Chit Chat Stocks - IZEA Worldwide (IZEA) | Deep Dive

Episode Date: February 4, 2021

IZEA manages online marketplaces and platforms that allow content creators to connect with marketers. Their main business operation is connecting influencers to companies looking for marketing avenues. As always enjoy today's show! Subscribe to 7 Investing with the code "CCM": https://7investing.com/subscribe/ Follow Ian and check out his work on Twitter: https://twitter.com/IanGrayLive Follow us on Twitter: https://twitter.com/chitchatmoney Subscribe to our Youtube Channel: https://www.youtube.com/channel/UCG5Ni-SI-jyrEsoNUhqftNQ Timestamps Company Background | (2:41) Industry | (7:00) Management & Ownership | (10:58) Valuation | (14:30) Earnings | (15:35) Balance Sheet | (18:10) Our Analysis | (20:30) Disclosure: Chit Chat Money hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Brett Schafer and Ryan Henderson are general partners and portfolio managers at Arch Capital. Arch Capital and its partners may hold securities discussed on this show. Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. On this show, hosts Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are also general partners at Arch Capital, and Arch Capital may have positions in the securities discussed in this podcast. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guests is not formal advice or recommendation now please enjoy this episode okay welcome in this is the deep dive episode our thursday show it's with me ian and ryan ian how you doing today doing pretty well looking forward to the super bowl this

weekend so see how that goes but you guys got any picks no uh no tb12 yeah i kind of want a hundred down a hundred dollars down on that yeah once well sports betting is becoming legalized in washington soon which will probably be bad for my personal investments because i'll be funneling the money into there but i don't know i kind of want to see tom brady dominate but again it's a little tiring it's been two decades of them you know it's kind of like amazon or microsoft or something you're like let's get some new you know some new stuff in there oh and as we're talking about that the the goat is retiring it is yeah this is yeah 10 minutes after uh bezos stepped down so we're all in shock right yeah what he's going to become the ceo of gamestop um but yeah we're going to be

talking isea today an interesting company that a lot of people probably haven't heard of this is ian's pick for the week so he's going to be our expert if we have any corrections or anything you know he'll be our expert for the day but before we get started we have to talk about seven investing So Ryan, is it your turn? Sure. Yeah. You get $10 off your first month, so it's like $7, I think, which is, we should do the math on that one of these times.

I think it's a 66% discount, all because of us. You're welcome. But yeah, you just use our code CCM and you get to see all of 7investing's picks. And there are some fresh picks out as of, what, two days ago? Two days ago, yeah, or three from the time that you're going to be seeing this. And I did. I did. One of them, I will say, is they've done it twice now. So I hope that's not disclosing too much. Yeah, yeah. Well, we got plenty of them out there, so you're not giving it away. But yeah, I mean, there's something in there for everyone. People should check it out. It's a great service. But now on to IZEA. So Ryan, why don't you introduce the company? Yeah, so the company's actual name is IZEO Worldwide, which is already a red flag.

Worldwide, you got to get rid of that. But anyway, they create and operate online marketplaces that connect marketers, so brands, agencies, publishers with content creators, basically either bloggers, tweeters, any form of influencer you can find. And so it kind of seems like IZEA is a demand-side platform or an ad exchange between marketers and influencers. But there's pretty much three ways they do this, which is the managed services. And I'll let Ian get into this a little more. So there's the managed services, the software-as-a-service model, and then they're launching something new called Shake, which we'll talk about later, which is sort of their uh marketplace fiverr like competitor um and if you're thinking like who on earth would average because it sounds a little shady at first like you're just plugging

people with influencers but there are real advertisers like uh whole foods target levi's i think google uh there are like a lot of reputable uh actual advertisers so it feels like they have a good kind of interesting business model i'm missing anything there ian no that was a pretty good summary of it like i said i think it's some of the aspects kind of look like um a dsp but it's really more of an ad exchange they kind of service both sides of it both the supply and the demand side right so it's more of a marketplace and it's not something that's totally automated like a dsp something right or am i getting wrong okay and right now i believe the bulk of the revenue is still coming from managed services which is still like that is

