Greetings and welcome to IZEA, Inc. fourth quarter 2019 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. Thank you. Please begin.

Good afternoon and welcome to IZEA's Q4 2019 earnings call. I am Ryan Schram, Chief Operating Officer at IZEA and joining me today is IZEA Interim Chief Financial Officer, LeAnn Hitchcock and IZEA Chairman and Chief Executive Officer, Ted Murphy. Thanks for being with us this afternoon. Earlier today, the company issued a press release with details pertaining to our fiscal year performance for 2019. If you wanted to review those details, all of IZEA's investor information can be found on our Investor Relations website at izea.com/investors. Before we begin, please take note of the Safe Harbor paragraph that appears at the end of the press release covering the company's financial results and be advised that during the course of today's earnings call, our management team will discuss IZEA's business outlook and make forward-looking statements. These statements are predictions based on our team's expectations as of today that are subject to inherent risks and uncertainties and should not be unduly relied upon. Actual events, results or trends could differ materially from our forecast due to a number of factors, including those mentioned in our most recently filed periodic reports with the SEC. The company and our management team assume no obligations to update any forward-looking statements made in today's call. In addition, our update today will also refer to certain non-GAAP financial measures, specifically gross billings and adjusted EBITDA. A reconciliation of these measures to the most directly comparable GAAP measure is presented in our earnings release with additional discussion of both of these measures available in our most recent Form 10-K and 10-Q, available under SEC filings in the Investor section of izea.com. With the appropriate disclosures out of the way, I am pleased to introduce my colleague and IZEA's Interim Chief Financial Officer, LeAnn Hitchcock.

Thank you Ryan and good afternoon everyone. As we continue to transition towards a more balanced business process-related services, it is important to note that IZEA's individual revenue streams have different accounting treatments for revenue recognition. Managed services and SaaS licensing fees are accounted for as gross revenue, while marketplace spend and legacy workflow fees result in revenue being recorded net of the amounts paid to the creators providing the services. Over time, this difference in gross and net revenue recognition may widen the gap between what we report as gross billings and bookings and what ultimately gets reported as revenue in IZEA's financial statements. Additionally, the mix between revenue from our managed services and SaaS services will cause swings in our reported cost of revenues as a percentage of revenue as the reported cost of revenue line item primarily relates to managed services. I would like to begin with a summary of the fourth quarter 2019 before moving on to the results for the full year. For the fourth quarter 2019, IZEA reported total revenues of $5.8 million with $5 million coming from our managed service business and $800,000 coming from our SaaS offerings. We saw an $83,000 or 2% increase in our Q4 2019 managed service revenue, but this was offset by a $600,000 decline in our SaaS service revenue in Q4 2019 as compared to Q4 2018. For Q4 2019, our gross billings on these revenues decreased to $7.8 million compared to $11.1 million in Q4 2018. This 30% decline in gross billings was primarily due to lower marketplace spend from the TapInfluence platform customers and churn in the renewal of some of those customers, resulting in a $600,000 decrease in SaaS services revenue. Our cost of revenues, exclusive of amortization, was $2.7 million in Q4 2019…

Thank you LeAnn. Before I get started, I would like to thank my fellow IZEAns as well as the teams at K&L Gates and BDO. These are simply extraordinary times. People are working diligently in very difficult and uncertain situations. I appreciate the effort and commitment to get us filed on time, despite the challenges we all face. Today's update will be briefer than usual as our entire team is focusing their time and efforts on the core business. 2019 was a transitional year for our company as we integrated TapInfluence and shuttered the eByline platform. Following our capital raise in Q2 of 2019, we began making investments in sales, marketing and engineering to support our growth initiatives. Those investments translated to the start of a topline rebound in Q4 of last year with managed services bookings up 22% year-over-year and revenue up 17% in the second half of 2019 as compared to the first half of 2019. In addition to the strong Q4 managed services bookings growth, we also saw meaningful increases in efficiency. Our revenue per managed services sales person increased approximately 25% for fiscal 2019 compared to 2018. While churn in certain TapInfluence customers combined with our SaaS pricing model revisions will continue to impact year-over-year comparisons for SaaS licensing and marketplace revenue, the total number of SaaS customers licensing our IZEAx technology hit another high in December. With TapInfluence completely integrated into IZEAx and shuttered in Q1 of 2020 and all of our customer transitions complete, we can focus our efforts on IZEAx and BrandGraph. We are cautiously bullish on IZEAx licensing in 2020 despite the current challenges surrounding COVID-19. Total fees under contract by licensees of IZEAx in 2020 are already 40% greater than all IZEAx license fees collected in 2018, partially due to the…

[Operator Instructions]. The first questions comes from the line of Mike Malouf with Craig-Hallum. Please proceed with your questions.

