IZEA Worldwide, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. IZEA operates online marketplaces and software platforms connecting marketers with content creators. The financial statements are unaudited.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $6.54 million | $3.14 million | $11.91 million | $7.90 million |
| Operating loss | $2.07 million | $1.81 million | $4.08 million | $7.92 million |
| Net loss | $0.11 million | $1.79 million | $2.10 million | $7.95 million |
| Adjusted EBITDA | $(1.42) million | $(1.27) million | $(2.81) million | $(2.46) million |
| Operating cash flow | Not separately reported | Not separately reported | $(3.14) million | $(1.82) million |
- Q2 gross profit was approximately $3.25 million, or 50% of revenue; six-month gross profit was approximately $6.23 million, or 52% of revenue. Cost of revenue was 50% and 48% of revenue, respectively.
- Q2 net loss per share was reported as zero after rounding; six-month diluted loss per share was $0.04, versus $0.22 in 2020.
- At June 30, cash and equivalents were $74.99 million, versus $33.05 million at year-end 2020. Current assets were $82.19 million and current liabilities $12.38 million. Total liabilities were $12.44 million; notes payable were $32,255 and the finance obligation was $34,292.
- Six-month investing cash outflow was $21,000; financing cash inflow was $45.11 million, mainly equity issuance proceeds. Accumulated deficit was $72.74 million.
Changes versus prior comparable periods
- Q2 revenue increased 109% year over year; six-month revenue increased 51%. Managed Services drove growth, rising 146% in Q2 and 66% for the half-year.
- SaaS Services revenue declined 34% in Q2 and 28% for the half-year. Management attributed lower marketplace spend fees to reduced customer spend and competitive pricing, and lower license fees partly to lower standardized IZEAx pricing.
- Operating expenses rose 74% in Q2, outpacing revenue growth; management cited higher creator delivery costs, marketing investment, personnel costs, and technology contractors. The operating loss therefore widened in Q2.
- Six-month net loss improved substantially, but comparisons include the $4.3 million goodwill impairment recorded in 2020 and the $1.93 million PPP debt-forgiveness gain recorded in 2021. Excluding that gain, Q2 and six-month Adjusted EBITDA remained negative and worsened year over year.
- Cash increased mainly from common-stock sales: 11.19 million shares generated $46.54 million gross proceeds in the first half. Shares outstanding at June 30 were 61.81 million, up from 50.05 million at December 31.
Outlook, commentary, and risks
- Management said cash on hand and available financing were expected to cover expenses for at least one year from the filing date, based on current revenue and expense estimates. No specific revenue, earnings, or margin guidance was provided.
- Managed Services bookings rose 187% in Q2 to $11.10 million and 163% for the first half to $17.55 million. Management cautioned that bookings may take about nine months on average to convert to revenue, may not predict quarterly revenue, and can be cancelled.
- The June 2021 ATM agreement permits up to $100 million of additional common-stock sales; no sales had occurred under it by June 30. The prior ATM agreements had been fully utilized and terminated.
- The PPP loan and accrued interest, totaling $1.93 million, were forgiven in June and recognized as other income. The secured credit facility was terminated in April 2021. The company had no office lease or other lease longer than 12 months at quarter-end.
- Risks include ongoing operating losses and negative operating cash flow, COVID-19 uncertainty and customer cancellations, customer and receivables concentration, competitive pressure on SaaS pricing, reliance on third-party social platforms, potential dilution from equity issuance, and extreme common-stock price volatility. Three customers accounted for 36% of Q2 revenue; two customers represented 31% of receivables at June 30.
- Management reported disclosure controls were effective and no material change in internal control occurred during the quarter. The company reported no known legal matters expected to have a material adverse effect.
Important facts for investors to verify
- Whether strong Managed Services bookings convert into recognized revenue, and at what pace, given the longer conversion cycle and cancellation risk.
- Whether operating costs and creator delivery expenses can be managed as revenue grows, and whether operating cash flow improves.
- How much of reported net-loss improvement reflects recurring operations versus PPP forgiveness and the prior-year goodwill impairment.
- Future use of the $100 million ATM facility, resulting share dilution, and cash deployment plans.
- Customer concentration, receivable collection, and the trend in SaaS revenue and marketplace spend.