marketers coming to them and saying, use your expertise and plug our new campaign with or some sort of marketing with whoever you think would be best fit, right? And then that's sort of IZEA's role? Yep, they get a budget and they say, go give us the best return on our investment that you can. Typically, in those managed services, they have what they consider their higher profile influencers, people that they have relationships with. Whereas if you're using their software, or if you're using their new platform, Shake, it won't necessarily be people that everybody recognizes. There'll be a little bit more of niche people

and kind of lower profile people that you're accessing on your own, whereas the managed services might get you some higher profile influencers. Okay, and then as far as history goes, they were originally founded in Nevada in 2006 under the name Pay Per Post, and they went public in 2011.

Over the last five years, They've had a number of acquisitions and mergers. They bought EbiLine, I think I'm saying that right, in 2015, which is a similar business model with a focus on editorial content. And then they bought Zen Content in 2016, which is more of a platform for custom content. And then I think they merged with Tap Influence in 2018, which had like a SaaS solution that was similar to Isaiah's. It looks like all three of these have been successfully integrated.

none of them are like standing alone and like they are all now a part of Isaiah's business and the company is headquartered near Orlando Florida it was originally founded by Ted Murphy and Ted is still the acting CEO and chairman am I missing anything there I don't think so okay the IPO was kind of a broken one though right if you look at the chart does that I kind of doesn't really matter to me but does that concern you guys at all for like this company was kind of like something forgotten that's turned into a mire top um when it used to be kind of a mid-cap or a small cap it has had like what eight uh like seven or eight years of non-existence almost right yeah it's it's not done much since it went public um and i think that that's like it would concern

me more if this was a recent ipo and it had just fallen off a cliff um but since it was you know nine ten years ago uh it's not as concerning just because you know that that price drop has been kind of got washed away in the years. But that is definitely one of the concerns here is that it IPO'd, you know, almost 10 years ago now, and it's, you know, hasn't done much in that in its history. Right. Okay, I'll hit the broader industry and competition. We all can guess that the industry is growing quickly. There's an estimated $8 billion spent on Instagram influencer marketing in 2020. I don't know about the broader social media numbers, but that's kind of a big representation. That's definitely the number one platform. Estimates are for rapid growth,

but from what I was looking at, you know, how there's typically like industry estimates for 2025, and usually it's kind of hovering around the same number. But for this one, it was a huge range, some 15 billion, some like $10 billion over the next, you know, in like three years, some upwards of 25 billion, if you're really optimistic. So it's tough to pin down a number. And I guess really investors kind of need to know, all right, well, this is a fast growing market, there's going to be a big tailwind behind them. Sprout Social looks to be like a big competitor. There's a lot of smaller competitors out there, but Sprout Social isn't exactly a competitor. They're kind of adjacent where they're working with a company, say, for example, like you

mentioned before, I bet one of those companies like, what was it, Levi's, they run a ton of social accounts. They use Sprout Social to help increase the efficiency of what they're running on their own accounts. And I'm not sure if they have an influencer integration with that, but they could probably adopt that. And if they're not, I don't know, partners, it seems like they will start competing with IZEA if they get traction at some point. But I don't know if there's any other competitors. You could argue maybe something like Clubhouse Media Group, which is the people that try to run those influencer TikTok houses, could be a competitor, but they're tiny and they're really kind of a concept SPAC play. Ian, are there any competitors? Ryan, are you thinking

they did label facebook and instagram and that kind of thing as indirect competitors and i mean it's it seems like there is the potential for like a first mover disadvantage in isaiah's case where they start to build out this fantastic platform and facebook can easily i imagine they can do something very similar and they have the thing is the data and the algorithms aren't that useful because all you need to do is see who is someone's audience. That's it. And so maybe Facebook doesn't have necessarily an edge there. I guess their only edge is basically unlimited capital, right? Yeah. And the wide network and Facebook has a wide network already where they have, you know, a lot of influencers and people who would want to purchase things, you know,

