IZEA Worldwide Inc

Previous wording

•risks associated with doing business internationally; and

Current wording

•risks associated with doing business internationally;

Previous wording

On December 1, 2023, IZEA purchased certain assets of Zuberance, further enhancing its suite of software offerings. Zuberance offers specialized advocate marketing tools, enabling brands to cultivate communities of loyal customers and influencers. The addition of Zuberance’s advocacy marketing solutions enriches IZEA's suite of services, providing clients with tools to amplify brand affinity, generate influential reviews, and gather valuable customer feedback. With a strategic focus on offering cost-effective, scalable solutions, IZEA continues to set industry standards, ensuring that it remains at the cutting edge of technology and marketing practices while fostering growth in the creator economy.

Current wording

In December 2023, IZEA acquired Zuberance, Inc. (“Zuberance”) and Hoozu Holdings Pty Ltd (“Hoozu), further enhancing its suite of software offerings. Zuberance offers specialized advocate marketing tools, enabling brands to cultivate communities of loyal customers and influencers. The addition of Zuberance’s advocacy marketing solutions enriches IZEA's suite of services, providing clients with tools to amplify brand affinity, generate influential reviews, and gather valuable customer feedback. Hoozu is a leading influencer marketing company in Australia, service a roster of the region’s most innovative brands. With a strategic focus on offering cost-effective, scalable solutions, IZEA continues to set industry standards, ensuring that it remains at the cutting edge of technology and marketing practices while fostering growth in the creator economy.

Previous wording

SaaS Services revenue is generated by the self-service use of our technology platforms by marketers to manage their own content workflow and influencer marketing campaigns. SaaS Service revenue increased to $256,341 during the three months ended March 31, 2024, compared to $234,968 in the same period of 2023. The increase is primarily due to a growing number of licensees but at a lower cost per license.

Current wording

SaaS Services revenue is generated by the self-service use of our technology platforms by marketers to manage their own content workflow and influencer marketing campaigns. SaaS Service revenue increased to $243,353 during the three months ended June 30, 2024, compared to $70,678 in the same period of 2023. The increase is primarily due to a growing number of licensees but at a lower cost per license.

Previous wording

The cost of revenue for the three months ended March 31, 2024 decreased by $2.0 million, or approximately 33%, compared to the same period in 2023. The decrease is due to the loss of our non-recurring customer costs, which totaled $2.8 million in the quarter ended March 31, 2023. This was partially offset by increased costs associated with higher revenues from our recurring customer base in the current quarter.

Current wording

The cost of revenue for the three months ended June 30, 2024 decreased by $1.1 million, or approximately 17%, compared to the same period in 2023. The decrease is primarily due to the elimination of costs relating to our non-recurring customer, which totaled $3.6 million in the quarter ended June 30, 2023. This was partially offset by increased costs associated with higher revenues from our recurring customer base in the current quarter.

Previous wording

Sales and marketing expense for the three months ended March 31, 2024 increased by $651,740, or approximately 27%, compared to the same period in 2023. This increase is related to increased spend on brand awareness and advertising to drive revenue growth.

Current wording

Sales and marketing expense for the three months ended June 30, 2024 increased by $375,030, or approximately 13%, compared to the same period in 2023. This increase is related to increased spend on brand awareness and advertising to drive revenue growth.

Previous wording

General and administrative expense for the three months ended March 31, 2024 increased by $379,478, or approximately 11%, compared to the same period in 2023. General and administrative expense for the three months ended March 31, 2024 increased primarily due to an overall increase in human capital costs.

Current wording

General and administrative expense for the three months ended June 30, 2024 increased by $204,856, or approximately 6%, compared to the same period in 2023. General and administrative expense for the three months ended June 30, 2024 increased primarily due to overall increases in human capital costs, professional fees, and contractor fees.

Previous wording

Depreciation expense on property and equipment was $26,557 and $18,786 for the three months ended March 31, 2024 and 2023, respectively. Depreciation expense has increased slightly due to the purchase of new equipment.

Current wording

Depreciation expense on property and equipment was $26,701 and $27,160 for the three months ended June 30, 2024 and 2023, respectively. Depreciation expense decreased slightly due to the disposal of equipment.

Previous wording

Amortization expense was $177,629 and $327,476 for the three months ended March 31, 2024 and 2023, respectively. Amortization expense related to internal use software developments costs was $128,342 and $327,476 for the three months ended March 31, 2024, and 2023, respectively, due to the accelerated amortization of IZEAx during the first quarter of 2023. Amortization expense related to intangible assets acquired in the Zuberance and Hoozu acquisitions was $49,287 and $0 for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Amortization expense was $199,047 and $83,272 for the three months ended June 30, 2024 and 2023, respectively. Amortization expense related to internal use software developments costs was $124,381 and $83,272 for the three months ended June 30, 2024, and 2023, respectively, due to cumulative adjustments made in the quarter for year-to-date activity. Amortization expense related to intangible assets acquired in the Zuberance and Hoozu acquisitions was $75,709 and $0 for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Other income, net, totaled $792,805 during the three months ended March 31, 2024, an increase of $222,283 compared to the same period in 2023, primarily due to increased investment portfolio interest income.

