Attached files
| file | filename |
|---|---|
| 8-K - CURRENT REPORT - SharpSpring, Inc. | shsp-20201231.htm |
Exhibit 99.1
SharpSpring Reports Third Quarter 2020 Results
Continued Execution of Larger Agency Deals Drives Sequentially
Improved Topline and Annual Recurring Revenue
Return to Net Positive Agency New Client Additions Underpins
Improving Business Conditions in Recent Months
GAINESVILLE, FL – November 10, 2020 – SharpSpring,
Inc. (NASDAQ: SHSP),
a leading cloud-based marketing and sales automation platform,
reported financial results for the third quarter ended September
30, 2020.
Recent Operational Highlights
●
Appointed
award-winning public company CEO and veteran software investor
Savneet Singh to the Board of Directors, providing additional
investor perspective and directly applicable industry operator
experience. Singh has also been named a member of the
Company’s Compensation and Audit Committees.
●
Recognized by two of the leading software review
platforms, earning placement as a 2020 Best Software
Award winner on G2 and a
Top Rated
Marketing Automation Software for 2020 on TrustRadius. Additionally, recognized as sales
and marketing automation industry leader in 16 different
performance categories as part of the G2 Crowd Fall 2020
Reports.
●
Launched Agency Acceleration
Series with top digital
marketing experts leading speaker line-up, including
superstar industry influencers like Neil Patel, Shama Hyder, Rand
Fishkin, Ann Handley, and Seth Godin.
●
Customer
acquisition cost (CAC) decreased 26% to $7,900 from $10,700 in the
same year-ago period and 29% from $11,100 in the second quarter of
2020. The substantial year-over-year and sequential improvement was
primarily due to improvements and cost reductions to the
Company’s sales and marketing campaigns in recent
months.
Third Quarter 2020 Key Performance Indicators (KPIs)
●
Total
monthly recurring revenue (MRR) from new customers in the third
quarter of 2020 improved 21% to $176,000 compared to $146,000 in
the third quarter of 2019 and 9% compared to $162,000 in the second
quarter of 2020. The year-over-year and sequential increase in
total MRR was primarily a result of larger agency and direct
customer deal sizes.
●
New
customer additions are expected to generate approximately $2.1
million in annual recurring revenue (ARR).
●
Finished the quarter with approximately 2,000
agency customers, 500 direct customers, and more than 10,000
total businesses across all
SharpSpring sales and marketing platforms including Perfect
Audience and legacy products.
●
On
a year-over-year basis, Q3 2020 net revenue retention was 90.1%,
when compared to the third quarter of 2019.
Third Quarter 2020 Financial Results
●
Total
revenue increased 28% to a record $7.3 million from $5.7 million in
the same year-ago period.
●
Gross
profit increased 40% to a record $5.4 million (74% of total
revenue) from $3.9 million (68% of total revenue) in the same
year-ago period.
●
Net
loss was $1.5 million, or $0.13 per share, compared to net loss of
$2.5 million, or $0.23 per share, in the same year-ago
period.
●
Adjusted
EBITDA loss (a non-GAAP metric reconciled below) totaled $468,000,
compared to an adjusted EBITDA loss of $2.0 million in the same
year-ago period.
●
Core
net loss (a non-GAAP metric reconciled below) totaled $735,000, or
$0.06 per share, compared to core net loss of $2.1 million, or
$0.20 per share, in the same year-ago period.
●
At
quarter-end, the Company had $15.0 million in cash, compared to
$11.9 million at December 31, 2019.
2020 Financial Outlook
For the fiscal year ending December 31, 2020,
SharpSpring now expects total revenue to range between
approximately $29.0 million to $29.4 million, which would represent
an increase of 28% to 30%
compared to the prior year. The Company’s guidance is based
on recurring revenue from its current customer base and performance
results tracked through September of this year. The updated
guidance range primarily reflects the uncertainty of digital
advertising revenues from Perfect Audience in the fourth quarter of
this year. These expectations also
include an anticipated impact from the COVID-19 global pandemic
based on information available as of the date of this
report.
