IZEA Worldwide, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. The financial statements are unaudited. IZEA operates online marketplaces and software connecting marketers with content creators, with most revenue generated by managed influencer-marketing and content services.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $10.69 million | $12.58 million | $19.43 million | $21.47 million |
| Operating loss | $1.68 million | $0.44 million | $5.05 million | $2.89 million |
| Net loss | $1.03 million | $0.17 million | $3.84 million | $2.65 million |
| Diluted loss per share | $0.07 | $0.01 | $0.25 | $0.17 |
| Adjusted EBITDA (non-GAAP) | $(0.64) million | $0.25 million | $(2.82) million | $(1.87) million |
- Revenue and mix: Q2 managed-services revenue was $10.62 million, down 13%; SaaS services revenue was $0.07 million, down 82%. For the first half, managed services fell 7% and SaaS services fell 67% year over year.
- Margins: Gross margin, calculated as revenue less cost of revenue, was approximately 41.5% in Q2 versus 42.7% a year earlier, and 37.1% for the first half versus 42.3%. Management attributed first-half pressure primarily to lower-margin large contracts.
- Cash flow: Operating cash use was $3.81 million in the first half, compared with $4.57 million in 2022. Investing activities provided $11.20 million, largely reflecting purchases and sales/maturities of marketable securities; financing used $0.76 million, mainly for share repurchases and taxes on withheld shares.
- Liquidity: At June 30, cash and equivalents were $31.22 million, short-term investments $14.08 million, and long-term investments $19.75 million—$65.06 million combined. Current assets were $53.15 million against current liabilities of $12.57 million, or approximately $40.58 million of working capital.
- Debt and equity: Total liabilities were $12.67 million, including a $162,918 equipment-financing obligation; no material conventional borrowing balance is reported. Stockholders’ equity was $66.36 million. The company repurchased $705,403 of stock under a $1 million authorization during the first half.
Changes versus the prior period
- Q2 revenue declined 15%, while net loss widened by $0.86 million. First-half revenue declined 10%, and net loss widened by $1.19 million; operating loss increased $2.16 million.
- A large customer generated approximately $3.3 million, or about 31%, of Q2 revenue. IZEA is winding down that relationship after completing the remaining contract backlog during 2023. Core-customer managed-services revenue was approximately $7.2 million in Q2, up 6% year over year; management also said ongoing-customer demand grew 24% year over year and 25% sequentially.
- Managed Services Bookings were $7.3 million in Q2 versus $9.3 million, and $13.4 million for the first half versus $21.5 million. Bookings from the departing customer were sharply lower. Management cautions bookings do not predict quarterly revenue reliably because conversion timing varies.
- SaaS revenue declined as legacy IZEAx and BrandGraph offerings were wound down during the transition to IZEA Flex. Flex became available for customer use in Q2, and IZEAx was scheduled to be sunset in Q3 2023. First-half software amortization rose to $0.41 million from $0.21 million.
Outlook, risks and notable items
- Management believes available cash and investments are sufficient to fund operations and planned investments for at least the next 12 months, while noting the company has a history of losses and negative operating cash flow. It expects expenses to increase as it pursues growth; additional capital, if needed, may require equity, equity-based or debt offerings.
- No quantified revenue, earnings or other formal forward-looking guidance is provided. Management cited improving pipeline evidence and strengthening core business demand, but also said bookings had not met internal expectations and opportunities were taking longer to close.
- Risks include customer concentration (one customer represented 30% of Q2 gross billings; two customers represented 43% of receivables), the departing large customer, economic pressure on marketing budgets, competition, product-transition execution, potential future funding needs, Nasdaq listing requirements, and cybersecurity and personnel risks.
- IZEA reported no legal proceeding it believed would have a material adverse effect and no subsequent event requiring disclosure. Management concluded disclosure controls were effective as of June 30, 2023; it reported no material quarterly change in internal control over financial reporting.
- The company completed a 1-for-4 reverse stock split effective June 16, 2023; share data in the filing reflect the split. Investments had $644,515 of net unrealized losses recorded in accumulated other comprehensive loss. The filing notes approximately $30.6 million of bank deposits exceeded applicable deposit-insurance limits.
Investor verification points
- Track core-customer bookings, revenue conversion, margins and replacement demand as the large-customer backlog runs off.
- Assess Flex adoption, subscription/license revenue recovery, and costs or impairment risks associated with the platform transition.
- Monitor operating cash burn and investment maturities, and verify whether management’s stated 12-month liquidity assessment remains supportable.
- Review customer concentration and receivables collections, including the large prepaid-customer contract-liability balance and remaining prior-year receivables.
- Reconcile non-GAAP Adjusted EBITDA with GAAP results and consider recurring stock compensation and software-related costs excluded or treated differently in that measure.