Great and thanks for taking my questions.

Hi Mike.

Hi. I want to focus first off on IZEAx. And I am wondering if you could, at this point, now that you have gotten everything switched over to IZEAx, give us a little bit of color on how many customers you have now? Maybe just a range of how much per month or per year that these contracts are in size and maybe an average to give us a sense of what's going on there?

Yes. We are not going to disclose the exact customer counts or price ranges really for competitive reasons. What I can tell you is, the overall customer count hit and all-time record at the end of the quarter. That is partially from IZEAx Discovery customers and partially from IZEAx Unity Suite customers. What we have also seen here in Q1, the count of new IZEAx Unity Suite customers is up about 85% from Q4. So we believe that we are starting to get some material traction there. We are continuing to see those customers renew that have been on the platform even now through COVID-19. But given the amount of competition that there is in this space currently, we are not going to put out information that would provide too much detail on pricing.

Got it. And then with regards to the marketplace spend, has there been any change with regards to marketplace spend in their willingness to make that part of the package?

We have definitely seeing more customers that are doing product-only activations. That has had an impact on the overall marketplace spend and the revenue that we get to recognize from the take rate.

Yes. Okay. Great. And then just a clarification on the spend in G&A. There was a $418,000 in the G&A of the impairment charge.

Yes. I will let LeAnn speak to that.

Yes. That is correct. There was a $418,000 impairment charge and that was as a result of the transfer of the Tap platform to the IZEAx and all those customers. It really was the kind of unusable portion of the software that was remaining.

Okay. Great. So then going forward, we should be back down to sort of that $1.6 million level going forward?

For G&A expense or for --

I am sorry. $2.6 million going forward for G&A.

With the COVID, we are not really putting complete estimates out at this point just because of the unknown. But they should definitely start returning back to normal as we are optimizing our cost.

Okay. And then with regards to the sales personnel, that's in the sales and marketing part that we saw, right? We were right around $1.4 million, then last quarter it was $1.5 million and then it jumped up to $2.0 million. That's the $536,000, is in the sales and marketing side? Is that correct?

Yes. It was pretty much half of personnel and the other half was related to the additional marketing spend that we were investing in.

Got it. Okay. Great. All right. That's all I needed. Thanks a lot. I appreciate it.

Sure.

The next questions comes from the line of Jon Hickman of Ladenburg. Please proceed with your questions.

Hi. Ted, I was wondering, could you comment on, you mentioned two customers for BrandGraph. Are there more than that? Just you mentioned two really large ones. Could you give us a little more?

Yes. Those are our initial customers for that platform. We really started to sell that right as COVID began to explode. So we do have a lot of opportunities in the pipeline right now, but those are the two core customers. I will say that the sales process for those customers was incredibly fast, faster than IZEAx Unity Suite certainly and significantly faster than any managed services sell. And both of those customers are also were net new to IZEA. One actually went up licensing BrandGraph and then shortly thereafter turned into an IZEAx customer on the other side. So we are hopeful that we will see more of that type of activity once the dust settles a little bit and people get back to more normal activities.

So let's talk about that for a minute. So it seems to me that if an advertiser can't reach me while I am out and about, they can reach me while I am streaming Netflix or whatever. But it seems like social media is like, everybody is on their phones. It seems like the perfect opportunity to increase my social media advertising efforts. So are you seeing any of that?

We definitely, we agree with you and that's what our research also points to. I think that what we are seeing now is really people are just a bit gun-shy, right and they are working from home and there is just a lot of disorganization right now. But I do think that from a product perspective, influencer marketing is a great fit for advertisers. It's just a question of them getting a level of comfort and understanding and being able to get some of their operations going again.

Okay. Well, keep up the good work. Nice quarter. And we wait to hear from you relatively soon on Q1.

Thank you.

Thanks Jon.

We have reached the end of the question-and-answer session. I will now turn the call back over to Ryan Schram for any closing remarks.

We would like to thank everyone for joining us this afternoon and remind you that all of IZEA's investor information is available online on our corporate website, which is izea.com/investors. On behalf of everyone here at Team IZEA, please stay safe and stay well.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great evening.