Management Commentary
“During
the third quarter we continued to push forward in a challenging
global economic environment and were able to generate sequentially
improved results, which were aided by a return to net positive
agency client additions for the first time since the pandemic took
hold,” said SharpSpring CEO Rick Carlson. “While our
core business continues to perform according to plan, we did
experience a delayed reduction in our Perfect Audience retargeting
business, specifically ad spends, which, while unfortunate, should
be temporary. On the SharpSpring side, we are driving increased
average deal sizes through sales of multi-packs to more mature
agencies. Through our new sales-focused approach, we are also
driving meaningful improvements to our acquisition costs, which
decreased nearly 30% sequentially.
“Operationally,
we remain focused on driving new sales, marketing and product
initiatives that are designed to have a long-term positive impact
on the business. Our Agency
Acceleration Series led by top digital marketing experts has
been effective in driving inbound leads as well as overall brand
recognition. We have also made significant improvements to our
onboarding program, reducing the turnaround time on platform
integration and introducing new features such as our upcoming
in-app engagement tool SpringBoard. As we close out the year, we
are cautiously optimistic that the improved conditions we’ve
seen in recent months are indicative of a return to growth and
historical industry trends.“
Conference Call
SharpSpring
management will hold a conference call today, November 10, 2020 at
4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these
results.
Company
CEO Rick Carlson and Interim CFO Aaron Jackson will host the call,
followed by a question and answer period.
U.S.
dial-in number: 844-369-8770
International
number: 862-298-0840
Please
call the conference telephone number 5-10 minutes prior to the
start time. An operator will register your name and organization.
If you have any difficulty connecting with the conference call,
please contact Gateway Investor Relations at
949-574-3860.
The conference call will be broadcast live and available for
replay here
and via the investor relations section
of the company’s website at investors.sharpspring.com.
A
replay of the conference call will be available after 7:30 p.m.
Eastern time today through November 24, 2020.
Toll-free
replay number: 877-481-4010
International
replay number: 919-882-2331
Replay
ID: 38253
About SharpSpring, Inc.
SharpSpring, Inc. (NASDAQ: SHSP) is a rapidly
growing, highly-rated global provider of affordable marketing
automation delivered via a cloud-based Software-as-a-Service (SaaS)
Platform. Thousands of businesses around the world rely on
SharpSpring to generate leads, improve conversions to sales, and
drive higher returns on marketing investments. Known for its
innovation, open architecture and free customer support,
SharpSpring offers flexible contracts at a fraction of the price of
competitors making it an easy choice for growing businesses and
digital marketing agencies. Learn more at sharpspring.com.
Non-GAAP Financial Measures
Adjusted
EBITDA, core net loss and core net loss per share are "non-GAAP
financial measures" presented as supplemental measures of the
Company’s performance. These metrics are not presented in
accordance with United States generally accepted accounting
principles, or GAAP. The Company believes these measures provide
additional meaningful information in evaluating its performance
over time. However, the measures have limitations as analytical
tools, and you should not consider them in isolation or as a
substitute for analysis of the Company’s results as reported
under GAAP. A reconciliation of net loss to these measures is
included for your reference in the financial section of this
earnings press release.
Important Cautions Regarding Forward-Looking
Statements
The
information posted in this release may contain forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. You can identify these statements by use of the
words “may,” “will,” “should,”
“plans,” “explores,” “expects,”
“anticipates,” “continues,”
“estimates,” “projects,”
“intends,” and similar expressions.
Forward-looking statements are neither historical facts
nor assurances of future performance. Instead, they are based only
on our current beliefs, expectations and assumptions regarding the
future of our business, future plans and strategies, projections,
anticipated events and trends, the economy and other future
conditions.
Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and many of
which are outside of our control. Our actual results and financial
condition may differ materially from those indicated in
the forward-looking statements. Therefore, you should not
rely on any of these forward-looking statements.
Important factors that could cause our actual results and financial
condition to differ materially from those indicated in
the forward-looking statements include, but are not
limited to, general economic and business conditions, effects of
continued geopolitical unrest and regional conflicts, competition,
changes in technology and methods of marketing, delays in
completing new customer offerings, changes in customer order
patterns, changes in customer offering mix, continued success in
technological advances and delivering technological innovations,
our ability to successfully utilize our cash to develop current and
future products, delays due to issues with outsourced service
providers, those events and factors described by us in Item 1. A
“Risk Factors” in our most recent Form 10-K and other
risks to which our Company is subject, and various other factors
beyond the Company’s control. Any forward-looking statement
made by us in this press release is based only on information
currently available to us and speaks only as of the date on which
it is made. We undertake no obligation to publicly update any
forward-looking statement, whether written or oral, that may be
made from time to time, whether as a result of new information,
future developments or otherwise.