purchase advertising from influencers. So that is definitely a risk. And I think, you know, there's also things like Fiverr or Upwork where people can do kind of some of this type of similar stuff through those platforms, but it's not necessarily made for influencer marketing. And so I'll get into that a little bit later, but there's some reasons why having a specialized platform is an advantage for them. But yeah, I think those are the main competitors and really anywhere that you're going to have this big advertising spend, it's competing for advertising dollars. And so they both have to prove that influencer marketing is something that you should be doing and we're the place that you should be doing it and dms uh like i know that sounds like

a joke but a lot of smaller startups if they want one specific influencer to advertise their products we'll just dm them and be like hey we'll venmo you or we'll cash app you this much if you post or something like that and it's sort of under the table stuff uh that obviously doesn't scale that well but uh right that's how it's traditionally been done and they're trying to kind of say we're going to add a little bit more structure to this process and it's going to benefit both sides of the transaction because we do um but that's what you're competing against is making sure that you have to be something that's you know oftentimes in the startup community they say has to be 10 times better than the existing solution and so this has to be 10 times better than someone uh

finding an influencer and dming them and then venmoing them the money so right okay all right and you're up next with management what do you got yep so as ryan mentioned ted murphy is the founder and ceo um he's been active in the space for a lot of years and is kind of considered a pioneer of this um kind of influencer marketing movement and like ryan mentioned like the company was originally pay-per-post which was pretty revolutionary at the time to say we're actually going to pay people to post about our um you know our product or our service or write a review about it or things like that he's kind of an interesting guy he's an interesting follow on twitter you can find him on Twitter. He's verified. Um, he has a lot of interests. He builds a lot of things in

his free time. Like he built this, uh, light contraption. I was just watching this video of the other day. That's kind of interesting. Um, he like the company went through this cryptocurrency phase for like a year, which was a little bit of a red flag. And so there's a little bit of a question. And so there's a little bit of a question of like, okay, he seems to be kind of a renaissance man and have all these interests and be like a very creative entrepreneur um but i think there's i think there's some worthwhile questions to be asked about whether he's also unfocused and if that um kind of getting pulled in all these different directions by all these creative interests um is detrimental to the business right it's a fine line between being

innovative and a creative genius and being unfocused but that's something that um have to analyze a little bit. I don't know that I have a strong grasp on where he is on that, on that line, but, um, I tend to think I tend to side on the more optimistic side, but there's definitely a case to be made that he's been unfocused. He owns about 1% of the shares outstanding. Um, and that's been growing recently, mostly due to stock-based compensation. Uh, the other main management, uh, guy management is Ryan Schramm, who is the COO and was recently just this month, uh, or in January was appointed president. I assume maybe that means that he's going to become more of the front facing person. Um, we'll see like in their next earnings call,

but, uh, that's something to watch. He's been with the company since 2011. So quite a while. Um, and he owns about 0.25% of shares outstanding, but that's also been growing a lot. He's been receiving a lot of the same stock-based compensation that ted murphy has in total about six percent of shares outstanding are owned by insiders so not a huge percentage um but you know respectable uh less than five percent is owned by institutional investors and that's kind of fairly natural in a small cap space like this and provide some level of um potential price appreciation not necessarily based on fundamentals um as institutions if this were, if the market cap were to continue to grow to a point where institutions would feel

comfortable investing, I would expect that percentage to go away up and the stock would probably also see some more price appreciation. One last note I'll make about management and ownership. Murphy actually bought some additional shares recently, which generally we look at as a bullish sign, right? The old adage about, you know, many reasons to sell, but only one reason to buy. Um, I'll caveat that by saying it was only about, uh, $3,700 worth of stock. So like not a huge, um, like I was surprised to even see it, but, uh, anyways, it may be a slight bullish sign there, but. All right. Well, I'll hit valuation. I'll keep it quick here since this is kind of a, um, it's a gross stock. It's not something that you're basing it on the current

