Greetings and welcome to the IZEA Incorporated Second 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 today, Mr. Ryan Schram. Please proceed sir.

Good afternoon everyone and welcome to IZEA's Q2 2017 earnings call. I am Ryan Schram, Chief Operating Officer at IZEA. And joining me for today's call is IZEA's CFO, LeAnn Hitchcock; and IZEA's Founder, Chairman and CEO, Ted Murphy. On behalf of all those here at team IZEA, we are pleased to have you with us today. Earlier this afternoon, we issued a press release with additional information regarding IZEA's second 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 our most recent filings with the SEC. The company and its management assume no obligations to update any forward-looking statements made during this call. Our discussion today 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 corporate website izea.com. 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 second 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 targets each period. IZEA reported second quarter 2017 revenue up 1% to $7 million compared to $6.9 million in the second quarter of 2016. This increase was primarily due to organic growth in our Managed Service revenue which is comprised of sponsored social and content revenue. Our Managed Services increased 7% to $5.6 million in Q2, 2017 compared to $5.2 million in Q2 2016, accounting for 80% of total revenues in the quarter. Content workflow, our self-service revenue from traditional news agencies and publishers decreased 15% to $1.4 million in Q2 2017 compared to $1.6 million in Q2 2016, accounting for 20% of total revenues in the quarter. Net bookings decreased 3% to $6.6 million in the second quarter of 2017 compared to $6.8 million in 2016. The decrease was due to a $1 million cancellation by a customer in the second quarter of 2017 related to a 2016 booking. Revenue backlog at the end of the quarter was $11.8 million compared to $8.9 million in the same quarter last year, an increase of 28%. This includes unbilled bookings of $7.5 million and unearned revenue of $3.9 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. Revenue backlog consists of unbilled bookings for campaigns which have not yet started as well as unearned revenue for campaigns that have been built that are not yet complete. Gross profit for the quarter increased 1% by $43,000 as compared to Q2, 2016. The increase in gross profit is attributable to the increase in revenue during the quarter. Gross margin for the quarter was consistent…

Thanks LeAnn. As part of our managed services offering, custom content has become a key catalyst for IZEA’s growth in 2017. The impact of January 2015 acquisition of Ebyline, the business hypothesis was never about the growth of content workflow or the legacy newspaper side of that business. But the ability to produce high quality content at scale for brand marketers. Our purchases then Content last July further extended our custom content capabilities, unlocking the e-commerce category for the company while also increasing our margins. Throughout 2016, our leadership team focussed all efforts that were all about comprehensive cross trading for our sales staff. And we also completely revamped our marketing vehicles to underscore the advantages of these custom concept offerings. The teams focus at execution is apparent. We look at the growth in the managed custom content segment of our business in particular. The first half of 2017 produced our largest custom content netbookings ever, $2.78 million up from $1.29 million during the same period in 2016, that’s 115% growth year-over-year. And when you look at where that growth was coming from in custom content, it’s a healthy mix of both new and return business for IZEA. It’s also a diverse pool categorically driving from a wide range of sectors, one in the [Indiscernible] from travel and tourism to insurance of financial services to retail and e-commerce. This is validating over our chain marketing trend that puts a days’ consumer, brands will be to behave more like publishers in order to drive engagements in both the pre and post purchase decision making process. Developing content as such stay and distribute them effectively remains a top priority and a challenge for marketers. Since the efficiencies gained by IZEAs platform technologies and proprietary processes we are able to solve a meaningful…

Thank you, Ryan. Over the past few quarters, our leadership team has realigned our focus to emphasize profitability as our number one objective. It is never easy to shift operating plans but I am proud of our team’s ability to adjust, adapt and deliver results. It is a testament to the flexibility and strength of our organization. While many operational changes were made quarters ago, the results are just now becoming apparent. In Q1, large professional and marketing fees from IZEAFest clouded the overall financial picture making it difficult to see the gains we had made in efficiency beginning in Q4 last year. In Q2, those gains are now much more apparent. Cash based OpEx in Q2 was at its lowest point since 2015 and Q2 EBITDA loss was the lowest it has been since Q1 of 2014. At the same time, our team has continued to grow bookings and revenue and managed services growth is strong. This is important because the path to profitability requires a combination of topline growth and strong expense management. In this quarter, we were encumbered by a $1 million bookings cancellation from a 2016 booking. IZEA reports bookings as a net number, meaning we reduce our bookings number each quarter to reflect any cancellations or refunds issued in that quarter. Inclusive of that meaningful reduction the team still delivered 7% bookings growth in our managed services. The core of our business representing 97% of contribution margin. Exclusive of that reduction gross bookings for managed services increased 24% year-over-year and our average deal size was a record for Q2. In the trailing 12 months, our managed services revenue is up 30% to $21.8 million versus $16.7 million in the same period a year ago. This drove a large increasing gross profit up 29% in the…

Thank you. At this time we will conduct a question-and-answer session. [Operator Instruction] Our first question comes from Mike Malouf with Craig-Hallum. Please proceed with your question.

Hi, guys thanks for taking my questions. This is Eric on for Mike. Just had a couple of questions regarding your gross margin guide. I was wondering if you were seeing any margin pressure in the future with managed services with it becoming a larger mix of revenues and even more so a larger mix of gross profit. I was just wondering how that fits into your guide of 48% to 49% just it’s been still running at that 61%, so I was just wondering if you guys are seeing any expected margin pressure as we get to the second half? Thanks.

