Greetings and welcome to the IZEA Inc. First Quarter 2017 Earnings Call. At this time, all participants are in a listen only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Ryan Schram, Chief Operating Officer for IZEA Inc. Thank you Mr. Schram. You please go ahead.

Good afternoon and welcome to IZEA's Q1 2017 earnings call. I am Ryan Schram, Chief Operating Officer at IZEA. And joining me for today's call is IZEA's Chief Financial Officer, LeAnn Hitchcock; and IZEA's Founder, Chairman and CEO, Ted Murphy. We are very pleased to have you with us this afternoon. Earlier today, we issued a press release with additional information regarding IZEA's first quarter performance. As a reminder, all of our Investor Relations information can be found in the corporate section of our website, 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 to the Safe Harbor provision 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 the 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. Our discussion this afternoon will also include certain non-GAAP financial measures such as EBITDA and adjusted EBITDA. A discussion and reconciliation of these measures the most directly comparable GAAP measure is available in the press release issued today and available on our website izea.com. With the appropriate disclosures out of the way, I'll now 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 first quarter of 2017. LeAnn?

Thank you, Ryan, and good afternoon, everyone. I am pleased to share that IZEA continues to improve its operation and set higher record targets each period. IZEA reported first quarter revenue up 14% to 6.2 million compared to 5.5 million in Q1 2016. This increase is primarily due to organic growth in our Managed Service revenue comprised of sponsored social and content revenue. Managed Services increased 27% to 4.7 million in Q1 2017 compared to 3.7 million in Q1 2016, accounting for 76% of total revenues in the quarter. Content workflow, self-service revenue from traditional news agencies and publishers decreased 14% to 1.5 million in Q1 2017 compared to 1.7 million in Q1 2016, accounting for 23% of total revenues in the quarter. Net bookings increased 5% to 7.8 million in Q1 2017 compared to 7.4 billion in Q1 2016. Revenue backlog at the end of the quarter was 11.8 million compared to 9 million in the same quarter last year, an increase of 31%. This includes unbilled bookings of 8 million and unearned revenue of 3.8 million. Revenue backlog is increasing as a result of a large amount of bookings for longer term contracts that are up to a year in length. Gross profit for the quarter increased 27% to 3 million as compared to 2.4 million in Q1 2016. 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 43% in the prior year quarter. The increase in gross margin is attributable to the increase in revenue from our higher margin managed service business at 61% margins versus reduced revenue from our lower margin content workflows business, which is only a 7% margin. We estimate that average…

Thanks LeAnn. The company kicked off the 2017 fiscal year in a big time way with our signature events IZEAFest. For those of you not familiar with the event, IZEAFest is a two day conference unlike any other; bring together content creators, brands and agencies in a single track main stage experience. This year's speakers included thought leaders from Google, Yahoo Nasdaq, HP, Chipotle and many others are also showcasing leading influencers and celebrities like Daymond John from ABC's popular show Shark Tank. The energy from bring together the various facets of the IZEA ecosystem was indelible, both in the conference hall at the Gaylord Palms as well online. In fact, the hashtag IZEAFest was a trending topic on Twitter both regionally and nationally over the duration of the event. And what makes the investment of time and resources particularly compelling from a business standpoint is the 48 to 72 hours of exclusive face time with many of our largest existing clients and client prospects. This year, amongst the 1,500 registrants, we hosted over 700 IZEA clients from brands and agencies alike. As you might imagine, we find having a captive audience with nothing but the IZEA brand, IZEA culture in front of an audience for two straight days to be incredibly useful sales tool. On day one of the conference, Ted announced IZEAx 2.0 during his keynote address, which included a slew of new features and product enhancements. We've already seen several million dollars of pipeline added to 2017 as a direct result of IZEAFest. And did will quote unquote halo that comes from improve the company's overall thought leadership position and reputation to industry is something we believe will deliver additional benefits for quarters to come. Shifting gears for a minute, let's talk about the change in categorizations…

Thank you, Ryan. Q1 was a nuanced quarter for IZEA. On one hand, we delivered year-over-year revenue growth, a continued increase in average deal size, a new seven figure client, and many new brand direct relationships. On the other hand, we experienced a pull back from newspaper customers in our content workflow business increasing time to close as deals got larger and longer times from booking to revenue recognition. As excited as we are about our progress with major brands, the ongoing shift to these types of relationships has ramifications both positive and negative for the business. As the contracts and deliverables continue to increase in scope, an individual customer can have a meaningful impact on the quarter at our current scale. We saw that impact in Q1 both in bookings and in revenue recognition. The ways of a couple of weeks or even days can materially change what our financials look like for a given reporting period. This can be seen most directly in our revenue backlog which as Ryan mentioned has grown 31 % year-over-year and is up $1.6 million from Q4 2016. Our managed service sales team remains focused on growing these individual client commitments. IZEA has been very successful in our land and expand approach, which is a testament to our sales team, as well as the service we are providing. We expect that large deals will continue to impact our financials this year and may cause swings in bookings or revenue recognition until we reach greater overall scale. As Ryan mentioned earlier, the ongoing decline of workflow poses another challenge for us. Workflow revenue decreased 5 % annually from 2015 to 2016. The 2017 guidance we issued earlier this year assumed another 5 % year-over-year decrease in this revenue. However, in Q1, we experienced an…

