Greetings, and welcome to the IZEA Inc. Third Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode and a question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I’d now like to turn the conference over to your host Mr. Ryan Schram, Chief Operating Officer. Thank you Ryan, please go ahead.

Good afternoon everyone and welcome to IZEA’s Q3 2016 earnings call. I’m Ryan Schram, Chief Operating Officer at IZEA and joining me for today's call is IZEA’s Chief Financial Officer, LeAnn Hitchcock and IZEA Founder, Chairman and Chief Executive Officer, Ted Murphy. We’re pleased to have you with us this afternoon. Earlier today we issued a press release with additional information regarding IZEA’s third quarter performance. As a reminder, all of our Investor Relations information could be found on our corporate Web site at corp.izea.com. Please note that during the course of today’s call, our management team will discuss IZEA’s business outlook and may make forward-looking statements regarding the Company that are pursuant with Safe Harbor provisions of the Federal Securities Laws. These statements are predictions based on our team’s expectations as of today. Actual events or results could differ due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. The Company and its management assume no obligations to update any forward-looking statements made during today's call. With the appropriate disclosures out of the way, I’ll turn the call over to IZEA’s Chief Financial Officer, LeAnn Hitchcock to walk us through a summary of the Company’s performance in the third quarter of 2016. LeAnn?

Thank you, Ryan, and good afternoon everyone. I am pleased to share that IZEA had another record quarter. IZEA reported all-time record quarterly revenue up 38% to 7.5 million compared to 5.4 million in Q3 2015. This increase is primarily due to organic growth in all of the Company’s revenue streams, including sponsored social revenue, content revenue and to a lesser extent service fee revenue. Sponsored social revenue increased 44% to 4.6 million accounting for 62% of total revenues in the quarter. Content revenue increased 28% to 2.8 million, accounting for 37% of total revenues in the quarter. Net bookings increased 14% to 7.7 million compared to 6.7 million in Q3 2015. Revenue backlog at the end of the quarter was 9.2 million including unbilled bookings of 5.5 million and unearned revenue of 3.7 million. Revenue backlog consistent of unbilled bookings for campaigns which have not yet started, as well as unearned revenue for campaigns that are not yet completed. Gross profit for the quarter increased 66% to 3.6 million, as compared to 2.2 million in Q3 2015. The increase in gross profit is attributable to the increase in revenue during the quarter, along with improved margins on that revenue. Gross margin for the quarter was 48%, up from 40% in the prior year quarter. This gross margin improvement is primarily due to improved profit margins on our sponsored revenue and the doubling of our profit margins of content revenue, as we have shifted the focus from a newspaper client base to brand. Our content gross margin increased 1,500 basis points to 26% versus 11% in the same quarter last year. We expect margins on content revenue will continue to improve overtime, due to growth in brand-centric content creation. Sponsored social gross margin was 60%, up from 58% in Q3…

Thanks LeAnn. Our Q3, results underscore our continued march towards the growth. Just as important though is our continued focus on prudent investment to drive responsible growth, not just growth any cost, across every facet of IZEA. From human capital delta office supplies, we look at the business holistically to make delivers decision on how to continue and optimize everything that we do. Our team fundamentally believes that our steadfast commitment to that end is one of the differentiating factors about IZEA that drives our success. Finding a better way is not only a somatic of the company's culture, it's expected as table state for every person within our organization. As I have mentioned in previous earnings calls. We divide several strategic initiatives, some substantial, other [ph] as experiments that are proven to make an endurable impact on our fiscal 2016 performance. For example, as the start of the year we committed to be building out and scaling up a world class champion management team to support our client, along with a strategic planning unit to help them dream of even bigger ways to utilize influencer and concept marketing as part of the broader mix. Those efforts included creating a non-traditional revenue units helmed by one of our long time team members Larry Beaman, to launch an entirely new set of up sell [ph] offering to boost and amplify the success of existing influencer in context marketing spend which clients were already making with the company. We’ll have more detail on that and other exciting announcements for our clients and creators, at IZEAFest in February. The ability for our teams to grow not only through a series of acquisitions of outside talent, but additionally from within, is another testaments for IZEA's belief system and our operational culture. In the third…