fundamentals. Um, it's more about what they're going to be doing in the next few years. Market cap right now is about $241 million, Tigger I-Z-E-A, the same name as the company. Last 12 month EV to sales, I think are 12. I was getting conflicting numbers from all the different sites, but I tried to go with their fully diluted shares outstanding, getting the enterprise value from that, and then looking at the actual earnings report. So I think 12 is the number versus the stock price, which was around five bucks at the time. No dividend, as you probably expect. Shares outstanding are increasing that's how they raise money uh so they actually have fortified their balance sheet they have about 30 million dollars in cash right now and that is from some share

dilution from a common stock raised and they are also unprofitable and not cash flow positive so they will be earning multiple you know money for the time here and you can't really value them on that multiple but you know sales multiple looks it looks okay you know that's kind of the one thing you're looking after right now and then you're looking at earnings growth and revenue growth. Yeah. And for a company this size, growth is going to be lumpy. You look at it. And so I'll get into the earnings numbers. This is for the first nine months of 2020. Revenue was about $12 million for the first nine months, down 9% year over year. And of that, 85% was from managed services, 15% is from SaaS. Now, that looks like a bad headline number. But if Shake were super

successful, it could triple revenue. Yeah. So there is a, there's, that's why you're going to find that lumpy growth. So I think if you are a shareholder at this point, it's probably because you believe in the opportunity ahead of them. They had 9 million in operating losses for the first nine months. And that's like an negative 80 or 90% operating margin. But if you exclude some of the impairments to goodwill that they had. It's about negative 40% operating margins. Once again, a lot of that, they expect to be losing money right now. That's why they're raising so much money. Average common shares outstanding increased 41% year over year. And they almost, they have about 31 billion in cash and cash equivalents right now.

I like that they have chosen to raise at the current price because the stocks have done well, right yeah it has it's there's been a lot of appreciation the last six months okay and i mean i guess that's a good thing because you know you first you see the headline dilution numbers and it's concerning but that makes it a more likely chance of success if they're able to raise at less dilution and i mean if they're going to raise anyways at least they're doing it at a higher price. I agree. I didn't really find anything else. Sales and marketing makes up like 50% of revenue. Obviously, they're losing a lot of money, just an EBITDA negative, net negative. So you're really just analyzing the opportunity here. The earnings weren't super flattering for

them. And they also had a huge knock because of COVID. And they claimed that the macro environment is pretty bad. But we're not necessarily seeing the same numbers out of Facebook or Google and their ad business. So I'm wondering if it's sort of independent towards them or if maybe something's actually wrong with the underlying business and they're using that as a cop-out. I don't think they are. But yeah, so not an impressive last nine months. But yeah, who's next? Ian, you got balance sheet? Yeah, I've got balance sheet. So to kind of dive a little further into what you were talking about just a minute ago, they do have about $30 million in cash. You do want to watch dilution because, you know, since 2018, they've quadrupled share count. I think part of that was

due to the one or two of the acquisitions they made as well. But that, you know, they are diluting shares quite a bit. So the encouraging thing, though, is that the cash balance is up to 30 million from 2 million at the end of 2018. And so it's not like they've quadrupled share count and they've, you know, burned all the cash. They've actually grown their cash balance. They have the ability to use some of that cash likely. They've also proposed doing another equity offering with up to about $35 million, which they say they'd use towards growth. I don't know how likely it is that they'll do that given the cash on the balance sheet, but that's something to keep an eye out for over the next couple of weeks and month we'll just put it uh we'll just slide into