Thank you. Ladies and gentlemen, we'll now be conducting a question-and-answer session. [Operator Instruction] Our first question comes from the line of Mike Malouf with Craig-Hallum Capital Group. Please proceed with your questions.

Hi Guys. This is Eric on from Mike. Thanks for taking my questions.

Hey Eric.

I was wondering - so I think we mentioned that several million dollars has been added to the pipeline after introducing the IZEAx 2.0 platform. Obviously that came with a number of new features. I was wondering what kind of feedback you guys have gotten on the various features and you know if some are looking like greater growth potential than others. And you know just kind of your feedback and thoughts going forward on the various different new features?

Yeah. I think that the feedback overall has been very positive. I would say that the two biggest features that we're excited about are Promoted Posts and ContentAmp and that seems to be where it's really resonating with our clients. On top of that I think that the features that we introduced in the enterprise suite are definitely going to help us gain some efficiency and make it easier for our clients to deal with us and the managed services side.

Okay great. And then I was also wondering if you could talk a bit about IZEA Pay. I know you guys used basically directly the model from Ebyline and you know that's kind of what you have for the content workflow reported segment. Will you guys be included IZEA Pay in that content workflow reported segment. And if so, do you expect that to offset some of the decline caused by just general newspaper media, just kind of wondering you know how, where you guys will be reporting that and how you see that offsetting the decline with newspapers?

Once that becomes something that is more material, we might get at breaking that out separately. But right now that would likely be under the managed services because it would be part of likely of a campaign where there's some expenses that are being reimbursed that may not be tied to it directly to us sponsorship.

Okay. And then will that be booked in a similar way where it's gross you know you guys both revenue growth and then you know you basically have roughly 93% cost of revenue is just very similar to content workflow or because that managed service do you think you guys might be booking that now just kind trying to engage, how we should think about that going forward?

It would be booked gross as well.

All right, that's it for me. Thanks guys.

Thank you.

Thank you. Our next question comes from the line of Jon Hickman with Ladenburg Thalmann. Please proceed with your question.

Hi. This question is primary for LeAnn I guess. Could you go over the expenses in Q1 that are recurring also I guess associated with IZEAFest?

Yes, really the IZEAFest added about $400,000 additional expense to our Q1 and not definitely would not be recurring to the next quarters.

And if I can if I got what you were saying, you said that going forward for the rest of the year that you thought that EBITDA loss would total about $1.5 million, no, about $1.5 million dollars additional, so is that a total?

So that means over the next three quarters, the EBITDA loss going to total $1.5 million, right. It was it was $4 million to $4.5 million was in the total for the year.

For the year though.

Correct. For the next three quarters, it's $1.5 million.

$2.5 million.

It would be $2.5 million.

$2.5 million, okay.

$4.5 million minus $2 million.

Okay. So then the workflow business last year that was about a what of $2 million almost $3 million?

No, workflow last year in 2016 was $6.5 million aggressively.

Okay. And you expect it might go down by around 50%, okay.

That's correct. The contribution margin on that was much only about a $0.5 million.

Yeah, okay. So I guess that's it for me. Thanks.

Thank you.

Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Avi Fischer with Long Cast Advisers. Please proceed with your question.

Hi. Good afternoon. Ted, I asked you this question last quarter, I wondered if you could just speak again, how do you balance the value of your independence and your future growth opportunities in light of what you talk about this unsolicited proposal with your duties and obligations to your employees and shareholders considering the reality of your balance sheet? Thanks.

Thank you. You know that is something that we're continually evaluating. And as I mentioned earlier in the call, you know we were in the process of identifying a banking partner to help us look at the landscape and see what the opportunities are as it relates to that offer and other opportunities that are out there.

Thank you. There are no further questions at this time. I'd like to turn the floor back to management for closing comments.

I'd like to thank everyone for joining us this evening. And if you'd like more information about IZEA or any information regarding your investor materials, those are available for you online at izea.com/investors. Thanks again, I will talk to you next quarter.

This concludes today's teleconference. You may disconnect your line for this time. Thank you for your participation.