Company Contact:
Aaron
Jackson
Interim
Chief Financial Officer
Phone:
352-448-0967
Email:
IR@sharpspring.com
Investor Relations:
Gateway Investor Relations
Matt Glover or Tom Colton
Phone: 949-574-3860
Email:
SHSP@gatewayir.com
SharpSpring, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three Months
Ended
|
Nine Months
Ended
|
||
|
|
September
30,
|
September
30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
Revenue
|
7,306,832
|
$5,723,978
|
$21,630,466
|
$16,567,696
|
|
|
|
|
|
|
|
Cost of
services
|
1,869,278
|
$1,840,764
|
6,109,949
|
5,014,964
|
|
Gross
profit
|
5,437,554
|
3,883,214
|
15,520,517
|
11,552,732
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Sales and
marketing
|
2,705,141
|
3,102,653
|
8,134,363
|
8,976,466
|
|
Research and
development
|
1,380,926
|
1,207,605
|
4,443,956
|
3,684,314
|
|
General and
administrative
|
2,725,254
|
1,991,329
|
7,383,655
|
6,154,295
|
|
Intangible asset
amortization
|
152,801
|
95,250
|
489,348
|
285,750
|
|
|
|
|
|
|
|
Total operating
expenses
|
6,964,122
|
6,396,837
|
20,451,322
|
19,100,825
|
|
|
|
|
|
|
|
Operating
loss
|
(1,526,568)
|
(2,513,623)
|
(4,930,805)
|
(7,548,093)
|
|
|
|
|
|
|
|
Other expense,
net
|
(14,075)
|
(15,781)
|
(73,630)
|
(161,873)
|
|
Loss on induced
conversion
|
-
|
-
|
-
|
(2,162,696)
|
|
Gain on embedded
derivative
|
-
|
-
|
-
|
214,350
|
|
|
|
|
|
|
|
Loss before income
taxes
|
(1,540,643)
|
(2,529,404)
|
(5,004,435)
|
(9,658,312)
|
|
Provision (benefit)
for income taxes
|
1,706
|
(2,291)
|
(1,503,625)
|
835
|
|
|
|
|
|
|
|
Net
loss
|
(1,542,349)
|
$(2,527,113)
|
$(3,500,810)
|
$(9,659,147)
|
|
|
|
|
|
|
|
Basic net loss per
share
|
$(0.13)
|
$(0.23)
|
$(0.30)
|
$(0.96)
|
|
Diluted net loss
per share
|
$(0.13)
|
$(0.23)
|
$(0.30)
|
$(0.96)
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
|
|
|
|
|
|
Basic
|
11,564,856
|
10,948,416
|
11,538,457
|
10,028,246
|
|
Diluted
|
11,564,856
|
10,948,416
|
11,538,457
|
10,028,246
|
SharpSpring, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
September
30,
|
December
31,
|
|
|
2020
|
2019
|
|
Assets
|
|
|
|
Cash and cash
equivalents
|
15,018,607
|
$11,881,949
|
|
Accounts
receivable
|
278,624
|
340,344
|
|
Unbilled
receivables
|
1,144,793
|
998,048
|
|
Income taxes
receivable
|
42,179
|
15,010
|
|
Other current
assets
|
1,421,690
|
1,363,366
|
|
Total current
assets
|
17,905,893
|
14,598,717
|
|
|
|
|
|
Property and
equipment, net
|
2,271,661
|
1,996,722
|
|
Goodwill
|
10,938,143
|
10,922,814
|
|
Intangibles,
net
|
4,168,652
|
4,658,000
|
|
Deferred income
taxes
|
4,005
|
-
|
|
Right-of-use
assets
|
8,555,919
|
5,281,530
|
|
Other long-term
assets
|
615,994
|
549,022
|
|
Total
assets
|
44,460,267
|
$38,006,805
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
Accounts
payable
|
2,282,795
|
$2,052,538
|
|
Accrued expenses
and other current liabilities
|
954,309
|
919,089
|
|
Line of
credit
|
