Greetings. Welcome to IZEA Worldwide, Inc., Second Quarter 2022 Earnings Call. Please note this call is being recorded. I will now turn the conference over to Ryan Schram, President and Chief Operating Officer. Thank you. You may begin.

Good afternoon, everyone, and thanks for joining us for IZEA's earnings call covering the second quarter of 2022. I'm Ryan Schram, President and Chief Operating Officer at IZEA. And joining me on the call is IZEA Chief Financial Officer, Peter Biere; and IZEA Founder, Chairman and Chief Executive Officer, Ted Murphy. We're glad to have you with us today. Earlier this afternoon, the company issued a press release with details pertaining to our second quarter performance for the fiscal year 2022. If you'd like to review those details, all of our investor information can be found online on our Investor Relations website, at izea.com/investors. Before we begin, please take note of the safe harbor paragraph included in today's press release covering the company's financial results and be advised that during today's earnings call our management team will discuss IZEA's financial outlook and make forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to risks and uncertainties that could cause our actual results to differ materially from expectations and the assumptions we mention today. We encourage you to consider the disclosures contained in our SEC filings for a detailed discussion of these risks and uncertainties. We undertake no obligation to update these statements as a result of new information or further events, except as required by law. Our commentary today will also include the non-GAAP financial measure of adjusted EBITDA. Reconciliation between GAAP and non-GAAP metrics for our reported results can also be found in our earnings release issued earlier today as well as in our publicly available filings. And with that, I'm pleased to turn things over to my colleague and IZEA's Chief Financial Officer, Peter Biere.

Thank you, Ryan, and good afternoon, everyone. I'd like to review operating results and highlight our financial accomplishments for the second quarter. Revenue for the second quarter of 2022 totaled $12.6 million, which was 96% higher than Q2 of 2021. Managed Services revenue totaled $12.2 million during the second quarter of 2022, a record for IZEA and 103% growth over the prior year quarter. We recorded $400,000 in net revenue from our SaaS offerings during the current quarter, down 5.6% from the prior year quarter. Managed Services revenue, which more than doubled in the second quarter from the prior year, included $5.3 million in one large customer contract, $2.3 million of which is catch-up from prior quarters' production delays. The catch-up isn't run rate revenue and, as such, won't repeat in the following quarter. Strong sequential quarterly bookings also contributed to revenue growth in the second quarter. As we previously announced, Managed Services bookings, a key metric measuring sales orders net of cancellations and refunds during the period, totaled $9.3 million for the second quarter of 2022, off about 16% from Q2 of 2021. The bookings decline is partly related to large contract bookings which tend to be lumpy. We also experienced a bookings slowdown late in the second quarter due to a few delayed customer commitments over economic concerns. While some of these delayed opportunities closed after the end of the quarter and while economic uncertainties remain, we expect to have strong bookings in the third quarter. Our Managed Services backlog, which represents the total of unrecognized revenue for contracts that are underway as well as recent bookings that have yet to begin invoicing, totaled $25 million on June 30, 2022. We expect to record most of this backlog as revenue in the following three quarters. SaaS Services revenue, consisting of license fees, self-service marketplace spend fees and other fees, declined by $27,000 during the second quarter of 2022 from the prior year quarter. Total license counts on all platforms during the same time period declined by 7%. Revenue from license fees declined by 3% from the comparative quarter, while gross marketplace spend fees fell 26%. Gross billings for SaaS Services were relatively flat from the prior year quarter, indicating that the marketplace fees decline was due to lower average fees. Our cost of revenue was $7.2 million in Q2 of 2022, or 57% of revenue. That compares to $3.2 million, or 50% of revenue, in the prior year quarter. Accordingly, gross margin in the second quarter averaged 43%, compared to 50% in the prior year quarter. The increase in the cost of revenue was primarily due to higher delivery costs on one large customer contract which made up 42% of total revenues during the second quarter of 2022. This significant contract aside, the cost of revenue for our other customer contracts was within recent historical range, between 55% and 60%. Expenses other than the cost of revenue totaled $5.8 million for the second quarter, compared to $5.3 million for the prior year quarter. Sales and marketing costs were comparatively flat, at $2.3 million in the second quarter of 2022. Increased headcount and related payroll costs associated with driving customer growth were offset by lower sales commissions that vary with bookings. General and administrative costs increased to $3.4 million during the current quarter, compared to $2.7 million in the prior year quarter, due primarily to higher compensation and contractor costs to support operations and product investment. Our net loss was $170,000 for the second quarter of 2022, or $0.00 per share, compared to a net loss of $158,000 in the prior year quarter, also $0.00 per share. In Q2 of '21, the net income included a $2 million one-time gain on the forgiveness of our COVID-related PPP loan. So without this one-time gain, our net loss narrowed by about $1.7 million quarter-over-quarter. Adjusted EBITDA was positive $254,000 for the second quarter of this year, compared to negative $1.5 million for the prior year quarter. As of June 30, 2022, we had $70.3 million in cash, including the portfolio investments we made during the quarter. That's down from $75.4 million at the beginning of the year, lower partly due to negative $1.9 million of adjusted EBITDA during the six-month period, but also due to creator payments, in part, ahead of customer billings late in the quarter. I should add that we made $226,000 in interest income on our investments during the current quarter. Lastly, we do not have any debt on our balance sheet. In June of 2021, the company entered into an at-the-market sales agreement under which it may offer up to $100 million of its common stock from time to time. We've not sold any shares to date under that agreement. With cash on hand, any required liquidity from our investment portfolio, continued strong growth in our core business and a financing vehicle in place should we ever require it, we are in a solid position to execute on business growth and opportunities that may lie ahead. With that, I'll turn the call back over to Ryan.

