- Strong Finish Amidst Challenging Conditions Led by Improvements to Net Revenue Retention and Net Agency Client Expansion
- Early Investments in Sales and Marketing in 2021 Setting the Table for Accelerated Sales Growth as the Year Progresses
GAINESVILLE, FL / ACCESSWIRE / March 16, 2021 / SharpSpring, Inc. (NASDAQ:SHSP), a leading cloud-based revenue growth platform, reported financial results for the fourth quarter and full year ended December 31, 2020.
Recent Operational Highlights
- Company CEO Rick Carlson provided a Letter to Investors on SharpSpring's long-term business outlook, outlining the Company's ability and plan to achieve long-term, sustainable, high-margin growth. The assumptions in the Company's long-term projections are supported by over six years of individual cohort data and historical Company performance to-date.
- Further solidified Company balance sheet through underwritten public offering of common stock, adding $13.9 million in net proceeds, to support current health of the business, expand future sales and marketing initiatives and pursue additional growth opportunities.
- Appointed Aaron Jackson as Chief Financial Officer. Prior to his appointment, Jackson had been acting as interim CFO and has spent four years at SharpSpring in various finance and accounting leadership roles. Jackson brings a comprehensive understanding of SharpSpring Company culture, goals and objectives and has expert knowledge of the Company's core business model and growth strategy.
- Earned TrustRadius awards for Best Usability, Best Feature Set Award and Best Customer Support based directly on feedback from SharpSpring's customers. These accolades mark the fourth year in a row that SharpSpring has been honored as a top choice for customers through TrustRadius.
Management Commentary
"In what was an eventful and trying year, both for SharpSpring and the rest of the world, we were able to consistently grow our business, expand our platform and position ourselves effectively for long-term success," said Company CEO Rick Carlson. "Financially, we achieved our fifteenth consecutive record revenue performance and are now at the precipice of a $30 million run rate. During the fourth quarter, we also recorded a number of positive, incremental data points that support our belief that business is slowly, but surely, returning to normalized conditions. Within our customer base, we logged diminished attrition and also saw net revenue retention return to pre-COVID levels with a second straight period of net client expansion, all positive indicators for the future. Our Perfect Audience business also showed encouraging growth in Q4, aided mainly from larger customer campaigns. As we complete PA's integration into our marketing automation platform, we should begin to further realize benefits of cross-selling into our current user base as SharpSpring Ads."
"With the effects of the pandemic appearing to be moving to the rearview in 2021, we expect the coming year will be a period of major investment in our business, which will put us on the path to accelerated growth. After our successful capital raise in December, we have additional resources to drive new sales, marketing and product initiatives that are designed to have a long-term positive impact on the business. In Q1 we began the process of ramping spend, which should translate to new customer growth as the year progresses. As we introduce new go-to market strategies and pricing options, including free trials, annual client licenses and freemium offerings, we believe the universe of potential SharpSpring customers will expand. As a leading provider of revenue growth tools for small to medium businesses and digital marketing agencies, we are reducing the barriers to entry for all businesses to participate in ongoing digital transformation."
Fourth Quarter 2020 Key Performance Indicators (KPIs)
- Total monthly recurring revenue (MRR) from new customers in the fourth quarter of 2020 was $132,000 compared to $165,000 in the fourth quarter of 2019 and $176,000 in the third quarter of 2020. The decrease in MRR was largely due to delayed new customer adoption resulting from the ongoing COVID-19 pandemic as well as reduced sales and marketing spend during the quarter. The Company expects sales and marketing spend to increase meaningfully in 2021, which should have a material positive impact on new sales beginning in the second quarter of the year.
- New customer additions are expected to generate approximately $1.6 million in annual recurring revenue (ARR).
- Finished the quarter with approximately 2,000 agency customers, over 500 direct customers, and more than 10,000 total businesses across all SharpSpring sales and marketing platforms including SharpSpring Ads and legacy products.
- On a year-over-year basis, Q4 2020 net revenue retention was 91.7%, an improvement over 90.1% in Q3 2020.
Fourth Quarter 2020 Financial Results
- Total revenue increased 25% to a record $7.7 million from $6.1 million in the same year-ago period.
- Gross profit increased 42% to a record $5.7 million (75% of total revenue) from $4.0 million (65% of total revenue) in the same year-ago period.
- Net loss, including non-cash impairment charges, was $2.3 million, or $0.20 per share, compared to net loss of $2.7 million, or $0.24 per share, in the same year-ago period.