1,900,000
|
-
|
|
Deferred
revenue
|
566,084
|
860,820
|
|
Income taxes
payable
|
75,643
|
13,944
|
|
Lease liability,
current portion
|
709,036
|
370,340
|
|
Notes payable,
current portion
|
2,061,263
|
-
|
|
Total current
liabilities
|
8,549,130
|
4,216,731
|
|
|
|
|
|
Lease liability,
net of current portion
|
7,973,813
|
4,976,727
|
|
Notes payable, net
of current portion
|
1,338,236
|
-
|
|
Total
liabilities
|
17,861,179
|
9,193,458
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
Preferred stock,
$0.001 par value
|
-
|
-
|
|
Common stock,
$0.001 par value
|
11,611
|
11,537
|
|
Additional paid in
capital
|
60,139,290
|
58,851,285
|
|
Accumulated other
comprehensive loss
|
(226,321)
|
(224,793)
|
|
Accumulated
deficit
|
(33,241,492)
|
(29,740,682)
|
|
Treasury
stock
|
(84,000)
|
(84,000)
|
|
Total shareholders'
equity
|
26,599,088
|
28,813,347
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
44,460,267
|
$38,006,805
|
SharpSpring, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Three Months
Ended
|
Nine Months
Ended
|
||
|
|
September
30,
|
September
30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
Net
loss
|
(1,542,349)
|
$(2,527,113)
|
$(3,500,810)
|
$(9,659,147)
|
|
|
|
|
|
|
|
Adjustments to
reconcile loss from operations:
|
|
|
|
|
|
Depreciation and
amortization
|
405,022
|
256,355
|
1,179,162
|
727,873
|
|
Amortization of
costs to acquire contracts
|
207,004
|
199,058
|
611,772
|
630,815
|
|
Non-cash stock
compensation
|
397,471
|
284,308
|
1,138,521
|
849,900
|
|
Deferred income
taxes
|
1,706
|
-
|
(3,798)
|
-
|
|
Gain on disposal of
property and equipment
|
-
|
-
|
-
|
(617)
|
|
Non-cash
interest
|
-
|
-
|
-
|
139,372
|
|
Amortization of
debt issuance costs and embedded derivative
|
-
|
-
|
-
|
2,903
|
|
Gain on embedded
derivative
|
-
|
-
|
-
|
(214,350)
|
|
Loss on induced
conversion
|
-
|
-
|
-
|
2,162,696
|
|
Unrealized foreign
currency loss
|
10,874
|
26,344
|
120,802
|
43,470
|
|
Changes in assets
and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
171,229
|
10,280
|
64,969
|
(15,014)
|
|
Unbilled
receivables
|
(4,203)
|
(50,188)
|
(137,518)
|
(189,008)
|
|
Right-of-use
assets
|
201,002
|
109,247
|
(3,274,388)
|
323,180
|
|
Other
assets
|
(461,586)
|
(330,499)
|
(740,686)
|
(746,774)
|
|
Income taxes,
net
|
-
|
(2,291)
|
33,639
|
(30,853)
|
|
Accounts
payable
|
350,733
|
82,722
|
229,798
|
3,891
|
|
Lease
liabilities
|
(175,508)
|
(95,068)
|
3,335,783
|
(280,643)
|
|
Other
liabilities
|
315,812
|
50,661
|
27,772
|
(36,639)
|
|
Deferred
revenue
|
(95,491)
|
193,379
|
(297,384)
|
258,991
|
|
Net cash provided
by (used in) operating activities
|
(218,284)
|
(1,792,805)
|
(1,212,366)
|
(6,029,954)
|
|
|
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
|
|
Purchases of
property and equipment
|
(48,931)
|
(154,767)
|
(401,831)
|
(483,330)
|
|
Proceeds from the
sale of property and equipment
|
-
|
-
