SharpSpring Reports Fourth Quarter and Full Year 2019 Results

Eleventh Consecutive Quarter of Record Revenue Underpins 22% Annual Growth; Sequentially Improved New Customer Additions, Updated Pricing Strategy, and Perfect Audience Acquisition Provide Strong Runway for 2020 Expansion

GAINESVILLE, FL / ACCESSSWIRE / March 12, 2020 / SharpSpring, Inc. (NASDAQ:SHSP), a leading cloud-based marketing automation platform, reported financial results for the fourth quarter and full year ended December 31, 2019.

Fourth Quarter 2019 and Recent Operational Highlights

  • Added more than 300 new SharpSpring customers, of which approximately 80% were agency customers, who selected the platform to generate leads, convert more leads to sales and measure the ROI of their marketing campaigns. New customer additions are expected to generate approximately $2.3 million in annual recurring revenue.
  • Finished the quarter with approximately 2,000 agency customers, over 500 direct customers and over 9,000 total businesses using the SharpSpring Marketing Automation platform.
  • Average monthly net revenue attrition increased to 1.9% for comparable cohorts.
  • Reinforced company commitment to building out infrastructure and controls designed to achieve scaled growth through the appointment of experienced finance professional and software industry veteran Michael Power as SharpSpring’s new CFO.
  • Acquired Perfect Audience from Marin Software for net cash consideration of $4.6 million, combining a powerful SMB-focused digital ad platform with marketing automation.
  • Released Sales Dialer, a fully integrated, outbound calling solution that offers one-click calling, automated recording, and searchable transcription features, empowering sales teams to optimize the quality and quantity of conversations they have with prospects.
  • Announced a limited-time program to cover 100% of the $3,600 annual fee for marketing agencies currently enrolled, or wishing to enroll, in HubSpot’s Solutions Partner Program that join SharpSpring’s Agency Partner Program.

Fourth Quarter 2019 Financial Results

  • Total revenue increased 19% to a record $6.1 million from $5.2 million in the same year-ago period.
  • Gross profit increased 7% to $4.0 million (65% of total revenue) from $3.7 million (72% of total revenue) in the same year-ago period.
  • Net loss was $2.7 million, or $0.24 per share, compared to net loss of $2.3 million, or $0.26 per share, in the fourth quarter of 2018.
  • Adjusted EBITDA loss (a non-GAAP metric reconciled below) totaled $1.9 million, compared to an adjusted EBITDA loss of $1.6 million in the same year-ago period.
  • Core net loss (a non-GAAP metric reconciled below) totaled $2.1 million, or $0.19 per share, compared to core net loss of $1.7 million, or $0.19 per share, in the same year-ago period.
  • At year-end, the company had $11.9 million in cash, compared to $9.3 million at December 31, 2018.

Full Year 2019 Financial Results

  • Total revenue increased 22% to $22.7 million from $18.7 million in 2018.
  • Gross profit increased 21% to $15.6 million, or 69% of total revenue, from $12.9 million, or 69% of total revenue, in 2018.
  • Net loss totaled $12.4 million, or $1.20 per share, compared to a net loss of $9.5 million, or $1.11 per share, in 2018.
  • Adjusted EBITDA loss (a non-GAAP metric reconciled below) totaled $7.4 million, compared to an adjusted EBITDA loss of $6.2 million in 2018.
  • Core net loss (a non-GAAP metric reconciled below) totaled $8.2 million, or $0.79 per share, compared to core net loss of $7.0 million, or $0.82 per share, in 2018.

2020 Financial Outlook

  • Turning to our financial outlook, for the fiscal year ending December 31, 2020, we expect total revenue to range between $30 million and $31 million, which would represent an approximate increase of 32% to 37%, respectively, compared to the prior year. The company’s guidance is based on recurring revenue from our current customer base and early performance results we’re recording in the first quarter and the material positive impact from a recent price increase we enacted.

Management Commentary

“2019 was another period of steady growth for our company as we continued to build on our leading position as the premier agency-focused marketing automation solution in the market today,” said SharpSpring CEO Rick Carlson. “Financially, we generated our eleventh consecutive quarter of record revenue in Q4 and grew healthily above 20% for the year to $22.7 million. We also generated sequentially improved new customer wins and agency partner sales, which is an early but strong indicator that the efforts we took in the second half of this year to identify and improve key areas of our sales funnel are beginning to take hold. Nearing the 2,000-agency mark is a major achievement that speaks to our ability to consistently drive new customer wins over an extended period and clearly shows our immense value is being appreciated, both in price and in feature-set, by our customers.

“2019 was also a time of serious investment – investment in our processes, in our technology, and in our people. In the latter half of the year we made a number of key strategic moves with a focus on positioning our business for long-term growth. Our recent acquisition of Perfect Audience is a prime example of our approach to all three investment areas. Combining a powerful SMB-focused digital ad platform with marketing automation creates a combined product offering unlike anything on the market, and we plan to leverage the existing customer bases for both platforms to drive greater revenue streams for SharpSpring as well as our agency partners. Heading into 2020, we believe we’ve laid the necessary foundation to drive a re-acceleration new customer growth and improved net revenue retention, which will allow us to grow our position in a still rapidly expanding market opportunity.”