- Adjusted EBITDA loss (a non-GAAP metric reconciled below) totaled $869,000, compared to an adjusted EBITDA loss of $1.9 million in the same year-ago period.
- Core net loss (a non-GAAP metric reconciled below) totaled $1.1 million, or $0.09 per share, compared to core net loss of $2.1 million, or $0.19 per share, in the same year-ago period.
- At year-end, the Company had $28.3 million in cash, compared to $11.9 million at December 31, 2019.
Full Year 2020 Financial Results
- Total revenue increased 29% to a record $29.3 million from $22.7 million in 2019.
- Gross profit increased 36% to a record $21.2 million (72% of total revenue) from $15.6 million (69% of total revenue) in 2019.
- Net loss, including non-cash impairment charges, was $5.8 million, or $0.50 per share, compared to net loss of $12.4 million, or $1.20 per share, in 2019.
- Adjusted EBITDA loss (a non-GAAP metric reconciled below) totaled $3.2 million, compared to an adjusted EBITDA loss of $7.4 million in 2019.
- Core net loss (a non-GAAP metric reconciled below) totaled $4.2 million, or $0.36 per share, compared to core net loss of $8.2 million, or $0.79 per share, in 2019.
2021 Financial Outlook
For the fiscal year ending December 31, 2021, SharpSpring expects total revenue to range between $34 million and $36 million. The Company's guidance is based on recurring revenue from its current customer base and performance results tracked through February of this year. These expectations include the impact of increased sales and marketing spend that began in January 2021 which will support a related revenue ramp as the year progresses.
Conference Call
SharpSpring management will hold a conference call today, March 16, 2021 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results.
Company CEO Rick Carlson and CFO Aaron Jackson will host the call, followed by a question and answer period.
U.S. dial-in number: 877-545-0320
International number: 973-528-0016
Entry Code: 441277
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 March 30, 2021.
Toll-free replay number: 877-481-4010
International replay number: 919-882-2331
Replay ID: 40092
About SharpSpring, Inc.
SharpSpring, Inc. (NASDAQ:SHSP) is a rapidly growing, highly-rated, global and affordable revenue growth platform delivered via a cloud-based Software-as-a-Service (SaaS) solution. More than 10,000 businesses around the world rely on SharpSpring platforms 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 1A. "Risk Factors" in our most recent Form 10-K and under Part II, Item 1A. "Risk Factors" contained in our most recent Form 10-Q, 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
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 | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenue | $ | 7,657,416 | $ | 6,131,690 | $ | 29,287,882 | $ | 22,699,386 | ||||||||
Cost of services | 1,952,615 | 2,127,453 | 8,062,564 | 7,142,416 | ||||||||||||
Gross profit | 5,704,801 | 4,004,237 | 21,225,318 | 15,556,970 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing | 2,754,581 | 2,808,761 | 10,888,944 | 11,785,227 | ||||||||||||
Research and development | 1,628,147 | 1,352,299 | 6,072,103 | 5,036,613 | ||||||||||||
General and administrative | 2,843,472 | 2,462,779 | 10,227,128 | 8,617,073 | ||||||||||||
Intangible asset amortization | 152,801 | 95,250 | 642,149 | 381,000 | ||||||||||||
Impairment of goodwill | 710,000 | - | 710,000 | - | ||||||||||||
Total operating expenses | 8,089,001 | 6,719,089 | 28,540,324 | 25,819,913 | ||||||||||||
Operating loss | (2,384,200 | ) | (2,714,852 | ) | (7,315,006 | ) | (10,262,943 | ) | ||||||||
Other income (expense), net | 53,642 | 14,537 | (19,988 | ) | (147,338 | ) | ||||||||||
Loss on induced conversion | - | - | - | (2,162,696 | ) | |||||||||||
Gain on embedded derivative | - | - | - | 214,350 | ||||||||||||