|
-
|
617
|
|
Capitalization of
software development costs
|
(138,798)
|
(295,382)
|
(562,922)
|
(578,922)
|
|
Net cash used in
investing activities
|
(187,729)
|
(450,149)
|
(964,753)
|
(1,061,635)
|
|
|
|
|
|
|
|
Cash flows used in
financing activities:
|
|
|
|
|
|
Proceeds from line
of credit
|
-
|
-
|
1,900,000
|
-
|
|
Proceeds from note
payable
|
-
|
-
|
3,399,500
|
-
|
|
Proceeds from
exercise of stock options, net
|
167,417
|
19,733
|
190,880
|
926,350
|
|
Proceeds from
issuance of common stock, net
|
-
|
-
|
-
|
10,649,005
|
|
Payments for taxes
related to net share settlement of equity awards
|
(5,420)
|
-
|
(33,822)
|
-
|
|
Net cash provided
by financing activities
|
161,997
|
19,733
|
5,456,558
|
11,575,355
|
|
|
|
|
|
|
|
Effect of exchange
rate on cash
|
(24,272)
|
(20,504)
|
(142,781)
|
(50,690)
|
|
|
|
|
|
|
|
Change in cash and
cash equivalents
|
(268,288)
|
(2,243,725)
|
$3,136,658
|
$4,433,076
|
|
|
|
|
|
|
|
Cash and cash
equivalents, beginning of period
|
15,286,895
|
15,997,667
|
$11,881,949
|
$9,320,866
|
|
|
|
|
|
|
|
Cash and cash
equivalents, end of period
|
15,018,607
|
13,753,942
|
$15,018,607
|
$13,753,942
|
SharpSpring, Inc.
RECONCILIATION TO ADJUSTED EBITDA
(Unaudited, in Thousands)
|
|
Three Months
Ended
|
Nine Months
Ended
|
||
|
|
September
30,
|
September
30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
Net
loss
|
(1,542)
|
$(2,527)
|
$(3,501)
|
$(9,659)
|
|
Provision (benefit)
for income taxes
|
2
|
(2)
|
(1,504)
|
1
|
|
Other expense,
net
|
14
|
16
|
74
|
162
|
|
Non-cash gain on
embedded derivative
|
-
|
-
|
-
|
(214)
|
|
Non-cash loss on
induced conversion
|
-
|
-
|
-
|
2,163
|
|
Depreciation &
amortization
|
405
|
256
|
1,179
|
728
|
|
Non-cash stock
compensation
|
397
|
284
|
1,139
|
850
|
|
Restructuring
|
-
|
-
|
-
|
133
|
|
Sales Tax
Contingent Liability
|
256
|
-
|
256
|
-
|
|
Franchise tax
settlement
|
-
|
-
|
-
|
318
|
|
Adjusted
EBITDA
|
(468)
|
(1,973)
|
(2,357)
|
(5,518)
|
SharpSpring, Inc.
RECONCILIATION TO CORE NET LOSS AND CORE NET LOSS PER
SHARE
(Unaudited, in Thousands)
|
|
Three Months
Ended
|
Nine Months
Ended
|
||
|
|
September
30,
|
September
30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
Net
loss
|
(1,542)
|
$(2,527)
|
$(3,501)
|
$(9,659)
|
|
Amortization of
intangible assets
|
153
|
95
|
489
|
286
|
|
Non-cash stock
compensation
|
397
|
284
|
1,139
|
850
|
|
Non-cash gain on
embedded derivative
|
-
|
-
|
-
|
(214)
|
|
Non-cash loss on
induced conversion
|
-
|
-
|
-
|
2,163
|
|
Restructuring
|
-
|
-
|
-
|
133
|
|
Sales Tax
Contingent Liability
|
256
|
-
|
256
|
-
|
|
Franchise tax
settlement
|
-
|
-
|
-
|
318
|
|
Tax
adjustment
|
1
|
3
|
(112)
|
4
|
|
Core
net loss
|
(735)
|
$(2,145)
|
$(1,729)
|
$(6,119)
|
|
|
|
|
|
|
|
Core
net loss per share
|
$(0.06)
|
$(0.20)
|
$(0.15)
|
$(0.61)
|
|
Weighted average
common shares outstanding
|
11,565
|
10,948
|
11,538
|
10,028
|