wall street bets and i'll you know do a nice share appreciation then they can raise that at 10x multiple but no no that was a joke do not take that as a investment continuing yeah and then they've got about two million dollars in debt on the balance sheet and this company it's actually a PPP loan, which I don't love to see because that shows one of two things. Typically, either the business was in real trouble or that the business was getting PPP loans that it really didn't need. In this case, I think it was closer to the business being in some serious trouble back in March. I think it's low. The share price got down to like seven cents a share. And they even, And I'll mention this later, but they even shut down their headquarters down there back in March

because they're like, we don't have anybody working in the office and it's expensive. And I think it was a pretty tough move to make at the time, but it worked out to be good. But anyways, they've got this PPP loan, probably likely to be forgiven. But even if it's not, they have plenty of cash to pay it back. So nothing really concerning on the balance sheet. Looks pretty good. Just keep an eye out for dilution. Okay, well, we're going to hit the ad break here, and then we're going to get back and talk about their future growth opportunities

and what we liked and did not like about the business. Cox Panoramic Wi-Fi includes advanced security to help protect all your connected devices. You'll get real-time alerts. Oh, like this one, so you don't have to worry about malware. Or when your kid downloads a song from a shady link. And now all your computer can play is... Red color, red color, where are you?

All blocked. Thanks to advanced security included with Cox panoramic Wi-Fi. Advanced security must be enabled in the panoramic Wi-Fi app. Restrictions apply. Okay, welcome back. Next up is competitive advantages. Ian, why don't you go first? What do you think, you know, with Isaiah here?

Yep, so I think they actually have a competitive advantage, and I kind of hinted at this earlier, but that they've specialized. specialized um you know fiverr and upwork do everything right you can you can get any sort of service on fiverr upwork um but it's specializing in this niche and there are inherent issues associated with influencer marketing that make it less attractive to do through like something like fiverr or even something like uh you know a dm and finmoing people one is that you get clean verified payments you don't have to worry about whether someone you know is actually getting a payment or you're overpaying or when you pay or whether the service is going to be done.

It has that in baked into the platform. And so that helps. Also authenticity of followers. They say they have algorithms to determine whether someone's a hundred thousand followers are actually real or if they have 80,000 fake followers that they've bought. And so that provides another level of assurance, especially to some of these bigger brands that, okay, we're not getting ripped off here by someone who you know is charging us some per follower rate and they actually don't have engaged followers who are going to interact with our marketing campaign um and then it also provides sorry sorry to interject but that's good that might be no go for it over like instagram or something where they don't want to tell you who's fake because

you know it's not in their best interest to lower your follower count but if you're a brand you're you're you're worried about that for sure because some people have 90 of their followers are fake There's definitely easy ways to tell though. Just you could probably track like average comments per post in relation to followers because a lot of followers are just like bots. Yeah. But that's a lot of work. Brands don't want to be doing that work on every single influencer. It just verifies it.

Yeah, no, it is. But it's repeatable. Like other people, it's not some special technology to be able to find that out. Right. Exactly. There's other, there's like, you know, there's services you can go in online to check out whether people have fake followers now. It's kind of centralizing it and bringing it. And so it's really a competitive advantage against other services like Fiverr that are broad, that won't necessarily have that type of stuff baked into its service. And so it just creates a nice place. And then it's also a platform where advertisers can manage the whole process, track results, see return on investment, things

like that. So it kind of, you know, it just provides some benefits to doing it through here rather than bootstrapping it. Okay. Ryan, what do you got? Mine is industry acumen. So like you said, the brands don't really want to do that stuff themselves. Now, if you were like a startup and let's say you were building your own fitness equipment and you wanted to get it in the hands of as many customers as possible or raise awareness, yeah sure you could go dm some lifter or some athlete and try to do just an exchange of goods like that but if you're a big brand if you're like a like target doesn't have people like oh how many followers does that girl have now or you know they're not tracking that and it's not worth