Thanks, Peter. The advertising industry continues to shift rapidly and is currently facing another cycle of unpredictability, given the macroeconomic climate of the last several months. To not just survive but thrive amidst change, our team has taken proactive steps to optimize our core operations, launch new products, sign new partnerships and align our resources internally accordingly. We're fortunate that our organization is filled with seasoned industry veterans who, for better or worse, have now navigated through numerous financial cycles across their careers. They understand the importance of being as in tune as possible to the benefits change can bring to an industry if you're actually prepared to meet the moment. With regard to expenses, we continue to execute against a disciplined and prudent approach to cost management in light of the financial climate in the world around us. That's why we elected to implement proactive measures across the second quarter and into the present period, including, but not limited to, achieving OpEx savings by select personnel attrition, vendor and contractor expense reduction, pausing certain marketing efforts and lowering recurring software purchasing outlay. At the same time, the company also believes that the macroeconomic environment accentuates how important it is for us to continue to thoroughly invest in key growth platforms, as they serve to increase the absolute number of clients we interact with, differentiating IZEA from both an eminence and revenue standpoint. Over time, these effects can also stand to improve conversion rates and lower our customer acquisition costs holistically. Needless to say, this is an extremely important but also energizing time for IZEA. Our ability to constantly innovate to serve our clients better, particularly through challenging times, will allow us to capture market share across various lines of business. It's important to underscore that we have always taken a long-term view of our businesses, both philosophically and functionally. Through every cycle in our nearly 16-year history, from the Great Recession to the COVID pandemic to today, we have sought to adapt and emerge stronger as a result. And in uncertain times, history has shown that prudent investments into our own business are one of the best that we can make. Consequently, IZEA's flywheel is poised to spin faster than ever as we look ahead to the back half of this year and into 2023. As Ted will share in his remarks later, IZEA is well positioned to again revolutionize the modern influencer marketing industry we helped to create in more ways than ever before: by further expanding our client base across North America and beyond within our Managed Services group, including incremental personnel investments to provide expanded innovation, strategic planning and analytics capabilities; by launching our latest flagship SaaS offering this fall that will set the foundation for our next stage of software growth, providing brands and agencies complete optionality in how they choose to leverage IZEA's industry acumen; and by continuing to diversify our revenue sources via our self-service tools and marketplace offerings, which keeps customers actively engaged in IZEA's overall ecosystem of solutions, no matter the price point or need. As we continue to focus on our future, we're also keeping our sights firmly set on maximizing the opportunities afforded to us by previous announcements and initiatives. Here are a couple of the highlights. In our last earnings update, I shared the news about IZEA's entry into the Chinese marketplace in March of this year. And during the second quarter, we closed our very first sale from that team. To put that into perspective, we were not only able to establish a business presence, recruit additional supporting team members, but also build an actual opportunity pipeline and begin closing on it in less than 90 days' time. For anyone who's ever worked in advertising or marketing, you know how difficult those tasks can be, not to mention how impressive the execution has been to be able to deliver against that time frame. And the best part? We continue to see solid demand from that region and believe it can be a significant contributor to our Managed Services unit in 2023 and beyond as momentum continues. Now let's go to the topic of human capital. More than ever, IZEA's goal is to be the leading company where our industry's best talent lives, and that's been front and center to our approach. In particular, we've seen success across 2022 in being able to recruit senior-level client partners who have relationships with brands and agencies that the company has not previously been able to secure given the fragmented nature of spend within influencer marketing. Therefore, the addition of that talent provides an asymmetrical growth opportunity from a revenue perspective, both mid- and long-term, in addition to beginning to consolidate top performers under one roof. Last, but not least, being best in class. A central tenet to IZEA's ability to bring in talent to the company is our commitment to being a world-class workplace. That's why we are so particularly proud about being recognized by Comparably as a 2022 Best Company for career growth and for best company leadership. These honors accompany our previous 2021 award for being a best company for work-life balance. What makes these awards so meaningful to us is that they're based on real-life ratings from our employees and benchmarked against companies from all industries, not just technology or advertising. All told, it's our belief that challenging times call for experience, balanced with ambition and proven execution capability. And that's where we believe IZEA has the greatest opportunity in the near term. Knee-jerk reactions to economic uncertainty have spurred certain of our competitors to downsize or substantially reduce the quality of their services due to a lack of client diversification, flexible offerings involving technology and declining access to capital. This creates a compelling case for more brands and agencies to partner with a proven industry pioneer, IZEA, and presents a unique opportunity for the company to grow its client base and market share in return. While we are thrilled to deliver record-setting Managed Services revenue growth in the second quarter while dutifully managing our expense profile, we recognize that consistent success will be born out of continually meeting our current and prospective customers where they are by providing an array of software and service solutions that are underpinned by our proprietary infrastructure, not just having the company myopically focused on one dimension of the creator economy to its detriment. This is why our investments in technology continue to be pivotal to IZEA's future success. They are an important contributor from a force multiplier perspective to each facet of our strategy and core to our differentiation as a business. They also allow us to grow by offering solutions that are complementary, not competitive, to one another, taking the risk of cannibalization largely out of the equation. Therefore, continue to expect to hear more from us and see more from us around these concepts of innovation, flexibility and scalability in the weeks and months to come. And speaking of what's to come, for some additional commentary on our business and his perspective on our second quarter performance, I'd now like to turn the call over to IZEA's Founder, Chairman and CEO, Ted Murphy.

