IZEA(IZEA) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements IZEA's Q1 2021 revenue increased 13% to $5.4 million, with net loss improving to $2.0 million from $6.2 million due to the absence of a $4.3 million goodwill impairment, while cash and equivalents grew to $65.5 million from $33.0 million, boosted by $33.6 million from stock sales Unaudited Consolidated Balance Sheets As of March 31, 2021, the company's total assets increased to $75.8 million from $44.8 million at the end of 2020, primarily driven by a significant rise in cash and cash equivalents to $65.5 million, while total liabilities remained stable at $12.5 million, leading to a substantial increase in total stockholders' equity to $63.3 million Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $65,465,588 | $33,045,225 | | Total current assets | $69,966,275 | $38,526,191 | | Total assets | $75,847,757 | $44,752,071 | | Liabilities & Equity | | | | Total current liabilities | $12,376,338 | $12,462,520 | | Total liabilities | $12,549,530 | $12,965,711 | | Total stockholders' equity | $63,298,227 | $31,786,360 | Unaudited Consolidated Statements of Operations and Comprehensive Loss For the three months ended March 31, 2021, revenue increased 13% to $5.4 million compared to $4.8 million in the prior-year period, and the company reported a net loss of $2.0 million, or ($0.04) per share, a significant improvement from a net loss of $6.2 million, or ($0.18) per share, in Q1 2020, largely due to the absence of a $4.3 million goodwill impairment charge Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended Mar 31, 2021 | Three Months Ended Mar 31, 2020 | | :--- | :--- | :--- | | Revenue | $5,375,632 | $4,763,668 | | Total costs and expenses | $7,383,751 | $10,882,767 | | Impairment of goodwill | $0 | $4,300,000 | | Loss from operations | ($2,008,119) | ($6,119,099) | | Net loss | ($1,992,438) | ($6,163,461) | | Basic and diluted loss per common share | ($0.04) | ($0.18) | Unaudited Consolidated Statements of Cash Flows For the first quarter of 2021, net cash used in operating activities was $0.8 million, while net cash provided by financing activities was $33.3 million, primarily from $34.4 million in proceeds from the sale of securities, resulting in a net increase in cash and cash equivalents of $32.4 million, bringing the quarter-end balance to $65.5 million Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Three Months Ended Mar 31, 2021 | Three Months Ended Mar 31, 2020 | | :--- | :--- | :--- | | Net cash used for operating activities | ($829,707) | ($1,348,372) | | Net cash used for investing activities | ($13,217) | ($51,004) | | Net cash provided by financing activities | $33,263,287 | $1,149,188 | | Net increase (decrease) in cash | $32,420,363 | ($250,188) | | Cash and cash equivalents, end of period | $65,465,588 | $5,634,441 | Notes to the Unaudited Consolidated Financial Statements The notes detail the company's business as an online marketplace connecting marketers with content creators through platforms like IZEAx, BrandGraph, and Shake, including disclosures on revenue sources, a pending $1.9 million PPP loan forgiveness, significant equity financing through ATM offerings raising $34.4 million in Q1 2021, and a $4.3 million goodwill impairment recognized in Q1 2020 due to COVID-19 - The company operates online marketplaces (IZEAx, BrandGraph, Shake) that connect marketers with content creators for influencer marketing and custom content creation[21][22][23] - In Q1 2020, the company recorded a $4.3 million goodwill impairment charge due to adverse economic conditions caused by the COVID-19 pandemic[79] - The company received a $1.9 million PPP loan in April 2020 and submitted a forgiveness application in December 2020, which is awaiting SBA approval[86][88] - During Q1 2021, the company sold 8.7 million shares through its ATM offerings for gross proceeds of $34.4 million[103] Revenue by Product Service Type (Q1 2021 vs Q1 2020) | Revenue Type | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Managed Services Revenue | $4,872,034 | $4,125,061 | | SaaS Services Revenue | $503,598 | $638,607 | | Total Revenue | $5,375,632 | $4,763,668 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported a 13% YoY revenue increase to $5.4 million in Q1 2021, driven by 18% growth in Managed Services despite a 21% decline in SaaS Services, with net loss improving significantly to $2.0 million from $6.2 million due to the absence of a $4.3 million goodwill impairment, and liquidity substantially enhanced to $65.5 million cash from ATM offerings, sufficient for at least twelve months Company Overview and COVID-19 Impact IZEA operates online marketplaces connecting marketers with content creators via its technology platforms IZEAx, BrandGraph, and Shake, and despite an initial negative impact from COVID-19 in 2020, the company saw a rebound in Managed Services bookings in Q4 2020 and Q1 2021, leading to 13% overall revenue growth in Q1 2021, while transitioning to a permanent 'virtual first' work-from-home model - IZEA's primary business is connecting marketers with content creators through its technology platforms: IZEAx, BrandGraph, and Shake[143][146][147] - The company transitioned to a