their time or money to do it so uh having sort of the expertise in the industry i think can be an advantage and it just better serves their customer value prop okay i'll hit mine uh i think running a marketplace on the internet gives you that inherent competitive advantage we've talked about it before with a few companies we've discussed over the last few months you know like fiverr is probably the busy busy biggest excuse me example here uh where you know if you aggregate the supply you aggregate the demand um if all the supply of advertisers go there then all the influencers are going to go there and if all the influencers are signed up with isea then all of the advertisers will as well i don't want to say flywheel but that's kind of how

people describe it i'm sure they have it in their investor presentations uh but yeah does that makes do they have like a fiber like you know hopeful network effect slash competitive advantage with the marketplace yeah i think that's definitely what they're going for they're looking to they're looking to aggregate supply and demand to create something that uh you know i guess has a little bit of that flywheel effect and continues to grow and build and and increase their um even increase their pricing power to some extent because they once they build the network then uh and the marketplace then they have more power over the marketplace right and then they can add more functions and hopefully increase prices okay we have future growth opportunities now which will

be some more functions that they're adding um so ian you're up first yeah so i think a future growth opportunity for them is the secular trend towards people with audiences um monetizing those audiences um one way is through the emergence of new social platforms so something like tiktok all of a sudden has provided a whole new way where people can build an audience and are likely wanting to monetize that audience and so uh isaiah has the ability to you know all there's all these new TikTok influencers that weren't around a year ago. And IZEA can hopefully help them monetize their audiences. I think that's going to continue to happen with new social platforms. And you even see a lot of other ways for people to monetize their audiences. You don't have to be a celebrity

anymore. You can use Substack, Gumroad, influencer marketing, affiliate links, YouTube. There's all sorts of ways if you have an audience to start making money. And IZEA, I think, fits nicely within that trend um and we'll like i said we'll continue to kind of benefit as new social platforms and new influencers arise whether it's in you know gaming working out uh you know health all sorts of stuff okay ryan what do you have mine is shake uh but to touch on ian's at first when i at first when i read up on isia i thought it was just like the people that were connecting you know when a tweet goes viral and it's like someone that's never had a viral tweet and then like they add to it and they're like by the way buy this i thought that was like isaiah's whole

business model do you know what i'm talking about i know what you're talking about but what's the connection uh i was just saying like uh there's all these new influencers where it's like one tweet wonders and i i'm sure someone's sitting in there plugging their product in their dms after every time a tweet goes viral uh but shake is their new marketplace and this is their new way of transacting with influencers, unlike its current platform where the large enterprise customers get access to IZEA's private network, this is more public. So any buyers can access it. This is a lot like Fiverr.

This is really that marketplace where it's sort of open-ended on both sides. And the creators or the influencers, they can create their own self-determined price, and then people will pay them for their services. So they opened pre-registration to this. this quarter i think they have a stream that was like a stream of the demo i don't think it's totally open yet am i getting that right is it still in beta um i can't remember now actually i thought i saw that it just opened up um either way either way it's either it's it's just starting right around now yeah yeah and also i think this is coming at a really good time uh because if the

iOS 14 updates are pushing or really giving small businesses limited visibility or less effectiveness on their ads with like Facebook and stuff, this might be where they migrate towards. Yeah, I mean, that's true. In general, like people get upset that, yeah, Facebook ads work fairly well and they do tout that their effectiveness is so strong. but in reality i mean we've tried that with some other part of i think we were trying to even advertise this show on like twitter and twitter sucks but the it seems like the effectiveness is

overrated but if you get these influence in in there it might work it might work better you know or like i don't know it does seem like some of it kind of is you know fake uh with um you know facebook's had that lawsuit where they were pumping up the video views like 10 times you know like when you scroll past it even if you're there for one second it counts as a view against your advertisement yeah so when you use these influencers it might work better uh but i'll hit my future growth opportunity next it's the isea x discovery which is probably one of their main this is the same thing as the main platform right ian yeah this is their sas offering yeah okay so it's so it's an existing part of the business um it's been around for at least a year and