Current wording

Other income, net, totaled $634,226 during the three months ended June 30, 2024, an decrease of $11,283 compared to the same period in 2023, primarily due to a decrease in the value of digital assets, offset by deferred tax benefit.

Previous wording

Net loss for the three months ended March 31, 2024 was $3.3 million, a $459,511 increase compared to the net loss of $2.8 million for the same period in 2023. The increase in net loss was a result of the changes discussed above.

Current wording

Net loss for the three months ended June 30, 2024 was $2.2 million, compared to the net loss of $1.0 million for the same period in 2023. The increase in net loss was a result of the changes discussed above.

Previous wording

Managed Services revenue during the three months ended March 31, 2024 decreased by $1.8 million, or 21% from the same period in 2023. Managed Services revenue during the three months ended March 31, 2023 included approximately $3.5 million from one large customer (the ‘non-recurring customer’) that we began parting ways with in January 2023. Managed Services revenue from our ongoing customer base, which totaled $6.7 million during the quarter ended March 31, 2024, increased on the strength of improving demand by $1.7 million, or 33%, from the same period in 2023.

Current wording

Managed Services revenue during the six months ended June 30, 2024, decreased by $3.6 million, or 19% from the same period in 2023. Approximately $6.8 million of the Managed Services revenue during the six months ended June 30, 2023 came from the non-recurring customer. Managed Services revenue from our ongoing customer base, which totaled $15.5 million during the six months ended June 30, 2024, increased on the strength of improving demand by $3.3 million, or 26%, from the same period in 2023.

Previous wording

Managed Services Bookings is a measure of all sales orders received during a time period, less any cancellations received or refunds given during the same time period. Sales order contracts vary in complexity with each customer and range from custom content delivery to integrated marketing services; our contracts generally run from several months for smaller contracts up to twelve months for larger contracts. We recognize revenue from our Managed Services contracts on a percentage of completion basis as we deliver the content or services over time, which can vary greatly. Historically, bookings have converted to revenues over a 6-month period on average. However, since late 2020, we have received increasingly larger and more complex sales orders, which, in turn, has lengthened the average revenue period to approximately 9-months, with the largest contracts taking longer to complete. During the latter half of 2023, the time between bookings and revenue improved to an average of 7.5 months. For this reason, Managed Services Bookings, while an overall indicator of the health of our business, may not be used to predict quarterly revenues and could be subject to future adjustments. Managed Services Bookings is useful information as it reflects the number of orders received in one period, even though revenue from those orders may be reflected over varying amounts of time. We use the Managed Services Bookings metric to plan operational staffing, to identify key customer group trends to enlighten go-to-market activities, and to inform its product development efforts. Managed Services Bookings for the three months ended March 31, 2024 and 2023 was $9.3 million and $6.1 million, respectively.

Current wording

Managed Services Bookings is a measure of all sales orders received during a time period, less any cancellations received, or refunds given during the same time period. Sales order contracts vary in complexity with each customer and range from custom content delivery to integrated marketing services; our contracts generally run from several months for smaller contracts up to twelve months for larger contracts. We recognize revenue from our Managed Services contracts on a percentage of completion basis as we deliver the content or services over time, which can vary greatly. Historically, bookings have converted to revenues over a 6-month period on average. However, since late 2020, we have received increasingly larger and more complex sales orders, which, in turn, has lengthened the average revenue period to approximately 9-months, with the largest contracts taking longer to complete. During the latter half of 2023, the time between bookings and revenue improved to an average of 7.5 months. For this reason, Managed Services Bookings, while an overall indicator of the health of our business, may not be used to predict quarterly revenues and could be subject to future adjustments. Managed Services Bookings is useful information as it reflects the number of orders received in one period, even though revenue from those orders may be reflected over varying amounts of time. We use the Managed Services Bookings metric to plan operational staffing, to identify key customer group trends to enlighten go-to-market activities, and to inform its product development efforts. Managed Services Bookings for the three months ended June 30, 2024 and 2023 was $10.3 million and $7.3 million, respectively. Managed Services Bookings for the six months ended June 30, 2024 and 2023 was $19.6 million and $13.4 million, respectively.

Previous wording

The following table sets forth a reconciliation from the GAAP measurement of net loss to our non-GAAP financial measure of Adjusted EBITDA for the three months ended March 31, 2024 and 2023:

Current wording

The following table sets forth a reconciliation from the GAAP measurement of net loss to our non-GAAP financial measure of Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023:

Previous wording

The Company’s primary cash needs have historically been funding the development and integration of our technology platforms used in its business, marketing expenses, and general and administrative (“G&A”) expenses including salaries, bonuses, and commissions. The Company has incurred losses and negative cash flow from operations for most periods since inception, primarily the result of costs associated with third-party creators, salaries, bonuses and stock-based compensation, and other G&A expenses, including technology and development costs, which has resulted in a total accumulated deficit of $88.7 million as of March 31, 2024. While we have not achieved profitability, we believe we have sufficient resources to fund operations and planned investments for at least the next twelve months.