Loss before income taxes | (2,330,558 | ) | (2,700,315 | ) | (7,334,994 | ) | (12,358,627 | ) | ||||||||
(Benefit) provision for income taxes | (2,340 | ) | 28,514 | (1,505,965 | ) | 29,349 | ||||||||||
Net loss | $ | (2,328,218 | ) | $ | (2,728,829 | ) | $ | (5,829,029 | ) | $ | (12,387,976 | ) | ||||
Net loss per share, basic and diluted | $ | (0.20 | ) | $ | (0.24 | ) | $ | (0.50 | ) | $ | (1.20 | ) | ||||
Weighted average common shares outstanding, basic and diluted | 11,828,706 | 11,210,816 | 11,611,020 | 10,323,889 | ||||||||||||
SharpSpring, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 28,267,792 | $ | 11,881,949 | ||||
Accounts receivable, net | 323,130 | 340,344 | ||||||
Unbilled receivables | 1,248,060 | 998,048 | ||||||
Income taxes receivable | 54,449 | 15,010 | ||||||
Other current assets | 1,433,543 | 1,363,366 | ||||||
Total current assets | 31,326,974 | 14,598,717 | ||||||
Property and equipment, net | 2,188,948 | 1,996,722 | ||||||
Goodwill | 10,250,088 | 10,922,814 | ||||||
Intangibles, net | 4,015,851 | 4,658,000 | ||||||
Right-of-use assets | 8,352,028 | 5,281,530 | ||||||
Other long-term assets | 611,857 | 549,022 | ||||||
Total assets | $ | 56,745,746 | $ | 38,006,805 | ||||
Liabilities and Shareholders' Equity | ||||||||
Accounts payable | 1,074,594 | 2,052,538 | ||||||
Accrued expenses and other current liabilities | 1,259,836 | 919,089 | ||||||
Line of credit | 1,900,000 | - | ||||||
Deferred revenue | 845,265 | 860,820 | ||||||
Income taxes payable | 81,221 | 13,944 | ||||||
Lease liability, current portion | 724,627 | 370,340 | ||||||
Notes payable, current portion | 2,630,962 | - | ||||||
Total current liabilities | 8,516,505 | 4,216,731 | ||||||
Lease liability, net of current portion | 7,771,898 | 4,976,727 | ||||||
Notes payable, net of current portion | 768,538 | - | ||||||
Total liabilities | $ | 17,056,941 | $ | 9,193,458 | ||||
Shareholders' equity: | ||||||||
Preferred stock, $0.001 par value | - | - | ||||||
Common stock, $0.001 par value | 12,819 | 11,537 | ||||||
Additional paid in capital | 75,544,966 | 58,851,285 | ||||||
Accumulated other comprehensive loss | (215,269 | ) | (224,793 | ) | ||||
Accumulated deficit | (35,569,711 | ) | (29,740,682 | ) | ||||
Treasury stock | (84,000 | ) | (84,000 | ) | ||||
Total shareholders' equity | 39,688,805 | 28,813,347 | ||||||
Total liabilities and shareholders' equity | 56,745,746 | $ | 38,006,805 | |||||
SharpSpring, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
Net loss | $ | (2,328,218 | ) | $ | (2,728,829 | ) | $ | (5,829,029 | ) | $ | (12,387,976 | ) | ||||
Adjustments to reconcile loss from operations: | ||||||||||||||||
Depreciation and amortization | 416,984 | 282,250 | 1,596,146 | 1,010,123 | ||||||||||||
Impairment of goodwill | 710,000 | - | 710,000 | - | ||||||||||||
Amortization of costs to acquire contracts | 204,328 | 200,173 | 816,100 | 804,780 | ||||||||||||
Non-cash stock compensation | 388,172 | 354,313 | 1,526,693 | 1,204,213 | ||||||||||||
Deferred income taxes | 4,157 | - | 359 | - | ||||||||||||
Loss (gain) on disposal of property and equipment | 262 | - | 262 | (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 (gain) loss | (72,733 | ) | (18,045 | ) | 48,069 | 25,425 | ||||||||||
Changes in assets and liabilities: | ||||||||||||||||
Accounts receivable, net | (42,980 | ) | (189,203 | ) | 21,989 | (204,217 | ) | |||||||||
Unbilled receivables | (93,377 | ) | (65,979 | ) | (230,895 | ) | (254,987 | ) | ||||||||
Right-of-use assets | 203,891 | 110,800 | (3,070,498 | ) | 433,980 | |||||||||||
Other assets | (209,195 | ) | (116,516 | ) | (949,881 | ) | (837,082 | ) | ||||||||
Income taxes, net | (10,698 | ) | 28,759 | 22,941 | (2,094 | ) | ||||||||||
Accounts payable | (1,208,626 | ) | 435,137 | (978,825 | ) | 439,028 | ||||||||||
Lease liabilities | (186,325 | ) | (96,621 | ) | 3,149,459 | (377,264 | ) | |||||||||