Thank you Ryan. What is difference a year means, we have made a tremendous amount of progress in Q3 and a year-over-year comparison are impressive. The strong results in this quarter were driven by continued growth in organic revenue across all revenue streams. In addition to topline growth, we continue to see large gains in our custom content margins which had more than doubled from this time last year. These increases are in line with the assumption we made when we acquired Ebyline in 2015. And we will continue to see margin improvement on our content business as we focus on brand opportunity. While Q3 was a record, we have seen some unexpected delays in bookings over the past several months. The election cycle has had an impact on client commitments especially for our larger engagements while we are still expecting Q4 to be higher than in previous years the delays and political uncertainty will have a near term effect as many executives have taken a wait and see position. That position has started to warm post-election night, however we still have work to do this quarter. In addition to political headwinds one of our clients who made a large commitment in Q3 filed for bankruptcy protection this quarter and another Fortune 500 company recently announced lay off to the team which had engaged up. This resulted in two large bookings cancelation that have already impacted net bookings in Q4. These challenges combined with the management decisions we have made to reduce burn and slow hiring of new sales members will have an effect on our Q4 bookings outlook and as a result our overall fiscal '16 forecast. Our revenue forecast of $27 million to $30 million for 2016 remains unchanged while our gross profit margin forecast has increased to…

Ladies and gentlemen, at this time will be conducting a question-and-answer session. [Operator Instructions] And our first question comes from the line of Jon Hickman with Ladenburg. Please go ahead.

Can you tell us how you know that some of the kind of push back in the quarter was due to the election?

What we are seeing is that clients are very slow to commit right now. We have a tremendous amount of -- starting to actually get a little bit better, but we had a tremendous amount of clients really kind of slow walking us and as we’ve talked to people in and around this space, we -- there has just been a general sense of uneasiness and hesitation to commit. Most specifically to the larger campaign that really impact us that span the greater amounts of time. So I think that it's political and micro economic which are kind of tied together, as people weren’t quite sure of what was going to happen on the other side of this election and I still think that there is -- there remain some uneasiness about what the future maybe.

So there is hesitancy to advertise?

I think there is [multiple speakers] well, I think that there is hesitancy to spend and to make large commitments in general right now.

Okay.

Marketing is one of the easiest expenditures for people to control.

Okay, so then just one -- I didn’t write this down fast enough, so I am sorry to ask you to repeat yourself, but you said you lost two large booking customers, one was the bankruptcy and the other one was? I didn’t get the other.

Yes there was the team that we were working with got laid off.

Okay.

And that was [multiple speakers] a Fortune 500 Company. That was Direct that we were working with Direct.

Okay. So one other things that I think you have been saying for while is that you are of size and maturity now that allows brands to actually put you in their budget?

Yes.

Instead of you buying [ph] -- instead of you are spending what was left over at the quarter or whatever. So can you talk about how that’s going versus what you said about the current environment and the election?

Yes, I mean I think that there is kind of two sides of that, for clients that we’ve been working for an extended period of time, those budgets we’ve seen have been allocated and here in Q4 we expect to see -- and I’ve already seen some sizable increases in those budgets. The challenge really remains when we are going after large dollars with new clients that there may be more of a hesitation to commit, because those maybe dollars that are being pulled from something else that they may not -- that they may just sit on, media dollars that they may just sit on, but they haven't necessarily been ear marked or allocated for us this year.

Okay. I guess that’s it for me thanks.

And our next question comes from the line of Matt Tiampo from Craig-Hallum. Please go ahead.

I have a question on the new opportunity pipeline, I think any color to take down on the quarter in size, but also a pretty significant pick up in conversion rate and maybe if you can just give us a little bit of color on what's -- what are the dynamics causing that, both the tick down in new opportunities and also the [technical difficulty]. I'm not sure if I fully understood, the down tick in the total numbers is from the election cycle or not? Thanks.

Hi Matt, it’s Ryan. This is actually what we had telegraphed in our Q2 remarks [indiscernible] this time, which is that we're really focusing on the curation of our growth pipeline and a real emphasis on quality as opposed to "Spray and Pray" putting everything under the sun in there. So I think that is directly attributable to the really nice 31% improvement in pipeline conversion going from 18.5 percentage points to 27 percentage points, we're really pleased with that. We’re going to continue to be very aggressive to look at those kind of things and you should expect that we we’ll see different effects over time where that pipeline number will adjust up and down, as first of all seasonality plays a role, perhaps in the business and secondarily as the balance continues to tip towards larger deal sizes, when you look at Q3, we had 24% increase in average deal size as well. So it wasn’t just the conversion improving, it was actually the access to client fund that we're improving by a quite a large margin at the same time.

[Operator Instructions] And now our next question comes from the line of George Kafkarkou, Private Investor. Please go ahead sir.

A couple of observations -- both conversions and the signs of deals are improving and Ryan you mentioned that you anticipate that’ll continue to improve, did I hear that correctly?

Correct.

And is that -- what's the secret sauce behind that? How do you guys think about improving that guidance?

