IZEA Worldwide, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. IZEA operates online marketplaces and software platforms connecting marketers with content creators. Financial statements are unaudited.
Financial results and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $7.61 million | $4.04 million | $19.52 million | $11.93 million |
| Operating loss | $1.50 million | $1.27 million | $5.58 million | $9.19 million |
| Net loss | $1.48 million | $1.25 million | $3.58 million | $9.21 million |
| Adjusted EBITDA (non-GAAP) | $(1.01) million | $(0.72) million | $(3.82) million | $(3.19) million |
- Q3 revenue increased 88% year over year; nine-month revenue increased 64%. Managed Services drove growth, rising 104% in Q3 and 79% year to date.
- Managed Services represented 94% of Q3 revenue and 93% of nine-month revenue. SaaS Services revenue decreased 13% in Q3 and 23% year to date.
- Cost of revenue was 52% of revenue in Q3 and 50% year to date, versus 42% and 44% in the comparable 2020 periods. Management attributed the increase to a greater volume of larger, higher-delivery-cost contracts.
- Cash and cash equivalents were $74.45 million at September 30, 2021, up from $33.05 million at December 31, 2020. Working capital was approximately $68.78 million. Operating cash outflow was $3.65 million for the first nine months.
- Total liabilities were $14.52 million. Notes payable totaled approximately $31,000, with a further $65,604 finance obligation; the PPP loan had been forgiven. The company terminated its secured credit facility in April 2021.
- Cash increased primarily from equity issuance: the company sold 11.19 million shares in ATM offerings for $46.54 million gross proceeds during the first nine months. Common shares outstanding rose from 50.05 million at year-end 2020 to 61.90 million at September 30, 2021.
Changes, outlook, and risks
- Q3 net loss widened by $0.23 million year over year despite strong revenue growth, as cost of revenue, sales and marketing, and general and administrative expenses rose. Nine-month net loss improved substantially, but comparison benefited from the absence of the $4.3 million goodwill impairment recorded in 2020 and included $1.93 million of PPP loan forgiveness income in 2021.
- Managed Services bookings increased 181% in Q3 to $11.29 million and 170% for the nine months to $28.84 million. Management cautions bookings are not a quarterly revenue forecast: larger, more complex contracts have lengthened average conversion to revenue to approximately nine months, and customers may cancel before services are performed.
- Management said available cash and financing sources were expected to cover expenses for at least one year from the filing date, based on its current revenue and expense estimates. No specific revenue or earnings guidance was provided.
- COVID-19 remains a source of uncertainty affecting customer spending and forecasts. Other identified risks include customer cancellations, competition and platform adoption, reliance on third-party social media platforms, ability to raise capital, Nasdaq listing compliance, cybersecurity and privacy, key-personnel retention, and stock-price volatility. Management reported no known legal proceedings expected to have a material adverse effect and no material change in internal control during the quarter.
- One customer accounted for 24% of Q3 revenue; one customer accounted for 13% of nine-month revenue, and one customer represented 14% of receivables at quarter-end. Bank deposits exceeding FDIC insurance limits were approximately $73.9 million.
Key facts for investors to verify
- Whether the substantial growth in Managed Services bookings converts to recognized revenue, and on what timetable, given longer contract cycles and cancellation risk.
- Whether revenue growth can improve margins and reduce operating cash burn as delivery, sales, and administrative costs rise.
- How cash deployment and any further ATM share sales affect liquidity, runway, and shareholder dilution.
- Whether SaaS Services revenue stabilizes after its year-to-date decline, and whether new BrandGraph, IZEAx Discovery, and Shake offerings gain traction.
- The sustainability of reported nine-month loss improvement after excluding PPP forgiveness income and considering the prior-year goodwill impairment.