Other liabilities | 313,037 | (355,841 | ) | 340,808 | (392,480 | ) | ||||||||||
Deferred revenue | 276,336 | 162,414 | (21,048 | ) | 421,405 | |||||||||||
Net cash provided by (used in) operating activities | (1,634,985 | ) | (1,997,188 | ) | (2,847,350 | ) | (8,027,142 | ) | ||||||||
Cash flows from investing activities | ||||||||||||||||
Acquisition of business | - | (4,566,402 | ) | - | (4,566,402 | ) | ||||||||||
Purchases of property and equipment | - | 249,712 | (401,831 | ) | (529,001 | ) | ||||||||||
Proceeds from the sale of property and equipment | - | - | - | 617 | ||||||||||||
Capitalization of software development costs | (181,732 | ) | (552,508 | ) | (744,654 | ) | (836,047 | ) | ||||||||
Net cash used in investing activities | (181,732 | ) | (4,869,198 | ) | (1,146,485 | ) | (5,930,833 | ) | ||||||||
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 | 1,075,816 | 42,636 | 1,266,695 | 968,986 | ||||||||||||
Proceeds from issuance of common stock, net | 13,942,446 | 4,938,985 | 13,942,446 | 15,587,990 | ||||||||||||
Payments for taxes related to net share settlement of equity awards | (7,050 | ) | - | (40,872 | ) | - | ||||||||||
Net cash provided by financing activities | 15,011,212 | 4,981,621 | 20,467,769 | 16,556,976 | ||||||||||||
Effect of exchange rate on cash | 54,690 | 12,772 | (88,091 | ) | (37,918 | ) | ||||||||||
Change in cash and cash equivalents | $ | 13,249,185 | $ | (1,871,993 | ) | $ | 16,385,843 | $ | 2,561,083 | |||||||
Cash and cash equivalents, beginning of period | $ | 15,018,607 | $ | 13,753,942 | $ | 11,881,949 | $ | 9,320,866 | ||||||||
Cash and cash equivalents, end of period | $ | 28,267,792 | $ | 11,881,949 | $ | 28,267,792 | $ | 11,881,949 | ||||||||
SharpSpring, Inc.
RECONCILIATION TO ADJUSTED EBITDA
(Unaudited, in Thousands)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
Net loss | $ | (2,328 | ) | $ | (2,729 | ) | $ | (5,829 | ) | $ | (12,388 | ) | ||||
(Benefit) provision for income taxes | (2 | ) | 29 | (1,506 | ) | 29 | ||||||||||
Other (income) expense , net | (54 | ) | (15 | ) | 20 | 147 | ||||||||||
Non-cash gain on embedded derivative | - | - | - | (214 | ) | |||||||||||
Non-cash loss on induced conversion | - | - | - | 2,163 | ||||||||||||
Depreciation & amortization | 417 | 282 | 1,596 | 1,010 | ||||||||||||
Non-cash stock compensation | 388 | 354 | 1,527 | 1,204 | ||||||||||||
Restructuring | - | 176 | - | 309 | ||||||||||||
Sales Tax Contingent Liability | - | - | 256 | - | ||||||||||||
Franchise tax settlement | - | - | - | 318 | ||||||||||||
Impairment of goodwill | 710 | - | 710 | - | ||||||||||||
Adjusted EBITDA | $ | (869) | $ | (1,903) | $ | (3,226) | $ | (7,422) | ||||||||
SharpSpring, Inc.
RECONCILIATION TO CORE NET LOSS AND CORE NET LOSS PER SHARE
(Unaudited, in Thousands)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
Net loss | $ | (2,328 | ) | $ | (2,729 | ) | $ | (5,829 | ) | $ | (12,388 | ) | ||||
Amortization of intangible assets | 153 | 95 | 642 | 381 | ||||||||||||
Non-cash stock compensation | 388 | 354 | 1,527 | 1,204 | ||||||||||||
Non-cash gain on embedded derivative | - | - | - | (214 | ) | |||||||||||
Non-cash loss on induced conversion | - | - | - | 2,163 | ||||||||||||
Restructuring | - | 176 | - | 309 | ||||||||||||
Sales Tax Contingent Liability | - | - | 256 | - | ||||||||||||
Franchise tax settlement | - | - | - | 318 | ||||||||||||
Impairment of goodwill | 710 | - | 710 | - | ||||||||||||
Tax adjustment | (2 | ) | 29 | (1,506 | ) | 32 | ||||||||||
Core net loss | $ | (1,079) | $ | (2,075) | $ | (4,200) | $ | (8,195) | ||||||||
Core net loss per share | $ | (0.09) | $ | (0.19) | $ | (0.36) | $ | (0.79) | ||||||||
Weighted average common shares outstanding | 11,829 | 11,211 | 11,611 | 10,324 | ||||||||||||
SOURCE: SharpSpring, Inc.
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