Conference Call

SharpSpring management will hold a conference call today, March 12, 2020 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results.

Company CEO Rick Carlson and CFO Michael Power 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 on the same day through March 26, 2020.

Toll-free replay number: 877-481-4010
International replay number: 919-882-2331
Replay ID: 33149

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 monthly contracts at a fraction of the price of competitors making it an easy choice for growing businesses and digital marketing agencies. Learn more atsharpspring.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.

SharpSpring, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
  Three Months Ended     Year ended  
 
  December 31,     December 31,  
 
  2019     2018     2019     2018  
Revenue, net
  $ 6,131,690     $ 5,151,244     $ 22,699,386     $ 18,651,525  
 
                               
Cost of services
    2,127,453       1,418,201       7,142,416       5,798,269  
Gross profit
    4,004,237       3,733,043       15,556,970       12,853,256  
 
                               
Operating expenses:
                               
Sales and marketing
    2,808,761       2,724,563       11,785,227       10,092,691  
Research and development
    1,352,299       1,232,342       5,036,613       4,298,031  
General and administrative
    2,462,779       1,989,343       8,617,073       6,358,087  
Non-employee stock issuance expense
                      508,561  
Intangible asset amortization
    95,250       115,000       381,000       460,000  
 
                               
Total operating expenses
    6,719,089       6,061,248       25,819,913       21,717,370  
 
                               
Operating loss
    (2,714,852 )     (2,328,205 )     (10,262,943 )     (8,864,114 )
 
                               
Other expense, net
    14,537       (31,723 )     (147,338 )     (545,482 )
Loss on induced conversion
                (2,162,696 )      
Gain (loss) on embedded derivative
          25,934       214,350       (400,220 )
 
                               
Loss before income taxes
    (2,700,315 )     (2,333,994 )     (12,358,627 )     (9,809,816 )
Provision (benefit) for income taxes
    28,514       (83,579 )     29,349       (330,994 )
 
                               
Net loss
  $ (2,728,829 )   $ (2,250,415 )   $ (12,387,976 )   $ (9,478,822 )
 
                               
Basic net loss per share
  $ (0.24 )   $ (0.26 )   $ (1.20 )   $ (1.11 )
Diluted net loss per share
  $ (0.24 )   $ (0.26 )   $ (1.20 )   $ (1.11 )
 
                               
Weighted average common shares outstanding
                               
Basic
    11,210,816       8,600,259       10,323,889       8,512,297  
Diluted
    11,210,816       8,600,259       10,323,889       8,512,297  

SharpSpring, Inc.
CONSOLIDATED BALANCE SHEETS

(Unaudited)

 
  December 31,     December 31,  
 
  2019     2018  
Assets
           
Cash and cash equivalents
  $ 11,881,949     $ 9,320,866  
Accounts receivable
    340,344       80,521  
Unbilled receivables
    998,048       740,425  
Income taxes receivable
    15,010       22,913  
Other current assets
    1,363,366       1,184,217  
Total current assets
    14,598,717       11,348,942  
 
               
Property and equipment, net
    1,996,722       1,260,798  
Goodwill
    10,922,814       8,866,413  
Intangibles, net
    4,658,000       1,866,000  
Right-of-use assets
    5,281,530        
Other long-term assets
    549,022       665,123  
Total assets
  $ 38,006,805     $ 24,007,276  
 
               
Liabilities and Shareholders’ Equity
               
Accounts payable
  $ 2,052,538     $ 1,613,477  
Accrued expenses and other current liabilities
    919,089       774,944  
Deferred revenue
    860,820       250,656  
Income taxes payable
    13,944       23,705  
Lease liability, current portion
    370,340        
Total current liabilities
    4,216,731       2,662,782  
 
               
Convertible notes, including accrued interest
          8,342,426  
Convertible notes embedded derivative
          214,350  
Lease liability, net of current portion
    4,976,727        
Total liabilities
    9,193,458       11,219,558  
 
               
Shareholders’ equity:
               
Preferred stock, $0.001 par value
           
Common stock, $0.001 par value
    11,537       8,639  
Additional paid in capital
    58,851,285       30,446,838  
Accumulated other comprehensive loss
    (224,793 )     (231,053 )
Accumulated deficit
    (29,740,682 )     (17,352,706 )
Treasury stock
    (84,000 )     (84,000 )
Total shareholders’ equity
    28,813,347       12,787,718  
 
               
Total liabilities and shareholders’ equity
  $ 38,006,805     $ 24,007,276  

SharpSpring, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
  Three Months Ended     Year ended  
 
  December 31,     December 31,  
 
  2019     2018     2019     2018  
Net loss
  $ (2,728,829 )   $ (2,250,415 )   $ (12,387,976 )   $ (9,478,822 )
 