At this point we are expecting everything to remain consistent. A lot of that consolidated gross margin is going to be dependent on the mix of our workflow business compared to the managed services, where the managed services are running at that higher 61% margin, to the extent that content workflow revenues are higher that 7% margin will pull our average mix down. So if it doesn’t decrease as much as we are predicting or it increases over that, that could change the overall mix. So that’s why we are sticking with our guidance of the 48%, 49%.

Okay, that makes sense. And then you guys said that you expected content workflow to continue to decrease obviously, I was wondering if you guys just sort of how drastically you expect that to happen last year it looks like content workflow is flattish from the second half to the first half. Are you guys expecting that sort of same trajectory as we get to the second half of 2017 or are you expecting a more sudden sequential decrease in content workflow revenues?

Yes we believe that that is going to continue to decline over the course of the rest of the year and it’s a little bit unpredictable for us. We don’t know exactly at what rate, but if you look at the past two quarters you’ll see that there has been a pretty big decline year-over-year.

Okay, great. That’s it from me guys, thank you.

Our next question comes from Alex Silverman with Special Situations Fund. Please proceed with your question.

Hey guys, how are you?

Good, how are you?

Well, thank you. Nice job on controlling expenses. That’s a really pleasant surprise. Wondering if you could give us some sense of what the environment is like for your customers and what sort of feedback you are getting from your salesforce?

Sure. Hey, so the idea here is that we are seeing a few things particularly in quarter two they were interesting to us. As it relates to new content customers I made a reference that we were seeing a wide range of client categories and now it was [Indiscernible] new names who have been buying from us for the very first time. Interestingly enough in some cases these were people who are clients that we targeted when we only had influenced the marketing to offer and that they have not been [Indiscernible] that time and content became the door opener. So that’s one interesting trend. What we also are seeing is that by using influence or marketing as a distribution mechanism once that content is rooted and that relationship is built it actually extends the conversation and therefore the budget opportunity in a much more handsome way.

Very helpful. Thank you.

You’re welcome.

[Operator Instructions] Our next question comes from Jon Hickman with Ladenburg Thalmann. Please proceed with your question.

Hi, Ted I just want to make sure I have this straight. The – now that we are in the third quarter and when you announced your third quarter bookings the $1 million lost cancellation, that’s gone, that’s in the past that won’t affect Q3s booking results. So I have got it right?

Yes. That is the bookings cancellation that we originally announced on the last call, in that last call in this call we received the formalized paper work on that and the entire $1 million bookings cancellation was taken in Q2. So we are happy to have that behind us and being able to focus on the future.

And that you are not seeing like that’s not a trend, right. I mean, those kind of one-off event.

Yes, I mean that you can never control when customers have budget cuts and unfortunately was the result of a budget cut. So I don’t believe it’s all indicative of other clients or what else is happening on the sales front.

And then what about competition are you seeing in new – like I mean you are obviously having success or is that inviting copy cats at all anything different there?

Yes, I mean there are absolutely a lot of copy cats out there. There is a tremendous amount of fragmentation in this space. I mean, I think that what we are seeing is that there are many many players, but few players with any real scale or the calibre of clients that we have and I thing that we are in a very unique spot and that we have a managed services business, a SaaS business business, custom content business and influence our business and that allows us to open up doors that I think that smaller players that are in any one of those given niches, they are not able to open those doors in the same way and unlock the same type of commitments from clients that we are seeing. One of the things that we are most excited about is as these deal sizes have gotten larger we’ve noticed that our margins have actually gone up with those larger commitments because we are able to get more scale and efficiency out of the tag [ph] part form. So that’s one of the things that we are very much so focused on as an organization and having that combination of influence or marketing from content has allowed us to unlock those bigger deals.

Okay. I have another one for you. So did away with social winks [ph] right?

Correct, correct.

But while coming out of IZEAFest in February you introduced several new products, what can you tell us about the uptake of those?

I would say that our promoted post product is by far growing the fastest out of all those, there is a lot of interest in that from clients, it dovetails and really nicely into what we are doing on the sponsored social side. And then behind that would be our content platform. More and more of what we are seeing is that our clients are spending across all these different offerings that we have and so they may dialled up in one area and dialled back in another area but it gives us a pretty unique offering of raw.

And maybe this is a question for Ryan, but everything I am reading says that videos like the new way to communicate with the consumer, so are you seeing big demand for video at the expense of maybe the written order.

I would certainly say its growing -- necessarily at the expense of something like a long form blog post quite yet, because when you stop and think about what makes a great blog post great is that it tends to have video that accompanies it, right. In the sponsored social category what I will say is that we are seeing uptick in all visual mediums, so Instagram for example I’ve been able to handle photo and video and the fact that its snapable and very mobile centric it hits a sweetspot. YouTube certainly continues to be on a tier, but frankly that’s consumed in a slightly different fashion.

Okay. I guess that’s it from me. Thank you very much and nice quarter.

Thanks Jon.

At this time I would like to turn the call back over to management for closing comments.

I'd like to thank everybody for joining us today. And as a familiar reminder, you are welcome to join us online anytime at izea.com/investors for a detailed summary of our second quarter results. Thanks, and we’ll see you again next quarter.

Thank you. This does conclude today's teleconference. You may disconnect your line at this time and have a great day.