Current wording

The Company’s primary cash needs have historically been funding the development and integration of our technology platforms used in its business, marketing expenses, and general and administrative (“G&A”) expenses including salaries, bonuses, and commissions. The Company has incurred losses and negative cash flow from operations for most periods since inception, primarily the result of costs associated with third-party creators, salaries, bonuses and stock-based compensation, and other G&A expenses, including technology and development costs, which has resulted in a total accumulated deficit of $90.9 million as of June 30, 2024. While we have not achieved profitability, we believe we have sufficient resources to fund operations and planned investments for at least the next twelve months.

Previous wording

We had cash and cash equivalents of $39.0 million as of March 31, 2024, as compared to $37.4 million as of December 31, 2023. This increase of $1.6 million is the result of the maturing of certain investments, offset by cash used to fund operating activities.

Current wording

We had cash and cash equivalents of $44.3 million as of June 30, 2024, as compared to $37.4 million as of December 31, 2023. This increase of $6.9 million is the result of the maturing of certain investments, offset by cash used to fund operating activities.

Previous wording

Net cash used for operating activities was $3.3 million during the three months ended March 31, 2024, primarily due to the continued use to cover operating losses. Net cash provided by investing activities was $5.0 million during the three months ended March 31, 2024, primarily due to the maturity of marketable securities and acquisitions. Net cash used for financing activities during the three months ended March 31, 2024 was $37,233, which consisted of payments on shares withheld for taxes.

Current wording

Net cash used for operating activities was $7.3 million during the six months ended June 30, 2024, primarily due to the continued use to cover operating losses. Net cash provided by investing activities was $14.2 million during the six months ended June 30, 2024, primarily due to the maturity of marketable securities and acquisitions. Net cash used for financing activities during the six months ended June 30, 2024 was $116,508, which consisted of payments on shares withheld for taxes.

Previous wording

Since 2020, supply-chain issues, labor disruption, business closures, and, recently, inflationary pressures have impacted our business operations and results. Additionally, the cautious economic outlook of many customers may be affecting marketing budgets as evidenced by the softness in bookings the Company has experienced during 2023. We announced in January 2023 that we had begun the process of parting ways with a single large customer that, while having a significant impact on Managed Services revenue growth, carried significantly lower gross margins than our core business. Our business with this customer was completed during the fourth quarter of 2023, including contract liabilities and payment of accounts receivable. While our 2023 quarterly bookings have not reflected the opportunity pipeline growth we’ve experienced, we saw our first quarter bookings for Managed Services reach a seven quarter high, bearing fruit of the evidence of continued demand for influencer marketing services in our pipeline. Despite these bookings taking seven and a half months on average to be fully recognized as revenue, we believe that our core business remains strong. However, these matters, taken together, could have a material adverse impact on our business, results of operations, and financial position in future periods.

Current wording

Since 2020, supply-chain issues, labor disruption, business closures, and, recently, inflationary pressures have impacted our business operations and results. Additionally, the cautious economic outlook of many customers may be affecting marketing budgets as evidenced by the softness in bookings the Company experienced during 2023. We announced in January 2023 that we had begun the process of parting ways with a single large customer that, while having a significant impact on Managed Services revenue growth, carried significantly lower gross margins than our core business. Our business with this customer was completed during the fourth quarter of 2023, including contract liabilities and payment of accounts receivable. While our 2023 quarterly bookings did not reflected the opportunity pipeline growth we’ve experienced, we saw our 2024 first quarter bookings for Managed Services reach a seven-quarter high and our second quarter bookings reach an eight-quarter high, bearing fruit of the evidence of continued demand for influencer marketing services in our pipeline. Despite these bookings taking seven and a half months on average to be fully recognized as revenue, we believe that our core business remains strong. However, these matters, taken together, could have a material adverse impact on our business, results of operations, and financial position in future periods.

Previous wording

You should carefully consider the factors discussed under this item and under Item 1A of Part I to our Annual Report on Form 10-K for the year ended December 31, 2023 regarding the numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks occur, our business, financial condition, or results of operation may be materially and adversely affected. In such a case, the trading price of our common stock could decline, and investors could lose all or part of their investment. These risk factors may not identify all risks that we face, and our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. There have been no material changes to the risk factors described under “Risk Factors,” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Current wording

You should carefully consider the factors discussed under Item 1A of Part I to our Annual Report on Form 10-K for the year ended December 31, 2023 regarding the numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks occur, our business, financial condition, or results of operation may be materially and adversely affected. In such a case, the trading price of our common stock could decline, and investors could lose all or part of their investment. These risk factors may not identify all risks that we face, and our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. There have been no material changes to the risk factors described under “Risk Factors,” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.