                               
Adjustments to reconcile loss from operations:
                               
Depreciation and amortization
    282,250       260,101       1,010,123       892,233  
Amortization of costs to acquire contracts
    200,173       200,296       804,780       758,014  
Non-cash stock compensation
    354,313       253,797       1,204,213       964,676  
Non-employee stock issuance expense
                      508,561  
Deferred income taxes
          (14,229 )           (168,119 )
(Gain)/Loss on disposal of property and equipment
          (4,700 )     (617 )     (4,700 )
Non-cash interest
          100,000       139,372       304,301  
Amortization of debt issuance costs and embedded derivative
          (19,078 )     2,903       (6,088 )
(Gain)/loss on embedded derivative
          (25,934 )     (214,350 )     400,220  
Loss on induced conversion
                2,162,696        
Unrealized foreign currency gain/loss
    (18,045 )     (1,047 )     25,425       289,339  
Changes in assets and liabilities:
                               
Accounts receivable
    (189,203 )     (36,358 )     (204,217 )     3,896  
Unbilled receivables
    (65,979 )     (43,530 )     (254,987 )     (187,246 )
Right-of-use assets
    110,800             433,980        
Other assets
    (116,516 )     (324,075 )     (837,082 )     (1,097,683 )
Income taxes, net
    28,759       (83,643 )     (2,094 )     1,966,648  
Accounts payable
    435,137       424,807       439,028       1,094,281  
Lease liabilities
    (96,621 )           (377,264 )      
Other liabilities
    (355,841 )     135,200       (392,480 )     162,984  
Deferred revenue
    162,414       (87,255 )     421,405       (27,283 )
Net cash used in operating activities
    (1,997,188 )     (1,516,063 )     (8,027,142 )     (3,624,788 )
 
                               
Cash flows from investing activities
                               
Acquisition of business
    (4,566,402 )           (4,566,402 )      
Purchases of property and equipment
    (302,796 )     (497,733 )     (1,365,048 )     (893,886 )
Proceeds from the sale of property and equipment
          4,700       617       4,700  
Net cash used in investing activities
    (4,869,198 )     (493,033 )     (5,930,833 )     (889,186 )
 
                               
Cash flows used in financing activities:
                               
Proceeds from issuance of convertible note
                      8,000,000  
Debt issuance costs
                      (141,657 )
Proceeds from exercise of stock options
    42,636       147,128       968,986       596,387  
Proceeds (cost) from issuance of common stock, net
    4,938,985             15,587,990        
Net cash provided by financing activities
    4,981,621       147,128       16,556,976       8,454,730  
 
                               
Effect of exchange rate on cash
    12,772       (950 )     (37,918 )     (19,637 )
 
                               
Change in cash and cash equivalents
  $ (1,871,993 )   $ (1,862,918 )   $ 2,561,083     $ 3,921,119  
 
                               
Cash and cash equivalents, beginning of period
  $ 13,753,942     $ 11,183,784     $ 9,320,866     $ 5,399,747  
 
                               
Cash and cash equivalents, end of period
  $ 11,881,949     $ 9,320,866     $ 11,881,949     $ 9,320,866  

SharpSpring, Inc.
RECONCILIATION TO ADJUSTED EBITDA

(Unaudited, in Thousands)

 
  Three Months Ended     Year ended  
 
  December 31,     December 31,  
 
  2019     2018     2019     2018  
Net loss
  (2,729 )   (2,250 )   (12,388 )   (9,479 )
Provision (benefit) for income taxes
    29       (84 )     29       (331 )
Other expense, net
    (15 )     32       147       545  
Non-cash gain on embedded derivative
          (26 )     (214 )     400  
Non-cash loss on induced conversion
                2,163        
Depreciation & amortization
    282       260       1,010       892  
Non-cash stock compensation
    354       254       1,204       965  
Non-employee stock issuance expense
                      509  
Franchise tax settlement
                318        
Restructuring
    176       252       309       252  
Adjusted EBITDA
    (1,903)       (1,562)       (7,422)       (6,247)  

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,  
 
  2019     2018     2019     2018  
Net loss
  (2,729 )   (2,250 )   (12,388 )   (9,479 )
Amortization of intangible assets
    95       115       381       460  
Non-cash stock compensation
    354       254       1,204       965  
Non-employee stock issuance expense
                      509  
Non-cash gain on embedded derivative
          (26 )     (214 )     400  
Non-cash loss on induced conversion
                2,163        
Franchise tax settlement
                318        
Restructuring
    176       252       309       252  
Tax adjustment
    29       (10 )     32       (87 )
Core net loss
  (2,075)     (1,665)     (8,195)     (6,980)  
 
                               
Core net loss per share
  (0.19)     (0.19)     (0.79)     (0.82)  
Weighted average common shares outstanding
    11,211       8,600       10,324       8,512  

Company Contact:

Michael Power
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

SOURCE: SharpSpring, Inc.

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