IZEA Worldwide, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report; the filing text does not provide a clear standalone Q4 income statement or cash-flow value. IZEA connects brands and agencies with content creators through managed marketing services and software platforms.
Financial performance
| Metric | FY 2022 | FY 2021 | Change |
|---|---|---|---|
| Revenue | $41.10 million | $30.02 million | +37% |
| Cost of revenue | $24.74 million | $14.46 million | +71% |
| Gross profit / approximate gross margin | $16.36 million / 39.8% | $15.56 million / 51.8% | Margin declined about 12 percentage points |
| Operating loss | $5.63 million | $5.36 million | Loss widened $0.27 million |
| Net loss | $4.47 million | $3.14 million | Loss widened $1.33 million |
| Adjusted EBITDA (non-GAAP) | $(2.76) million | $(3.14) million | Improved; margins were -7% and -10% |
| Operating cash flow | $(3.06) million | $(2.57) million | Use of cash increased |
Managed Services generated $39.46 million, or 96% of revenue, up 40%. SaaS Services revenue fell 10% to $1.64 million: license fees declined 11% and marketplace spend fees declined 36%. The company attributed the Managed Services increase largely to a major customer contract; cost of revenue rose faster than sales, partly because several large contracts had lower margins.
Liquidity, balance sheet and cash flow
- Year-end cash and cash equivalents were $24.60 million, versus $75.43 million a year earlier. IZEA also held $16.11 million of short-term and $29.30 million of long-term investments, for cash and investments of about $70.00 million in total.
- Current assets were $50.37 million and current liabilities were $15.35 million. Total assets were $85.67 million; stockholders’ equity was $70.27 million.
- Investing cash outflow was $47.70 million, primarily reflecting purchases and sales of marketable securities. Financing cash outflow was $0.08 million. The 2021 financing inflow included $46.54 million from stock issuance.
- Debt was limited: a $105,000 equipment finance obligation remained at year-end, with no notes payable outstanding. The Canadian CEBA loan was repaid in 2022.
- Available-for-sale investments had $780,795 of unrealized losses recorded in other comprehensive loss. Management said investments held to maturity would settle at par without loss.
Material changes and management outlook
- IZEA launched The Creator Marketplace in 2022, sunset the Shake platform, and developed Flex, commercially launched in January 2023. Flex is intended to replace IZEAx during 2023; BrandGraph’s standalone offering was also planned for sunset as features are incorporated into Flex and Marketplace.
- Managed Services bookings were $37.5 million in 2022 versus $39.5 million in 2021, despite reported revenue growth. Management said bookings softened through Q4 2022 and opportunities were taking longer to close.
- In January 2023, IZEA said it began parting ways with one large customer. The customer contributed to revenue growth but had margins 40%–50% below the company’s core business. Management said its pipeline showed continued demand but cautioned that the combined developments could materially affect future results and financial position.
- Management believed available cash and invested resources were sufficient for at least the next 12 months, while acknowledging continued losses and the possibility of needing additional capital. No quantified revenue or earnings guidance was provided.
- The company reported a $78.1 million accumulated deficit and a history of losses. FY 2022 net loss was also affected by the absence of the $1.93 million PPP loan-forgiveness gain recorded in 2021.
Risks, contingencies and controls
- Customer concentration is significant: one customer represented 29% of 2022 revenue, and three customers represented 64% of year-end receivables. The large-customer departure and completion of a major contract in 2023 heighten the need to assess revenue replacement and collections.
- IZEA received a Nasdaq minimum-bid-price deficiency notice in July 2022 and was granted until July 3, 2023, to regain compliance. Failure could lead to delisting.
- Competition, economic pressure on marketing budgets, execution and adoption of Flex and Marketplace, dependence on third-party social platforms, privacy and advertising regulation, cybersecurity, and the ability to raise capital are prominent disclosed risks.
- Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2022, and said a 2021 material weakness involving Managed Services liabilities and costs had been remediated. The auditor did not provide an ICFR attestation because IZEA was not required to obtain one.
- The independent auditor issued an unmodified opinion on the 2022 financial statements and identified revenue estimates for uncompleted Managed Services contracts and goodwill valuation as critical audit matters. IZEA reported no known legal proceedings expected to have a material adverse effect.
- The board authorized a share repurchase program in February 2023. The filing’s description of the authorized amount is unclear (“up to $1.0 million shares”); the program may be suspended or discontinued and does not require purchases.
Investor facts to verify
- How much 2023 revenue and bookings are exposed to the departing large customer, and whether replacement demand offsets that loss.
- Whether Flex and Marketplace gain paying customers and recurring license revenue, including customer retention and pricing after IZEAx is phased out.
- Whether gross margins recover after the lower-margin contracts, and how much of the reported revenue growth converts to cash.
- The composition, maturity, liquidity, and valuation of the investment portfolio, including the unrealized losses and the distinction between cash and investments.
- Nasdaq bid-price compliance status, capital needs, and the precise terms and amount of the share repurchase authorization.