from Mike Jeffrey, a Private Investor. Please go ahead.

Hello, everyone. My question is for Mr. Murphy. I have a few questions. The first one is that the reason that I call today is because I am really very, very concerned about IZEA's revenue decline quarter after quarter and then also IZEA’s stock price? And I think that the IZEA has been in business at least for 8 years or maybe longer and the price of the IZEA stock has come down from $500 in 2012 to less than $1 today, and that really concerns me very much. And I wonder that what the management, including yourself Mr. Murphy, you have done to bring up the price of the IZEA stock? Because I think that the investors are very unhappy with the stock price and I know that you are working hard, the management is working hard, I understand that. But the thing is that if it’s not working, then maybe it should add some business to your business, such as hot businesses, such as cryptocurrency, blockchain. I know that in January of 2018, your intention was to get into that business, and you announced it and I remember that, that day, the price of IZEA stock went from $4.50 to close to almost $8, almost doubled. So it seems that Wall Street really likes the idea of you getting into cryptocurrency, blockchain? So what was the reason that you changed your mind shortly after? And at that time, I remember that the Bitcoin prices were about $10,000, $11,000. So what was the reason that at that time you wanted to get into that business, and now, do you feel that it is a better time to get into that business now that the price of the Bitcoin is over $16,000, which is much more than 3 years ago? And some experts are predicting that the prices of Bitcoin, it might reach $250,000 in the next 2, 3 years? So, do you think that you might get into cryptocurrency blockchain business in the near future and if not, why not and why did you want to get into that business 3 years ago? And then I have another question.

I appreciate your question. We have already addressed our concerns with cryptocurrency. There are still a lot of unanswered questions about crypto. And ultimately, we made the decision to focus on our core software, and it’s not something that we are going to revisit at this time. Thank you.

The next question comes from Andrew Hanna, a Private Investor. Please go ahead.

How are you guys doing? How are you doing, Ted? Hopefully, if it’s okay with you, we will just focus on right now and into the future, I don’t know about that last guy. But I had a quick question is in regards to Shake, I believe it’s unique and I think it has unlimited potential. My question is what are the team's plans now and in the future obviously we want to get as many high-profile people on to the platform as possible. I know that’s obviously the goal. But what plans does the team have to acquire more people and get them onto the Shake platform, getting more eyeballs on it and get – and get that movement of course as fast as possible, which I am sure we would all like? That’s it. Thank you.

Thank you. That is a great question. I appreciate that. That is really what the marketing initiatives that we are kicking off today are all about. We are starting with an influencer marketing campaign that we are managing through IZEAx, we are supporting that with paid media, and our intent is to really focus our marketing resources on both Shake and IZEAx Discovery for the foreseeable future. We are really trying to drive as much self-service revenue as we can, but I do want to address one of the things that you brought up and that our focus for Shake is not necessarily bringing on the highest profile people or the biggest influencers, who may command tens of thousands or in some cases, hundreds of thousands of dollars for a single post. We love working with those influencers in our managed services business, but those are not the types of influencers that are going to provide a lot of value to the platform in terms of actual revenue. It’s pretty unlikely that someone is going to come in and spend $50,000 through their credit card to hire one of these influencers. So really, the sweet spot that we see is somewhere in the $1,500 to $2,000 range that’s really where we are going to focus on adding the most influencers that we can. And then recognizing that there are a lot of nano influencers and micro influencers that can also transact on the platform and provide us a lot of volume as well.

Okay. And if you can still hear me also, as far as what about a brand ambassador? I mean, have you ever considered something like that? I understand exactly what you are saying makes perfect sense. We are trying to get the common man and woman onto the platform, and obviously we all know social influencing is on the rise. It’s just tipping the scale. So I mean, we understand that there is a whole generation of young men and women that are just coming up. And that’s who we are trying to get onto the platform and build, and they are going to grow themselves, and maybe God knows how much they are going to grow. But what about as far as – has there ever been any thought by the team on maybe getting somebody just with a little bit higher profile, just to attract attention to the platform itself and just kind of put out the word that you know what this is what it is, it’s social influencing? This is the new way to market, which we all know. This is, in the advertising business, this is the sector to be in, and to try to grow? Has there been any thoughts on possibly getting somebody like that, like just somebody who can yes, disrupt the brand and say you know what this is what social influencing is and for people that aren’t doing it, to make them aware that this does have potential in this, you can actually make a living, whether it’s a side hustle, or whether you are growing into something that is just this is your career, is just to kind of ask somebody like Shake and set it aside and put Shake on a pedestal. And that’s it. I will leave it at that.

Thank you so much. That is certainly something that we have discussed and is potentially on the table, but I will tell you that our primary focus is really on a larger group of ambassadors that we can engage in an ongoing way. And what we have found for our customers in doing these transactions over the past 14 years is that the power middle really drives the value. The largest influencers are certainly exciting to work with, and those deals get a lot of attention, but when you look at the cost per engagement, the cost per click, and the value that is driven by an individual influencer, the campaigns that utilize large groups of people tend to drive the most success for the brands that we are working with. So, that has really been our strategy. That’s not to say that we might not mix it up like we do for many of our customers. But right now, we are starting with a larger group of ambassadors.

Fair enough. Thank you. I appreciate your time.

Thank you.

There are no questioners in queue. This concludes the question-and-answer session. I would like to turn the conference back over to Ryan Schram for any closing remarks.

I would like to thank everyone for joining us this afternoon. And as a reminder, all of IZEA’s Investor Relations information can be found online on our website at izea.com/investors. Thank you again for joining us. Please stay safe and stay healthy. We will talk to you soon.

This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.