permanent work-from-home policy and allowed office leases to expire in 2020[148] - After an initial negative impact from COVID-19 in 2020, the company saw a year-over-year increase in Managed Services bookings in Q4 2020 and Q1 2021, leading to 13% overall revenue growth in Q1 2021[149][150] Results of Operations Total revenue for Q1 2021 increased 13% to $5.4 million, driven by an 18% rise in Managed Services revenue to $4.9 million as customers expanded marketing efforts, while SaaS Services revenue declined 21% to $0.5 million, and total costs and expenses decreased 32% to $7.4 million due to the non-recurrence of a $4.3 million goodwill impairment, resulting in a narrowed net loss of $2.0 million from $6.2 million in the prior year Summary of Operations (Q1 2021 vs Q1 2020) | Metric | Q1 2021 | Q1 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $5,375,632 | $4,763,668 | $611,964 | 13% | | Total costs and expenses | $7,383,751 | $10,882,767 | ($3,499,016) | (32)% | | Loss from operations | ($2,008,119) | ($6,119,099) | $4,110,980 | (67)% | | Net loss | ($1,992,438) | ($6,163,461) | $4,171,023 | (68)% | - Managed Services revenue grew 18% YoY due to increased orders from new and existing customers expanding their marketing efforts[161] - SaaS Services revenue fell 21% YoY, primarily due to lower Marketplace Spend Fees and a decrease in License Fees from competitive pricing changes[161][163] - Sales and marketing expenses increased 36% due to higher advertising spending to build brand awareness and increased commission expenses from higher customer bookings[166] Key Metrics and Non-GAAP Measures The company uses Gross Billings as a key metric, which increased 9% to $6.6 million in Q1 2021, driven by an 18% increase in Managed Services despite an 11% decrease in SaaS Services Gross Billings, while Adjusted EBITDA, a non-GAAP measure, was a loss of $1.4 million, slightly higher than the $1.2 million loss in Q1 2020 Gross Billings by Revenue Type (Q1 2021 vs Q1 2020) | Gross Billings Type | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Managed Services | $4,872,034 | $4,125,061 | 18% | | SaaS Services | $1,746,393 | $1,972,088 | (11)% | | Total Gross Billings | $6,618,427 | $6,097,149 | 9% | Adjusted EBITDA Reconciliation (Non-GAAP) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net loss (GAAP) | ($1,992,438) | ($6,163,461) | | Adjustments | $604,090 | $4,968,708 | | Adjusted EBITDA (Non-GAAP) | ($1,388,348) | ($1,194,753) | Liquidity and Capital Resources The company's liquidity significantly improved, with cash and cash equivalents increasing by $32.4 million during the quarter to reach $65.5 million as of March 31, 2021, primarily driven by net proceeds of approximately $33.6 million from at-the-market (ATM) stock offerings, and management believes its current cash reserves are sufficient to cover expenses for at least the next twelve months, despite a pending $1.9 million PPP loan forgiveness application - Cash and cash equivalents increased to $65.5 million at March 31, 2021, from $33.0 million at December 31, 2020[184] - Financing activities provided $33.3 million in cash, mainly from the sale of common stock through ATM offerings[185] - From June 2020 to April 2021, the company sold a total of 26 million shares for gross proceeds of approximately $75 million through its ATM offerings[186][139] - Management expects to have sufficient cash to cover expenses for at least one year from the report's issuance date[188] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company is a smaller reporting company - Disclosure is not required for smaller reporting companies[192] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2021, with no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[196] - No material changes were made to the company's internal control over financial reporting during the first quarter of 2021[199] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports that it is not currently aware of any legal proceedings or claims that would be expected to have a material adverse effect on the business - As of May 10, 2021, the company is not aware of any legal proceedings that could have a material adverse effect[201] Item 1A. Risk Factors The company highlights the extreme price and volume volatility its common stock has recently experienced, noting that the stock price has fluctuated significantly and may be influenced by factors such as 'short squeeze' activity, potentially unrelated to operating performance - The company's common stock has recently experienced extreme price and volume volatility, which may be unrelated to its operating performance[204] - From January 1, 2020, to December 31, 2020, the stock's closing price ranged from $0.13 to $2.82, and in January 2021, it reached an intraday high of $7.45[204] - The company acknowledges that its stock price may be subject to 'short squeeze' activity, which can lead to short-term, high volatility trading conditions[205] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not sell any unregistered securities during the period covered by this report, other than what may have been previously reported on Form 8-K - The Company did not sell any unregistered securities during the quarter[207]