Thank you, Ryan. Before we look to the future, I would like to take a moment to reflect on the past. In 2016, when our company was the largest it has ever been, measured by employee count, our full year revenue was $21 million. Here in 2022, we are the largest we have ever been by a different measure: revenue. We have achieved $21.5 million in revenue in the first half of the year and done so with about 15% less full-time employees compared to our peak. I am proud of the efficiencies we have gained over the past two years, in particular. The advent of COVID-19 forced our team to reimagine our business, and the net effect of the operational changes we have made have been remarkably positive for our company. Our revenue per FTE hit an all-time high this quarter, driven by a combination of strong management and advances in our technology that make our people more productive. While we have certainly come a long way, we know we are still far from our full potential. If we are to get to a place of sustainable, profitable growth, we must be willing to continue to make investments amid an ever-changing and challenging industry landscape. In a time of record inflation, talent shortages, and increasing labor costs, it is my belief that meaningful revenue growth is the only path to long-term success. From software licenses to accounting fees, we must expect that the baseline cost of ongoing operations will continue to increase for the foreseeable future. It is incumbent on us to actively control these costs the best we can, and I want to commend our team for their efforts. But it is clear that the water line will continue to rise at a pace we haven't seen in the history of our company, and we must outpace it. As my father is fond of saying, "When you are green, you grow. When you are ripe, you rot." We can't expect to do the same things in the same ways and deliver substantially better outcomes. We must continue to evolve and make strategic investments in people and products when and where we see opportunities, and that is what we will continue to do. I would like to address our current reality regarding stock price and enterprise value. We recognize that our shares are trading at a discount to cash. I believe, as do many of you who have written or called me, that IZEA's stock is undervalued. Some suggested a stock buyback or a special dividend, but I want to be clear that IZEA has no current plans for such action. Stock buybacks rarely have lasting positive impacts, especially for micro caps, with the potential to leave the company and its shareholders with less cash on the balance sheet to execute and grow. Our number one focus is to grow our business, which will prove that we're increasing enterprise value, and the stock price should begin to reflect that as we succeed. We believe that our balance sheet is increasingly important in times of great macroeconomic uncertainty. The length and magnitude of the current financial slowdown is yet to be determined, and we want to remain in a position of financial strength with the ability to make long-term investments in our future. The importance of financial strength can't be underestimated in courting the larger customers we need to hit our revenue growth targets. Additionally, our financial strength helps in recruiting talent from competitors that are in precarious financial positions. On the other side of the capital markets coin is our $100 million ATM. We will leave our ATM open as needed to provide complete financial flexibility. But rest assured, we do not have any plans to sell shares into the market at current price levels, as we have demonstrated during the past year. Zero shares have been sold from the ATM since it was put in place. At the start of 2022, I shared that our team is nearly a full year ahead on our 3-year plan to deliver a 30% revenue growth rate each year from 2021 to 2023. We still believe that this is the case. As of today, we are on track to hit our 2022 revenue target of $39 million based on our current trajectory. While we have seen some delays in client commitments over the past few quarters, our pipeline remains robust and momentum is building again amongst our largest clients. Those customers have been least affected by the economic slowdown and continue to invest in influencer marketing, with many of them increasing their spend year-over-year. A notable recent win was an award from the U.S. military for the third consecutive year, with an expansion in scope from 2022 versus 2021. While our larger Managed Services clients seem to be well insulated, we did see some impacts to our software business in Q2, particularly with IZEAx Discovery. That product is primarily targeted at small brands and agencies who are using the product on a month-to-month basis. We saw an increase in cancellations and slower conversions in the quarter. We saw a similar pattern with IZEAx at the onset of the COVID-19 in 2020. Software licenses pulled back and rebounded to all-time record customer counts. We expect to see a similar pattern here. But this time, we have the benefit of a catalyst right around the corner. Actually, I should say catalysts, because we are launching a multi-pronged effort to transform the SaaS line in the business. As I alluded to on our last call, we've been working on a new enterprise Influencer Marketing Platform for some time now. That platform is getting closer to production-ready each day, and we expect to launch it prior to the end of the year. But that platform is just the beginning. We are also developing another SaaS platform in tandem, which we anticipate will also launch before year-end. Supporting the launch of these initiatives will be a broad-scale marketing push unlike anything we've ever executed at IZEA. It will be inclusive of targeted online advertising, broad-based awareness pushes, and tent-pole networking events spearheaded by our most seasoned sellers. We've made tremendous progress on the sales recruiting front in the past six weeks, in particular, signing top sellers from competitors at home and abroad. We intend to invest more in marketing support to help supercharge their ramp-up at IZEA and accelerate and capture new lines of revenue. At a time when we are seeing a pullback among our competitive set, we are aggressively focused on gaining share in order to continue our growth trajectory in 2022 and beyond. Our team is incredibly excited by our future prospects, and I can't wait to share what we've been working on. Thank you all for joining us today. I will now open the call for Q&A from the analyst community.