I think for us George I think it goes back to the balance of the dynamics that Ted was talking about before. The mix between brands and agency. If you think about it in the macro sense of advertising and marketing, when you're working with the source directly, there's a higher line of knowledge about who’s actually buying and when and why which lends to a different amount of confidence and therefore impacts year conversion rate. We also see that concept marketing tends to enjoy larger commitment sizes, because it's longer term engagement more often than not. So, when you look at the numbers in aggregate, this is a positive byproduct of our focus on selling influencer marketing and content marketing. The one thing I would say to that extent is when you look at the business overall in the quarter, you had over 40% of the bookings coming from brands directly in Q3 which is a very handsome ratio and very unusual in sort of the March Hack Madness [ph] space. Ordinarily you would see that number be 80% or 90% agency based.

What bookings success have we seen from my last acquisition that tend to focus on the ecommerce content side of things?

We have actually seen a nice uptake in bookings here in Q4, not necessarily on the higher end -- on the higher side of in terms of deal size, but they have been breaking into a lot of customers that we previously had done zero business with. One of the adjustment that we have made with that acquisition is they have historically been open to doing very, very small transactions, literally hundreds of dollars, and we are basically retraining that sale force to think about the business in a whole new way. So when I look at what our opportunity was with e-buy line the opportunity on that was to increase the margins, the margins just weren’t there even though they were selling big deals. For ZenContent it's kind of the opposite the big deals aren’t there but the margins are there. So that’s really the opportunity with that acquisition to say look, let’s set our sights a little bit bigger, let's not go in there and position ourselves as a very low cost alternative, let’s go in there and what fell a bit more strategic and make a bigger ask and feel comfortable when doing that.

So overtime you see this improving even further at fortunes on the content side. Both in dealer size and profit both size in margin?

Yes, I mean you actually make see an impact on average deal size in Q4 because of the ZenContent customers that they’ve been bring in because those are typically smaller than the deals that we do. But overtime and we think relatively quickly that will swing the other way and be in line with everything else. But we think of that as a big opportunity because they are accessing dollars that we have never gone after and client, but we don’t currently have relations -- or didn’t have relationships with.

Certainly I was not modeling gross margins for this quarter 46% to 47%, so you’ve over achieved their. Are you offering guidance for Q4 for gross margin?

I believe that we offered some guidance for the year, we are not -- I don’t think we’ve given anything specific but what we think for the year it's going to be somewhere between 46% and 47%.

So how do you see that next year vis-à-vis, next year clearly you guys have been telegraphing IZEAx for quite a while now and even now IZEAx is -- if I could do my math correctly, its three months out. We are now saying we have new revenue generating products or services on the IZEAx platform which will be 2.0 then and it will be our boldest release to date. How -- you know you’re leaving a lot out there, so I think you’re inviting questions if don’t mind me asking Ryan. I mean respectfully, I mean it's a how would you characterize these new rep product revenue or services revenue offerings. I mean obviously I am not asking for combination information, it’s going to be a launching in February and we are all very excited, as indeed I am. But is this a new, an additional genre of category in advertising or is it a double emphasis down on even more [indiscernible] content? Is it a first string or forth string type or is a refining our one on two strings? I don’t think [multiple speakers] if I may, given the visibility you guys can plugged for IZEAFest and given its so far away still.

I’ll say that was we are going to release does not exist in the market today. We believe that they tap into entirely new budgets from our clients and in many ways new buyers from the test that we’ve already been running and the partners that we’ve already been early selling these solutions into. The goal overall with all of our software initiatives is to make our operations more efficient and to allow our clients to do more with less human interaction from our team and open up more recurring revenue streams for us. So without getting into the specifics of what those solutions are, I can tell you that the bottom-line for us is about efficiency and scale and creating new ways for us to earn revenue on an ongoing basis and always our creators and giving them access to a new type of relationship with the brand.

Yes, I mean suddenly dramatic improvements in self-serving, reduces friction enormously and that makes the thing more horizontal and more wide spread and if that’s one of the things you are alluding to, then that’s very exciting. All right guys, very good quarter. Thank you so much.

Ladies and gentlemen, this does conclude our question-and-answer session. I would like to turn the call back over to management for any closing remarks.

Thanks everybody for joining us here for Q3. And as George was mentioning in the last Q&A portion of the call, we welcome any and all IZEA investors and analyst to join us for IZEAFest 2017 that is the first full weekend of February, here in Central Florida, you can find our more details by going to izeafest.com or by reaching out to Ron at Liolios. Thank you for joining us everyone.

Thank you. Ladies and gentlemen, this does conclude our teleconference. We thank you for your time and participation. And you may disconnect your lines at this time. Have a wonderful rest of the day.