probably longer than that. And it costs about $149 a month. So it's the self-service software platform. And over the last 12 months, customers have grown 2.6 times since it was like the last update for earnings was in October. So from October 2019, they grew 2.6 times. So that's a great number. Revenue hasn't followed suit yet. So they might be trying to do some loss leading or customer acquisition, giving people free access. But if they stay on, that's a lot of software customers that they're adding. And it looks like it is, you know, it's for advertisers in general. Their website was very confusing. They were just using a lot of terms and their video was quite funny. But they were just kind of throwing out like followers, Twitter, Pinterest,

and it was going really rapidly. So I think I understand what it was. But either way, it's growing quickly. All right, highlights and lowlights. Ian, you want to go first? Yeah, I'll go first. I'd say a highlight is Shake, like you just mentioned, Orion. I think that has some really interesting potential. It's something that's needed, I think, and something I'd probably use if I was starting a business. I'd look to find the influencers that I thought were related to my business. And I think it's another avenue for people who aren't having success with something like Facebook ads. And I've also heard that these influencer marketing campaigns, especially at low dollar levels, can be much more effective than something like a Facebook ad because things like

that it really takes um a bigger investment generally to reach the scale where that those start becoming as effective as you'd like them to be so i think that's much needed and really interesting um also i'll touch on this they've had some good recent news they've said that they just got had a record january almost as much um as many bookings in their managed services in january as they had all of q1 last year uh their managed service bookings also increased 48% in Q4 of 2020. They haven't reported that quarter yet, but they've given out some numbers. And so it looks like they've been making a rapid recovery in the last couple of months. And probably, I don't know, it, it, it looks to me like they have a chance to, uh, actually grow

revenue in 2020, which would be, uh, quite the, uh, quite the feat given, given COVID, um, a couple of low lights. Like I said, the business was really hit hard and was kind of, it looks like was kind of on the ropes back in March. Um, like I mentioned, they, they even shut down their headquarters. Um, there's, you know, and then there's, uh, some questions about maybe they're a little unfocused. They were trying to do like a community Bitcoin mining thing back in like 2018. That's a bit, that's a red flag. Uh, it is a red flag. It's like, okay, you know, what's, what's going on here. And, uh, that doesn't seem to be a part of the business at all anymore, but that just raises some questions about, okay, are you, what are we going to, in this company,

are we going to devote resources to the things that ought to have resources devoted to them? And so, you know, over the last couple of years that, you know, revenues have declined and it kind of raises some questions about whether they've lost three years when they really could have grown a lot these last three years, they've kind of lost three years and not seen any revenue growth. And so that's definitely a low light for me. Okay. Ryan, what do you have? Yeah. I think there's a very large opportunity obviously uh if one of the companies whoever's in this space gets it right uh it's a big space to get right uh but also there's less they're less susceptible to regulatory scrutiny than someone that's collecting data and advertising that way so we

we saw uh if you looked at the conference call from facebook in its most recent quarter zuckerberg talked about iOS 14 and how Apple's kind of going after them. And it's all based on users being willing to accept the data collection, I guess is a nice word to put it. And you don't have to do that in order to do this. All you have to do is find people, influencers on social media platforms, or even sub stacks where you think their audience is fitting to your product. And that's a lot easier uh and i just think it has less scrutiny but low lights it looks like they did do some discounting stuff uh to compensate for the less for less demand this last year um and yeah they had trouble because of the pandemic murphy even said in the latest quarter and yeah i guess you

said they've rebounded since he said we expect to see challenges with enterprise sass until such time that the micro or the macro environment stabilizes and marketers feel marketers feel more comfortable in making long-term commitments it sounds like they might have seen that um but yeah the i guess the biggest low light for me is probably the focus part and i would i actually wouldn't mind if maybe murphy came into like a chairman role or left the day-to-day operations to someone else i i did watch an interview with him and he seemed like a competent guy but some of his past stuff just brings up red flags yeah for sure all right i'll hit mine uh similar to everyone else's i think there really is a need to have you know the streamlining of these