Our first question is from Jon Hickman with Ladenburg Thalmann.

Okay. First of all, can I just go over this large customer and the $2 million that was kind of catch-up revenue? Theoretically, that revenue would have been recognized maybe in Q4 and Q1?

Yes, spread over those quarters.

Okay. But you got it all. And that's not recurring. Are revenues from this large customer recurring in Q3?

Yes, that customer continues to spend with us. It's just a question of how that revenue is recognized. So a lot of that is based on when influencers are actually activated and that can change from time to time depending on the influencers and the initiatives of the customer.

Okay. And the fact that you recognized this extra $2 million or this catch-up revenue, that in and of itself did not affect the margins? It was just the campaign, in general?

That does go ahead, Peter.

Sorry. Jon, the only thing that affected the margin was the concentration. So we had more lower-margin revenue from this customer than because of the catch-up adjustment, but that's the only reason.

Okay, so based on your comments, Ted, it seems like Ryan mentioned you will be careful with your operating expenses, but you also just noted that you've brought on some experienced salespeople. Could you let us know how many you hired?

We're not giving specific numbers there. It's lower than 10. We're not talking about a huge increase necessarily in overall headcount, but where we are talking about is continuing to invest in sales personnel, in particular. So when we look at other parts of the organization, we're at a point now where we will likely be backfilling if there's attrition, but not really aggressively hiring too many more people in those roles.

Okay. And then you've talked in the past about the new IZEAx platform, but you're not going to call it that. But what's the status of the other platform? What's that going to do for you?

Yes, there are two platforms that are going to be launching prior to year-end. You will have to wait and see for the announcement on those in terms of what they do, but we expect both of those to be launched here prior to the year-end.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Ryan for closing remarks.

Thanks, Sherry, and thank you, everyone, for joining us this afternoon. And as a friendly reminder, all of IZEA's investor information and related press releases and the company's latest news are available on our website, at izea.com/investors. Thanks again for joining us, and we'll talk to you soon.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. And thank you for your participation.