marketing deals there probably is a need or there definitely is a is a need for the middleman between uh the brands and the influencers uh and someone's gonna do that whether it's sprout social or isia or facebook and instagram themselves that's to be said uh low lights i'm not seeing consistency with the financials which again you have the covet excuse but there's been inconsistencies over the last three years like in and you highlighted um and i'm concerned of how reliant they are on social platforms because yeah okay right now the biggest platforms are ones that are influencer based instagram and tiktok right released in the united states what if in the future there's platforms that aren't as influencer based something like a discord you know something

like that, where it would be tougher to do something like this. I don't know if that is going to occur. And it's likely that Instagram and TikTok will be relevant for quite a while. But if we're at the peak of their usage, it's something that IZEA can't control. So they're relying on the growth of those other platforms. I don't see influencers ever going away. But it is a concern that some of those social medias could keep it in house like uh i don't think it'd be that difficult for instagram to say oh we'll also let you connect with influencers if you're a brand like it seems like that's an avenue they could go especially if they're seeing a lot of pressure with their other their other way of

advertising uh potentially that could be a problem all right more or less interested in you want to go first yeah so i'll go first i uh just for full disclosure i've started a position over the last couple of weeks in isea and uh so i guess i have to say i'm more interested um it's been it's one i think has a decent amount of upside um but as we've kind of highlighted throughout this this podcast it's going to require a lot of execution um so you know i i i think it's an intriguing one to watch if nothing else okay ryan yeah the upside is certainly there uh it might you're probably going to feel a little less security with this investment um i would say i don't know i'm right in the middle i guess uh the last year numbers were kind of concerning

but if i start to see that it's like really lumpy and they shake things ends up being a big success um that could be a little more validating um and honestly the valuation when they're about to launch a huge product and revenue can change on a dime it i take it with a grain of salt i mean 12 obviously you don't want to pay too much but 12 times enterprise value to sales is terrible for something this small that could grow really fast yeah it's not something like uh i'm bringing up clubhouse media because that's just something i was reading about one time but that was trading like four or five hundred times sales because it was a concept you know pre-revenue company like a lot of SPACs, at least with this. If they execute, it's not like the valuation will totally inhibit

all this growth. I mean, you could definitely see them if they're right, and that is the higher risk with this investment because they do have to at least get it right. They could definitely 10x their revenue over the next decade or even five years. Yeah, it's a great idea. I mean, execution is the problem here, I guess. And that's a huge part of it. Yeah. And I guess I'll fall on the slightly less interested as well i think the big key that that makes me lean one way or the other because i see you know i'm not concerned about the the growth and trailing financials um it happens and it's all about what they're going to do in the future it seems like the ideas they have are sound but management kind of tips tips it in the other direction i don't like the past history

with what murphy's been doing um stuff that's what's keeping you out well if you're i don't know yeah i mean yeah it's a big red flag if management left if murphy left and i haven't checked out this uh coo maybe i like it but yeah it's not like it it seems high risk high reward which we all know looking going into this small cap but it seems a little too risky uh i'm not sure but i wouldn't be surprised if it was a billion two billion dollar company in five years and uh anything else guys oh my my pick oh yeah okay before we uh wrap things up ryan what's your uh pick for next week's discussion next week we are doing mohawk group oh yeah oh exciting much about them but i'm seeing a lot of people tweet about them and

stuff and people i respect i think ian tweeted about him today too so uh excited to get into them okay that is a good pick another smaller that's sub billion right i don't know maybe yep it is sub sub billion all right well we're going to be planning the small caps for the next two weeks um that's going to do it for the isaiah group show use our promo code as always ccm at check out to get ten dollars off your first month at seven investing uh for the full disclosure remember we are not financial advisors anything we say on the show is not formal advice or recommendation and we have the new disclosure we uh run arch capital which is a investment fund so clients may hold positions in security discuss on the show. We'll formalize that disclosure

because I need to actually write down how to say it properly, but that's it. Thank you all for listening. We'll see you next week.